The looming doctor shortage and central planning in health care

Regardless of what the current crop of progressives say, capitalism and the free market have given Americans the greatest number of innovations and the highest quality of life in history. Compared to the people in socialist countries such as Cuba and North Korea, Americans have access and choices in obtaining food, shelter, and clothing for themselves and their families.

Unfortunately, instead of utilizing a free market, our health care system has developed over the past 80 years through government central planning. Instead of supply matching demand in a free and open marketplace, elected and unelected bureaucrats have relentlessly pushed to control a greater percentage of our health care system.

Let’s look at the supply side of health care. For years, the government has controlled the number of medical schools, the number of graduates from these schools, and their licensure. Over 40 percent of Americans have government health insurance through the Medicare and Medicaid programs. The government controls physician reimbursements through these plans.

A well-documented paper from the Pacific Research Institute (PRI) found that over the past 25 years, doctor payments in the Medicare program failed to keep up with inflation and fell well below market value. In inflation-adjusted terms, Medicare reimbursements for physicians are down 33 percent over the past 25 years, with Medicaid payments following the same downward trajectory.

These unrealistic payments are having serious consequences on the supply of health care. Doctors are retiring early; students are dissuaded from entering the medical field; private practice is financially discouraged; and ultimately the country faces a looming doctor shortage. The current doctor shortage is almost 40,000, while that number is anticipated to hit 86,000 by 2036, according to the PRI paper.

Bureaucrats are even attempting to legislate not only the total number of doctors, but also the number of primary care physicians versus specialists. This is absurd and has no relation to the actual needs of the American patient population.

Hospital payments from the government have likewise been trending downward over the past few decades. This has led to hospital consolidation, hospital closures that have hit rural communities the hardest, and fewer options for patients.

The government has also distorted the demand side of our health care system by central planning. Starting in 1943, the federal government allowed employers to take a business-income deduction for the costs of employee health benefits. This was the beginning of the U.S. employer-financed health insurance model. Fifty percent of Americans now have health insurance through their employer or their spouse’s employer.

In 1965, Congress passed the Medicare program and the Medicaid entitlement into law, which placed over 40 percent of Americans into government-financed health insurance. The U.S. now has a health care system in which over 80 percent of the costs are paid by a disinterested third party – either the employer or the government. It is now very rare for patients to take responsibility for the total cost of their medical care.

This government-planned third-party payment system has created ingrained market distortions and has caused an excessive demand for health care. After all, when someone else pays, there is no incentive for patients to question the price or quantity of services that are consumed in their care. Of course, central planners distort the situation further by forcing the above-mentioned price and payment controls on both hospitals and doctors.

Just like in all other economic activities, the free market offers the best solution to provide the greatest access to health care and to control costs. People freely making their own health care decisions and using their own health care dollars would give Americans the best chance to utilize access to health care with safety-net health programs provided for the most vulnerable people.

At the end of the day, health care is an economic activity like any other, albeit with the most personal interactions between patient and provider. Society should work towards putting patients in charge of their health care, reducing the role of government, focusing on access, and ending bureaucratic central planning of medical careers.