When Discussing Health Care Reform Don’t Forget Basic Supply and Demand
By Christine Chmura • Sep 16th, 2009 • Category: Health CareWhat does economics tell us about the proposed universal health care plan?
Volumes of books and perspectives literally are published on health care economics. Honestly, it’s too complex to thoroughly analyze in this column. So, let’s just discuss one small aspect that students learn in Econ 101: economics is the study of the scarcity of resources and price is the mechanism that brings those resources to the market.
Based on a 2008 Census report, 15.3 percent of people in the United States were without health insurance. That’s down from 15.8 percent in 2007, representing 45.7 million people.
What happens when those uninsured are covered?
The demand for health care will increase significantly, especially for primary care physicians and specialist doctors. Classic economics tells us that price will increase until supply catches up. If the government, through some sort of tax increase, can make money available to cover that health care, then supply will surely catch up quickly. I ask you to refrain from jumping to that conclusion quickly.
From a practical perspective, it may be fairly easy to produce more drugs and medical supplies but what about doctors, nurses, and other health care practitioners? A 2004 study by the Health Resources and Services Administration showed that the nation had a shortage of about 168,000 full-time equivalent registered nurses in 2003. Although that shortage has eased during the recession, the dearth will return when the economy recovers.
The health administration forecasts a 1 million full-time equivalent shortage for registered nurses through 2020. That means only 64 percent of the projected demand can be met by 2020 and this estimate does not factor in universal coverage. The health administration also looked at the future supply of physicians compared to demand for their services.
The report said that the supply and demand for primary care physicians will be about equal to the national demand but shortages are likely to happen in rural areas. Even larger shortages would take place in individual specialties such as general surgery, cardiology, and psychiatry, to name a few. The supply of health care professionals cannot catch up to demand because of the required intensive training and rigorous licenses, which takes time.
If 46 million more people are added to the demand side of the health care equation without optimistic productivity gains in the administration side, we likely will see a tradeoff between quantity and quality, particularly as it relates to rationing. Increased caseloads will no doubt reduce quality. Under universal care, rationing doesn’t mean that some people don’t get care. It means that all people wait longer for care.
Health care reform is necessary.
How we solve the problem will determine whether some portion of the 85 percent who currently have insurance can successfully bypass the proposed new system to create their own higher-cost, higher quality system.
Reprinted with permission from the Richmond Times-Dispatch.
Christine Chmura Christine Chmura is president and chief economist at Chmura Economics & Analytics. She can be reached at (804) 649-3640 or at chris@chmuraecon.com
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This article covers an important issue, but closely related has been the change from non-profit organizations to profit companies in the health care industry. It has added costs upon costs and in doing so has added tests for tests. Then add the greedy lawyers, that further complicates the issue. All of these related items just add to the requirements for more and more people. I believe it is time for basic reform rather than major reform. Start by getting the health care system back on track. Back to non-profit organizations, treating for results rather than defense, limiting the greedy lawyers. More people will be helped in this way rather than with massive reforms that will only lead to more and more costs. From the past, any government “reported” cost will be actually 3-10 times the reported cost.
well… do we agree that these folks are still getting treatment but instead of at a regular doctor at an ER or Trauma center with very expensive Doctors and Nurses?
How about creating community clinics right next the the ERs and hiring more nurse practicioners other technical support to do most of the work that does not require a full doctor anyhow?
the problem that we have – is that people are opposed to the GOVT …being involved at any level..
and we don’t go forward under that kind of environment. We have folks “out there” who would be opposed to govt-run community clinics for those without insurance.. and we have yet to hear from those opposed to the approach on the table – a different approach – because ..like I said.. they are opposed to the govt doing any of it and the want the pvt sector to do it. The private sector has had 40 years to do something about it and has not.. and right now.. has nothing on the table.
http://www.kff.org/pullingittogether/images/091509pitgif_2.gif
this is why basic reform may not be a solution.
I hear folks saying they are opposed to the govt being involved because they care about the future of their kids.
If you look at this chart – and imagine a 10 year old right now – look at his future – if we cannot agree on how to change.
and that’s assuming that he won’t be one of the ones who won’t be able to get insurance.
I think the public is either way behind in understanding what we are facing are they are just not dealing with the realities. This is no option available that says leaves things like they are right now.
Then Larry, why not “fix” what needs fixing and “keep” what works rather than allowing the Govt to turn health care into yet another government managed failure? Besides, if the Govt takes over health care, the Canadians and Europeans won’t have anywhere to go for health care.
As it stands now, If you are insured, under insured or have none. We are all in the same position. When an insurer denies your claim, When you must decide between paying a mortgage or buying groceries to pay your increased health Insurance payment and increased co-pays. When you have to make the decision to hope that your illness will have to get better on its own than go to the emergency room. ER visits can cause devastation to low income people because of the cost. Except for the lucky few, health care is already being rationed in this country. The Health Insurance Industry is a for profit industry. They are not here to help but to pay CEO Compensation and Stockholder satisfaction. Can’t we all agree that we bleed red. We get cancer, we get old, we have heart failure, kidney disease and the myriad other conditions that exist because we are human. The fact that this country stubbornly holds on to the idea that every problem can be fixed in a business model has brought us to where we are. The people that can pay to play will enjoy their status. The hardworking people that fall throught the cracks of this system are left to survive on their own. Rationing of Health Care has existed in this country for a very long time. If you cannot afford it. You don’t get it.