Looming Doctor Shortage Is One More Example Why Central Planning Doesn't Work In Health Care

The U.S. in general, and Washington state in particular, are facing a severe doctor shortage in the next 10 to 15 years. Not only is the population growing, but the baby boomer generation is aging and will require more medical services in the near future.

Also, the new federal health care law will give health insurance to 30 million previously uninsured people over the next few years. These millions of newly insured patients will further strain our stretched provider network.

In 2010, there were 27.7 doctors per 10,000 people in the U.S. and 27.0 per 10,000 people in Washington. Medical schools graduated 16,838 students nationally in 2010, and the University of Washington, our state’s only traditional medical school, graduated 169. Washington has a new osteopathic school in Yakima that will graduate its first class of 75 students next year.

The Association of American Medical Colleges anticipates a shortage of 150,000 doctors in the next 15 years. The Bureau of Labor Statistics predicts a need for 145,000 new doctors by 2018. Our state will potentially face a shortage of 3,000 to 4,000 doctors over the next 10 to 15 years.

For years the government has controlled the number of medical schools, the number of graduates from these schools and their licensure. This has created a distortion in the supply of health care. Government central planners are even attempting to legislate not only the total number of doctors, but also the number of primary care physicians and the number of specialists in the country. This is as futile and absurd as the government telling people how many laptop versus desktop computers we need. No amount of information or analysis will enable central planners to know how many doctors, and of what type, the country needs.

The government has imposed central planning on the demand side of our health care system as well.

Starting in 1943, the federal government allowed employers to take a business income tax deduction for the costs of employee health benefits. Individuals, however, were not allowed to take this same tax deduction. This was the beginning of the U.S. employer-financed health insurance model. In 1965, Congress passed Medicare and Medicaid entitlements into law, which placed millions of people into government-financed health insurance. The U.S. now has a health care system in which 85 percent of the costs are paid by a disinterested third party – either the employer or the government. It has become very rare for patients to take responsibility for the total cost of their own medical care.

This government-planned, third-party payment system has created ingrained market distortion and has caused an excessive demand in 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. In this situation prices soar and goods and services are heavily over utilized.

The advantage of an open market is that resources are constantly adjusted and balanced so that supply consistently equals demand. As demand fluctuates, supply will increase or contract to meet consumers’ needs. In health care, demand is set by the patients and supply is a function of the number of doctors and their availability.

Only when patients can control their own health care dollars can the demand be correctly determined. The necessary and sufficient number of doctors each community needs can only be known through millions of routine, voluntary actions made in the free market.