There are many interesting applications of the economic concepts of supply and demand. Those are largely lost on the population, but the effects of economics are arguably universal. They surround us in our daily lives. We address them individually and collectively. Imagine a workforce that would band together to artificially control supply, and thus strive to manage the economic equation regarding the value of services.
To increase price (wages), one need only increase demand for the service or decrease the supply of those who provide it. Either of these paths will increase the price to the consumer. I illustrate this in class with the observation that some rocks (diamonds) are deemed more desirable than others (granite). Yes, I realize diamonds are not rocks, but if you get mired in the various forms of carbon the whole conversation takes days. Despite common misconceptions, carbon is not your enemy
There are natural examples of scarcity. Physically, only a percentage of us are capable of dunking a basketball. Mentally, Einsteins come along only so often. Those people are scarce. But we create scarcity artificially as well. Make no mistake, there are various reasons why government might legitimately restrict access to various occupations. The predominant of these in the United States is the “police powers“ described by the words “health, safety, and welfare." Check the U.S. Constitution, Amend. 14 for discussion.
In that vein, it makes no possible sense to allow me to open an appendectomy store in the local mall. I lack medical training and expertise regarding the procedure and the potential for untoward outcomes or problems is nearly endless. I do, however, have "the ultimate set of tools," Jeff Spicoli, Fast Times at Ridgemont High (1982), or perhaps as apropos "I can fix it." I could do brain surgery as well, given a few moments to think it through.
But seriously, anyone interested in having me perform their appendectomy has far larger issues than appendicitis. It makes sense that only doctors can legally do surgery. We have seen that with fake plastic surgeon, Botox injections, allergy treatment, physical therapy, and more. People are injured when the untrained and unprepared perform medical treatment.
By the same token, however, such government licensure arguments can be easily made in favor of electricians, contractors, architects, engineers, lawyers, and more. There are legitimate interests in protecting the public. Some other licensure requirements may be viewed more as revenue-generation tools than public protection. As perceptions shift, areas, occupations, or professions might be discussed in such an analysis with varying degrees of agreement or dissent.
However, licensure requirements are generally intended to assure that those who practice in such occupations and professions possess the requisite skill, experience, and knowledge to both benefit their customers and to avoid harm to either the customer or the public.
A recent story from Korea is far different, British Broadcasting Corporation, February 2024. Physicians in South Korea are protesting by way of non-attendance or resignation. They are not seemingly delivering “health, safety, and welfare" arguments in support of their slowing or stoppage. Instead, they seem to be making simple supply and demand arguments. Their contention is that the government, allowing more individuals to be licensed, increases the supply of skilled practitioners, and thus decreases the price which each can viably demand in economic exchange
There is an effort to increase the supply of doctors there. The doctors are opposed. Their message is simple, too many practitioners (supply) means too little reward (wages). The argument is not about delivering better care, attaining better outcomes, or the public good. But really, is having too man doctors in society a bad outcome?
America is presently in a difficult position as regards, medical care. Becoming a professional can be long and arduous (10-12 years of hard work and studying). Furthermore, there is an understandable inclination for anyone undertaking such an investment to spend 30 to 40 years thereafter practicing that profession. It is understood that those who invest in that career path will want to make a living, recoup for lost time in achieving the status, and succeed.
It never ceases to amaze me that people are jealous of the wages doctors and other professionals earn. That four years of undergrad, three years of grad school, and pittance in initial earnings equates to a huge investment of deferred compensation. There is a huge emotional, financial, and chronological investment to join such a profession. That decade or more of deferral is being compensated, or it should be. If it is not, that will deter great students from taking that path. There is a benefit in attracting good people to the practice of any profession.
That said, the tail end of the baby boom generation (with admitted self-interest by yours truly) has snuck into the medical-consumption years. While it is not absolute, young people tend to require less frequent and less pervasive medical care than the older generations. And it seems that the curve keeps turning upward the older we get. Certainly, I am worried mostly out of self-interest. But that does not mean there is not a real problem that will impact many people.
Medicare will not, has never, paid the full cost of care. In Florida, workers' compensation pays doctors 110% of Medicare. Some have proposed increasing that. If we need to pay 150% or 200% of Medicare, does that mean workers' compensation would overpay? Or, does it suggest that Medicare is not paying enough to compensate providers?
I am inclined to disbelieve that workers' compensation would overpay. So, it likely means that the burden of caring for those on Medicare/Medicaid (whose care is discounted by the constraints of those programs) is being shifted to the provider or facility that then shifts it to other consumers like workers' compensation. This differential is an example of socialism at work in the delivery of medical care. "To each according to his needs." Karl Marx. The price of every product and service we consume is inflated by the price of workers' compensation subsidizing the medical care of others through this shifting.
And the U.S. is is already short of physicians. OPAGGA (Florida government agency) says Florida faces "an anticipated shortfall of nearly 18,000 physicians by 2035." That seems like ages, but it is literally 11 years away. And, this is not a "Florida thing." Fortune reports "30% of Americans don’t have a primary care doctor due to a shortage of providers." Fortune notes "The Association of American Medical Colleges projects we’ll be short as many as 124,000 physicians by 2034." That is almost the entire population of Gainesville, Florida.
Let's build medical schools on every corner! Hint, I am not competent to provide care. Do not let me open a medical school. However, there are a plethora of qualified institutions and doctors that could appropriately train new doctors.
But opening schools today might not help much. Look above at the 10-12 years. Even if we could divert more college graduates this year into medicine, the "medical school (four years), and a residency program (three to seven years)" would still see us just beginning to make a difference in 2031. In reality, the curve we are behind is at least 7 and more like 10-12 years. Why were we not building medical schools a dozen years ago? Did no one see this coming?
Any increase in production of positions, in anticipation of the aging, baby boomers (a dozen years back), had to be weighed against the probability of a potential decrease in demand for services for later generations. That is, was the deficit predictable? Or have we seen some exodus from the profession? (Note - I do not speak for the AMA). The AMA says that there is "burnout" that drives early retirement, "cut back hours," or "leave(ing) medicine altogether." The AMA also lists the stated reasons. Was this exodus predictable?
For whatever reason, medical school output does not seem to have kept pace with medical practice demands. On top of that, there is some likelihood that a population of medical professionals found our recent SARS-CoV-2 experience demoralizing, stressful, and retirement-inducing. That is likely true of various professions. Do not get me started on the projected nurse shortage (1.1 million, I kid you not).
Notably, others "insists there isn’t a nurse shortage at all. There are plenty enough nurses for the country, they say — merely a shortage of nurses who want to work under current conditions." There it is again, supply and demand. The supply is being constrained by circumstances of the workplace, perhaps, or by the output of the schools? Does it matter why there is unmet demand in the workforce? In the end, I am doubtful we patients care why there is no willing provider (doctor, nurse, etc.), we are simply pained that there is a shortage.
Nonetheless, expected or not, there is a shortage of physicians. There are persistent acknowledgments of challenges with finding willing providers. This is notably true in Worker’s Compensation, but more broadly also. The result of an insufficient supply will lead to increased prices, even without the boomer bubble. If demand only remains constant and supply decreases (retirement, etc.) prices will rise. This is only aggravated further by the increased demand of the aging boomers.
Price? Might prices have an impact? Would it bother anyone to know "that more than $100 billion may be lost in fraud, waste, and abuse annually?" That means each year folks. And, that is the figure that the government will own up to. Others claim that the waste is more like 25% of the "$4.3 trillion" in health expenditures. That is about $1 trillion of waste. I love those who strive to cast blame and propose easy answers to our challenges. But in the end that is still $1 trillion. It is easy to point fingers, but this is not a simple societal problem. It is a deep and murky challenge with many moving parts.
Who pays for waste? We all do. Sure, in one characterization, "34 percent of the nation’s healthcare spending is funded by the federal government." That is painful. The taxpayer is funding 34% of $1 trillion of waste. But wait, there is more. We all pay for waste more directly. What is the doctor busy with such that you cannot get an appointment? Well, the statistics here suggest that about 2 hours per day (at least) is "waste." That is a great deal of time that might be spent treating a patient instead of completing a form, interpreting a rule, or complying with a bureaucracy.
Would decreased red tape, forms, and constraints be a quicker path to more physician time (supply) than building medical schools? Would decreased bureaucracy mean more physician retention and satisfaction? (Supply) Is the challenge the fault of insurance, business, government? Many are quick to jump on the "fault" wagon. I watched an evolution recently on social media that illustrated the failure of the masses to think critically about medical care.
That debate was rife with indignation about people with insurance facing medical costs. The insurance is not covering everything! Notably, the government stepped in a few years back and mandated that people can wait until their house is on fire and then purchase insurance against fire. With it came the first mandate compelling Americans to purchase a product that they did not want (if they wanted it, they would have bought it without being told to).
Demand increased. Consumption of services increased. Someone, somewhere, is astounded that these increases led to price increases. When demand increases, and supply does not, prices rise. Water is wet, the sky is blue, and the Browns don't win Super Bowls.
There were many promises that prices would not increase (they did), that we could keep our present coverage (we didn't), and that everyone could have more and it would cost us all less. That this was promised is not surprising. Promises are easy. That anyone believes that everyone can get more for less is astounding. People seem enamored with the idea of taking more of what belongs to others, but then they are surprised when there are market corrections and impacts. Markets react.
Turning back to South Korea, one might wonder what the demographic shift portends in that nation. Is the supply that is being discussed an intended replacement supply, an increase in anticipation of greater demand, or an intended expansion of the current supply? In a nutshell, one might broadly question who is making the supply decision. Is it a central government, or a market economy? Are they planning more production (starting supply in the pipeline) as a reaction to insufficient current supply or proaction?
The point to this all is that there are impending storm clouds. The numbers in America point to many of us having little or no access to primary or specialized care. The trends are set, and there is no time to build our way into solutions. There is room to discuss why there are not more medical schools. There is room to discuss how we could avoid such a challenge in the future.
But, there also has to be some way to discuss how we provide the marketplace today with enough willing providers in the near term. How will workers' compensation work, how will anything work, without an adequate supply of willing providers to deliver the care, remediate the damage, and palliate the symptoms?
I doubt a strike such as South Korea's will make a difference. However, there has to be a way to prioritize and manage the needs of the population. Perhaps through leveraging technology? In tech is there any immediate path to efficiency or efficacy that would provide relief?
Those who would leverage other professionals (nurses, see the 1.1 million number above) are not likely to solve the problem.
Those who would blame these, those, or them are ignoring the problem. Blame will accomplish nothing.
Increasing demand is certainly not the answer. More waste, fraud, and abuse is not the answer.
The problem is simple supply and demand. There is too little supply and too much demand. The time has come to work on it in earnest. Or, we could just let folks like me start doing appendectomies? Trust me, my dad's "got this ultimate set of tools."
