Kirch on the Looming Doctor Shortage

Dr. Darrell Kirch, CEO of the Association of American Medical Colleges, writes in today's Wall St. Journal that

Our nation currently faces a shortage of physicians expected to worsen as the number of people over age 65 (who use more than twice the health care of younger adults) doubles. Even with significant changes to the health-care delivery system and improved prevention, the United States will face a shortage of more than 125,000 physicians in the next 15 years

Considering his place of employment, it isn't surprising that he focuses on federal caps on the number of subsidies given for training doctors.

While U.S. medical schools are working to increase their classes by 30%, these new medical school graduates will not increase the nation's overall supply of physicians, or even have a residency position in which to train, unless the government lifts the cap on residency training slots it pays for that was imposed as part of the Balanced Budget Act in 1997.

While I suppose lifting this "cap" on handouts to medical schools would likely lead an increase in the number of medical residents, it's a very shortsighted, limited, and ultimately counterproductive solution.

The most fundamental economic issue surrounding the shortage of physicians is not a cap on government subsidies, but the entire system of price controls and byzantine regulations of the health care industry, especially the distorting influence of Medicare/Medicaid.

I have written about this issue at length in a detailed post, The Flawed Economics of Socialized Medicine. Comparing this issue to the classic case study of gasoline price controls and shortages in the 1970s, I wrote:

To apply this economic lesson, one distinction must be stressed: at issue is not a shortage of doctors, but a shortage of health care services offered at the government-controlled price, under the government's regulations. With that in mind, if we substitute the supply of gasoline and its price controls with the availability of primary care appointments (supply) and Medicare/Medicaid-controlled prices, the clear picture emerges. . . no matter how much gas, or how many primary care doctors you have, if the price of a good (gas) or service (health care) is controlled, there will be shortages. Supply will not keep pace with artificially inflated demand.

Not only is the government distorting the market through price controls, they artificially limit the supply of producers (doctors) through licensing regulations, and as Kirch mentioned, by meddling with the supply of residencies through handouts. What we have now is a Central Plan gone awry. Kirch suggests modifying the Plan, but as I wrote:

Government planning, in any market, is doomed ultimately to fail. There is no good balance of controls and freedom. The solution is not picking the right government plan, nor is it manipulating the market in the false interests of social justice. The government cannot pick the "right number" of doctors, nor the "right price" for health care services. All such attempts to evade the reality of economics and the individual rights of consumers and producers result in disaster.

The only solution to the "doctor shortage," and the only reform that will respect the rights of all involved, is the total separation of economy and state.