Two Paths Forward for Healthcare
March 1, 2019 | View PDF
Numerous prominent Democrats now support Medicare for All, the most recent proposal for a single-payer healthcare system. A recent Trump Administration report, Reforming America’s Healthcare System Through Choice and Competition, offers a different path forward, detailing the numerous ways government restricts competition and increases costs.
Medicare for All suggests that we would be turning away from markets and private insurance to government healthcare. In truth, government rules have dominated the industry for over fifty years.
A handful of economists have argued for more competition. These arguments have been largely ignored. Until now. Market proponent and economist John Goodman describes the new report as “astonishingly bold,” and “the first time any administration has explicitly acknowledged” government as the source of our most serious problems in healthcare.
Competition for profits in markets controls costs. Let doctors and hospitals compete and we can see who offers patients the best service for the best price. Yet we do not truly use markets for healthcare. For instance, doctors rarely quote prices for treatments or procedures ahead of time.
People seem to fear that profitable medicine must involve cutting costs and offering low quality care. Yet luxury thrives under competition. Luxury hotels succeed because they deliver high quality, albeit costly, service. Examples like the Mayo Clinic demonstrate that reputations for excellence in medicine can be maintained. Concierge doctors provide high quality care for paying customers.
Reforming America’s Healthcare System’s list of how government inhibits competition is too long to thoroughly examine. I will consider some highlights.
Scope of practice laws often prevent medical professionals like physician assistants, advanced practice nurses, and pharmacists from offering services consistent with their training. These professionals can competently diagnose many routine conditions or prescribe standard drugs but are restricted by law. A Mercatus Center study estimated that eliminating state scope of practice laws would save over $800 million annually. Such restrictions particularly hurt rural areas facing a shortage of physicians.
Certificate of Need laws require government-appointed boards to approve new or expanded healthcare facilities. Alabama’s law covers hospitals, nursing homes, and out-patient surgery centers, among others. Executives from hospitals and clinics often staff these boards, letting existing providers deny entry to would-be challengers. This is a dubious idea. Sears would have loved to keep Walmart and Amazon out of retail.
Telemedicine promises considerable cost savings. Smart phones can already transmit a significant amount of information to a medical professional. The barriers to telemedicine today are primarily regulatory. And the benefits extend beyond dollars: patients with limited mobility can avoid painful trips to a doctor’s office.
America arguably needs more doctors. We have fewer doctors per capita than most other developed nations despite spending a larger percentage of our GDP on healthcare. Medical doctors must be smart and spend years in intensive training, so the supply will always be limited. But the restrictions are artificial, not natural. Medical organizations run by physicians - who benefit from restricted supply - determine the number of slots in America’s medical schools.
The report proposes redirecting Federal medical education dollars to gradually increase enrollment in U.S. medical schools. Simplifying the process for approving foreign-trained doctors to practice in the U.S. offers more immediate relief. Residency and licensure burdens could be waived for doctors completing foreign medical training judged comparable to American programs.
The alternative to markets and competition is governance by experts. State Certificate of Need laws resulted from one such Federal planning effort in the 1970s. Government experts would avoid investments in unneeded hospitals and facilities to help control costs. Yet the healthcare costs have outpaced inflation since the 1970s. Experts never seem to outperform competition in controlling cost.
Government control and markets provide alternative ways to organize our economy. We rely on markets to supply us with food, which is as much a necessity as medical care, with ever-declining prices and an incredible array of options as a result. Perhaps we should give a healthcare market a chance before turning to Medicare for All.
Daniel Sutter is the Charles G. Koch Professor of Economics with the Manuel H. Johnson Center for Political Economy at Troy University and host of Econversations on TrojanVision. The opinions expressed in this column are the author’s and do not necessarily reflect the views of Troy University.