Northern Industrial Dent

Northern Industrial Dent

Medical School Costs - Supply & Demand Issues

My goal here is not to weigh in on Obama-care.  That is heated political subject that has strong opinions on both sides, most of which are unwilling to waver regardless of how much contrary evidence is shown to them.  Unfortunately, once an issue becomes political – many from both the right and the left take their party's viewpoint and they are done taking in new evidence at that moment.  Of course, each side will accuse the other of this…but it is nothing where they themselves would admit guilt.

Too often, politicians have put peripheral entities (insurance companies, tort lawyers, drug reps) in their cross hairs for reform.  While those groups, et al, certainly play a role in the current rising costs of health care, blaming them skirts the biggest issue – simple economics.  Rising health care costs are primarily caused by the age-old economic factors of supply and demand.  Supply is limited and demand for an individual is only limited by the ceiling of one's resources.

In most industries, the products offered must be priced at a level that will not bankrupt the intended consumers in order to be marketable.  In health care, demand often exists even when the costs far exceed one's total net worth.  As long as self preservation is a staple of our species, there will be no decrease in demand to push prices down.

If demand is unchangeable, the solution must be found on the supply side.  Shortages of doctors all over the country lead to prices being higher than they would be with an adequate supply.  Some towns/states offer to pay tuition in exchange for future service (the "Northern Exposure" plotline), but this barely dents the overall nationwide cost of medical tuition.  It is interesting that many states complain about doctors working outside their borders, but then continue to raise prices for the state sponsored medical schools and also hold strict limits to incoming classes.  There are good economic and educational reasons behind both of these items, but the end result is a limited supply of doctors.

We have to find a way to flood the market with medical care options.  Obviously the best doctors will still be able to charge premium prices for those who can afford it, but this would serve to lower the prices of basic care and common procedures.  Whether you choose to increase the sizes of medical schools, increase the number of medical schools, or take another option such as adding accreditation to foreign (such as Caribbean) medical schools – the supply of doctors needs to be greater.  The solution might prove to be expensive and lead to higher taxes, which would make it unpopular, but the populace would need to understand that they would be saving money in the long run in the form of lower health care costs.

Ultimately, in order for it to prevent from bankrupting the nation, health care will have to reach [near] commodity status.  Supply will have to hit the market at such levels that consumers, not providers, set the final price.  The best way to get to that point is another debate in and of itself, but a serious alteration needs to be made with the overall strategy.  Let's understand that supply & demand is the overall problem, then we can focus on the right tactics.

About the Author

- EW

 

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