Political Cortex: Brain Food for the Body Politic

Today the system is failing on all three issues, and where will this lead and what may be some solutions that may actually help?  The "in-political-power" crowd has made it abundantly clear that they could give a crap about poor people, but now they also have to protect their business allies from soaring healthcare costs.  Their latest answer is consumer directed healthcare where more costs are directed to the patients!  In this diary, I intend to try and look at some often overlooked economic issues related to market solutions in Healthcare, and point out the inevitable supply and demand competing issues in healthcare!

Related to consumer directed healthcare, you may wish to look at this recently released report from the EBRI/
Commonwealth Fund

If you are going to solve a problem using an economic model, then the laws of supply and demand are at work.  In healthcare if you increase demand for health services without increasing the supply of providers, cost will increase to the demanders of care, the patients.  On the other hand, theoretically if you increase the supply of providers, then costs would decrease to the demanders, the patients.  NOTE: There is a concept called induced demand which tends to allow providers to increase demand to whatever level they wish. However, if this idea of induced demand is true, then healthcare by definition can never be controlled by patients, but that is a subject for another entire diary.  Suffice it to say that good standards of care (another whole diary topic) should be published, and following such standards should limit induced demand and bad quality of care.

Back to consumer-patient controlled healthcare.  In the economic model behind this, assumptions need to be made as to whether to favor supply side costs control or demand side cost control.  If the system does not increase the supply side while putting more control in patients hands, cost should increase to these patients which should lower their ability to get care.  This would follow the model that all doctors should be guaranteed a relatively high income so let forces in control of training slots favor low supply of providers.  The following editorial in the NYTIMES Stealing From the Poor to Care for the Rich deals quite well with this idea and is a good read.

Why are we so reliant on foreign doctors? The problem is that even as the demand for doctors has grown significantly in the United States, medical school enrollment has barely budged. The annual number of medical school graduates has remained almost constant since 1980, despite a population increase of 50 million. Over that same period, only one new medical school has opened its doors. As baby boomers reach retirement, the shortage of doctors will only grow worse, creating even greater demand for doctors from Africa, Asia and the Caribbean.

American medical schools have long limited enrollment, thanks in part to a deeply ingrained elitism. Though medical schools are no longer excluding groups like Jews and Italian-Americans, there remains a strong bias in favor of training an elite few for research instead of rank-and-file general practitioners.

So it would seem that if the trend in healthcare is toward consumer control, and if healthcare is an essential social commodity, then we could bring down the cost by clearly defining what are the standards of good care, and by increasing the number of providers available to supply that care.  That might also mean that some providers could not do well financially in this price competition for limited patients.  For some reason I do not see this happening.  That means instead that provider numbers will stay relatively low and healthcare costs will continue to spiral.  Thus, many poorer folks will not get good care.  Meanwhile the limited pool of providers should continue to do very well financially.

If one understands this economic trend information, a good question would then be how would a fair healthcare system work in an egalitarian system such as universal single payer?  How would demand for services be met fairly and how would healthcare providers be reimbursed?  Would we ration demand on a case severity basis, and/or would we train relatively many providers or relatively few providers and pay them from the same fee schedule?  See poll.