“Many proposals— such as Medicare-for-All bills on the left and interstate insurance markets on the right—are premised on forcing healthcare providers’ salaries downward.”
A far less important point than my other comment, but… while there is no doubt that some proposals from the right involve reducing healthcare providers incomes downward, I am dubious of the implied claim that it is many of them and/or that that is anything close to the biggest portion of the cost savings involved.
Arnold Kling wrote something about the Baumol cost disease effect recently. You emphasize here the competitive alternatives for MDs’ choices of employment, which is more than fair enough.
But it seems to me you dismiss the Say’s Law point that supply creates its own demand: because we are richer - thanks to productivity gains in other fields - we can afford to pay more for string quartet (or barber) services. That seems to me to be a bigger factor, frankly. Or at least as big.
But re: healthcare and the cost of doctors, while you do make a passing reference to “lower quality” doctors, you completely fail to mention the artificial supply restriction we put on doctors in this country. Put there by, if I’m not mistaken, the doctor guild.
I probably don’t wanna accept “lower quality” brain or heart surgeons, but I kinda think we *would indeed* be better off if we allowed doctors trained in India or Canada to do something like 80%-90% of the things that American M.D.s do now, and that we would get lower costs without any meaningful loss of healthcare quality.
I also suspect there is some additional fraction of tasks currently limited by the guild to MDs that could be done by RNs or others in the healthcare field, though I’m sure you would know which ones far better than I.
The main point being here your complete lack of focus on the supply of doctors paints a pretty misleading picture, even if your Baumol point indeed has a good deal of validity.
"But an alternative view—convincing, I believe—is that America’s heavy healthcare spending does not by itself constitute a crisis and is driven mostly by factors outside of healthcare. An earlier Bastiat’s Window piece, “From Strings to Sutures,” discussed how healthcare prices are influenced by prices in other sectors. This piece discusses how healthcare spending depends on factors outside of healthcare itself.
In particular, a 2017 article by software engineer and entrepreneur Peter Laakmann (“The Price is Right”) argues that Americans spend more on healthcare because, in effect, we’re wealthy spendthrifts (on everything)—not because of factors intrinsic to American healthcare. Laakmann’s arguments are related to a series of math-and-graph-laden posts at the RandomCriticalAnalysis (RCA) blog (e.g., “Why everything you have said about the determinants of health expenditure is wrong in one million charts: a response to Noah Smith”).
As these articles note, Americans spend a higher percentage of GDP on practically everything—for the simple reason that Americans save less and consume more than residents of other countries. Rather than stashing our income away for the future, we choose to buy things today—education, housing, travel, and, of course, healthcare. Plus, Americans have unusually high disposable income."
“Many proposals— such as Medicare-for-All bills on the left and interstate insurance markets on the right—are premised on forcing healthcare providers’ salaries downward.”
A far less important point than my other comment, but… while there is no doubt that some proposals from the right involve reducing healthcare providers incomes downward, I am dubious of the implied claim that it is many of them and/or that that is anything close to the biggest portion of the cost savings involved.
Hmmmm…
Arnold Kling wrote something about the Baumol cost disease effect recently. You emphasize here the competitive alternatives for MDs’ choices of employment, which is more than fair enough.
But it seems to me you dismiss the Say’s Law point that supply creates its own demand: because we are richer - thanks to productivity gains in other fields - we can afford to pay more for string quartet (or barber) services. That seems to me to be a bigger factor, frankly. Or at least as big.
But re: healthcare and the cost of doctors, while you do make a passing reference to “lower quality” doctors, you completely fail to mention the artificial supply restriction we put on doctors in this country. Put there by, if I’m not mistaken, the doctor guild.
I probably don’t wanna accept “lower quality” brain or heart surgeons, but I kinda think we *would indeed* be better off if we allowed doctors trained in India or Canada to do something like 80%-90% of the things that American M.D.s do now, and that we would get lower costs without any meaningful loss of healthcare quality.
I also suspect there is some additional fraction of tasks currently limited by the guild to MDs that could be done by RNs or others in the healthcare field, though I’m sure you would know which ones far better than I.
The main point being here your complete lack of focus on the supply of doctors paints a pretty misleading picture, even if your Baumol point indeed has a good deal of validity.
https://arnoldkling.substack.com/p/some-links-d9b
https://graboyes.substack.com/p/when-healthcare-spending-isnt-about
"But an alternative view—convincing, I believe—is that America’s heavy healthcare spending does not by itself constitute a crisis and is driven mostly by factors outside of healthcare. An earlier Bastiat’s Window piece, “From Strings to Sutures,” discussed how healthcare prices are influenced by prices in other sectors. This piece discusses how healthcare spending depends on factors outside of healthcare itself.
In particular, a 2017 article by software engineer and entrepreneur Peter Laakmann (“The Price is Right”) argues that Americans spend more on healthcare because, in effect, we’re wealthy spendthrifts (on everything)—not because of factors intrinsic to American healthcare. Laakmann’s arguments are related to a series of math-and-graph-laden posts at the RandomCriticalAnalysis (RCA) blog (e.g., “Why everything you have said about the determinants of health expenditure is wrong in one million charts: a response to Noah Smith”).
As these articles note, Americans spend a higher percentage of GDP on practically everything—for the simple reason that Americans save less and consume more than residents of other countries. Rather than stashing our income away for the future, we choose to buy things today—education, housing, travel, and, of course, healthcare. Plus, Americans have unusually high disposable income."