Todd G. Buchholz, White House director of economic policy from 1989 to 1993, is the author of “The Price of Prosperity: Why Rich Nations Fail and How to Renew Them.”
Parrots can learn economics, claimed Victorian economist Alfred Marshall. Just teach the parrot to squawk “supply and demand.” So if a parrot can learn, why can’t the U.S. government?
House and Senate GOP health-care plans, like Obamacare itself, have squawked loudly about subsidizing demand but said little about the supply of doctors, nurses and drugs. That is economic malpractice.
It is also so 20th-century. In an era of Amazon, Uber and Airbnb, the non-health-care economy is getting a shock treatment of new supply that is boosting accessibility while restraining prices. Health care needs a supply-side shock, too, and government can help.
Health care is not entirely immune to supply-side pressures. When Lasik eye surgery appeared in 1999, thousands of eye surgeons jumped into the act and prices fell by about 25 percent in 10 years. Shortly after the Food and Drug Administration approved Botox for furrowed brows in 2002, dermatologists, nurses and spas jumped in, keeping prices from rising. The government does not subsidize these cosmetic procedures.
We are seeing other hints of supply-side improvements in medicine. In California, Heal.com will send a doctor to your house for $99. Does it work? In San Diego, Heal.com receives a 4.5 score on Yelp. Nearby hospitals receive a 3.0.
Now, of course, the hospital handles many more dire cases than a drive-up doctor making house calls. But note this: Many hospital patients are labeled LWOT (left without treatment). These are cases in which sick or injured patients feel so frustrated with waiting times that they drive off. In one California hospital, more than 20 percent of emergency-room patients are LWOT.
An aging population is pushing up demand, and without more supply, prices will catapult higher. Doctors are aging, too: More than 30 percent are 60 or older. Forecasts project a physician shortage ranging from 46,000 to 90,000 by 2025, especially among specialists.
Already, one quarter of the federal budget goes to Medicare and Medicaid. Taxpayers will find themselves frustrated with packed waiting rooms and higher taxes. So what can Washington do to help spark a supply-side shock in health care? Here are four important steps:
First, we need new medical schools. The United States accredited no new medical schools from 1986 through 2004. Recently, in response to the looming shortage of doctors, a number of new schools have been announced, for example, at the University of Nevada, Seton Hall and Washington State. Yet new schools face formidable licensing costs and delays from federal, state and local boards, which can deny accreditation for serious reasons such as unhygienic equipment as well as nonmedical worries such as the dimensions of parking garage spaces. Government agencies can work together to fast-track approval processes.
Second, state governments should give greater authority to nurse practitioners and physician assistants to open their own practices and encourage walk-in clinics, such as CVS’s Minute Clinic and Walmart’s Care Clinic. Research shows that, compared with doctors’ offices, such clinics deliver cheaper and equivalent care for patients who presented symptoms of ear infections, sore throats and urinary tract infections.
Third, the Food and Drug Administration should pursue reciprocity for drug approval with other advanced countries. Under current law, if a drug is approved by the European Medicines Agency, Americans cannot buy it unless the FDA slogs through its own long, expensive protocol. And there’s precedent: In 2013, a potentially lethal meningitis outbreak spread through Princeton University’s dorms. Princeton begged the government to allow it to buy a common vaccine made by Novartis in Switzerland. The bureaucrats eventually relented. Why can’t the FDA permit reciprocity with other advanced countries for other cases?
Finally, legal reform could also save patients money. Fear of lawsuits cuts the effective supply of health-care services in two ways: First, malpractice insurance payments encourage early retirement. Second, fear prods practicing doctors to order unnecessary procedures, leaving fewer resources for those who need treatment. More than 80 percent of physicians say that they prescribe tests for fear they will be sued if they do not. The American Board of Internal Medicine has specified 45 tests that are often prescribed without merit, from annual electrocardiograms to imaging for temporary lower back pain.
Americans need more doctors, more nurses and more prudent care. Trying to solve health-care problems by focusing just on demand is like trying to cut rope with only the bottom blade of a scissors. You’ll likely struggle to get the results you desire, and you might even hurt yourself.