A subject of some repeated discussion in UES, as with most topics I suppose, is that of healthcare regulation. It has been a position of ours that scarcity of healthcare is a fact, since it is like any other good or service, and that one can build on that premise to understand certain things about healthcare. For instance, if healthcare is not like air in its relative abundance everywhere, then there must be some way of rationing it. Usually, prices will ration it. Generally, the more abundant healthcare is, the more the price ought to drop. The less abundant it is, the higher the price will be in a market economy.
Regulations limit the availability and abundance of healthcare because it raises the cost of doing it. If a doctor has more rules to comply with, that doctor will have to spend more time dealing with them and less time dealing with our health. This implies that the quality of healthcare may go down while the scarcity of healthcare actually goes up. One facet of this involves start-up costs. In other words, in LaLa World, where it costs $50,000 to start a medical practice without regulation and $55,000 to start a law practice and the payoffs are the same and they both lie on the person’s same indifference curve, then one would expect most persons in this situation to start a medical practice. But if the LaLa world government says that, say, you have to maintain certain files in such a way, that doctors must maintain insurance, then there is a cost for the medical practice attached to it. That means that overall start-up cost of the medical practice may be $60,000 now. Most people will become lawyers instead.
And we know the last thing the world needs is more lawyers.
One of the regulations raising the cost of healthcare is certification. While some believe that there are benefits to the public of certifying the competence of medical professionals, certification undeniably raises the cost of healthcare because it requires years and years worth of investment. These costs are deferred thanks to loans for many, but in the end the costs are paid one way or the other, thereby reducing the incentive for some to enter the field and increasing the scarcity of healthcare. This, in turn, may act to raise the salaries of the doctors who do make it through the arduous path toward becoming an unsupervised doctor without a drinking problem. In similar fields where certification acts ostensibly to serve the public, as in education, research has found no gain to the public but it has found increased salaries from such policies. Some then, like myself, see certification as ultimately self-serving at the public’s expense since there will be fewer doctors (or teachers or lawyers or engineers or– any profession under heavy regulation).
According to The Economist, in the Democratic Republic of Congo (DRC), the World Health Organization has begun approaching the problem of healthcare scarcity by attacking its structural roots as opposed to its fast-growing branches:
She has given vocal support to what she calls “horizontal” approaches that improve general health in poor countries—as opposed to glamorous top-down programmes that focus on one disease. That is one of the things that marks Dr Chan out from her predecessor, Lee Jong-wook, whose pet project was a high-profile anti-AIDS programme, “3 by 5”—which aimed to treat 3m HIV-positive people with antiretroviral drugs by the end of 2005. Putting more emphasis on general health and “amateur” care might sound like common sense, but advocates like Dr Chan or Dr Amazigo may well have some tough arguments ahead. For some African governments, single-disease efforts may seem like a more tempting focus when hard choices have to be made.
We could learn something from the WHO and DRC for healthcare in America. Although skeptical of the efficacy of the WHO (this isn’t a question of its accomplishments, but rather the misallocation of resources it represents), I think this is a good start. Here’s more:
In Congo alone, the organisation has recruited more than 35,000 community workers for its river-blindness project; they get nothing for their labours except the knowledge that they are protecting their families from disease.
Volunteers from each village are taught how to measure out the annual drug doses, fill in the obligatory record forms, and watch out for side-effects. WHO supplies the drugs and the villagers do the rest themselves. WHO was forced to devise the strategy after it received an offer from Merck, a pharmaceutical firm, of free supplies of a drug to people at risk of river blindness.
Merck is stepping up here, apparently, although if you were one of its policy-makers, you would be doing this too in order to garner goodwill from people and governments so as to avoid overregulation or the outright appropriation of your patents. Regardless of motivation, it’s a stand-up act and a worthy counter to those who bemoan corporations when in fact they may be the most important reason we have the living standards we have today in the world.
It certainly didn’t come from labor! Happy Labor Day everyone!
An interesting post, Admiral. I would say that the WHO-DRC program rus afoul of another strand of economic reasoning when applied the United States. In the DRC, it seems to me that the relative opportunity costs of getting the training encumbered by a villager or subsistence farmer are dwarved by the expected benefits of being able to stave off the riverbed blindness in one’s self, family, and friends.
Why might this be? First of all, I’ll hazard to say that the participant’s time is not so productive as to make participation economically crippling relative to the loss of eyesight. Secondly, as the beginning of the article notes, the distances to be traversed make a formal health system unfeasible at present (and perhaps for ever).
The latter line of reason simply does not generally hold in the United States or the First World more generally. And while opportunity costs of such training very likely would be smaller than the expected benefits, it seems to me that the training is a far more expensive option than going to a specialist for diagnosis and a pharmacist for executing the prescription.
Suffice to say, I doubt this would be a pragmatic solution to America’s medical ills, with the possible exceptions of the poorer parts of the South and remoter mountain communities. That said, I myself am no fan of public certification of the professions. There might be some scope for the practice when information costs are high (i.e., it’d take too long to check your physician’s credentials), but I’m unsure how much water that argument holds in the internet age.
ah, but is it a coalition of voting medical professionals who lobby for certification, or is it politicians capitalizing on a universal preference for good health by mandating certification and cloaking it in language that appeals to the masses? bob, your last sentence hits the nail on the head — only i’m think you have it backwards. people might find less expensive healthcare to be worth the time and energy it takes to accurately distinguish between the competent and the unqualified (and the risk they, rather than the government, would therefore have to assume), in the absence of a nation-wide standard for comparison — but i for one am skeptical!
:)
I’m not skeptical. Clearly, many would. Some wouldn’t. One has to look at the overall cost-benefits of the relative policies. I don’t really disagree with anything Bob wrote, but I just want to clarify that the point I think the US can learn from is that healthcare needn’t have to come from licensed professionals — both Sherwin Nuland and perhaps more colorfully Atul Gawande have made the case in their books that doctors make mistakes *all the time* and that the practice, as with anything human, is an art.
We certainly don’t need to have a license to figure out how to prescribe certain drugs for certain symptoms. We certainly don’t need a license to figure out how drugs work in various parts of the anatomy. How many poor people would have access to simple healthcare services that make their lives easier if the costs involved weren’t so high — and gated by way of certification/regulation?
We certainly don’t need a license to read Florida statutes or to figure out how to format a complaint, answer, reply, or other pleading. We don’t need one to learn the Federal Rules of Evidence. How many poor people would have access to legal services who don’t now in order to enforce their rights if the bar wasn’t raised so high on costs? Would you bother going to law school? I wouldn’t.
And on… and on… and on…
As far as doctors vs. politicians making these rules, it’s clearly both. It certainly is with law and education. In any case, if you want to know how politics really works, consider a politician’s perspective in the following tradeoff: how much people actually care about these certifications vs. contributions by doctors, lawyers, or educators.
again, money is only good to a politician insofar as it can be translated into votes. if an official can’t sell the policies his special interest bankrollers are looking for, they’ve gotten him nowhere.
That’s half right. Money and connections often go hand in hand, so it may very well tie in with personal wealth in the short or long-run. This is a frequent scenario. One might look to lobbyist work afterwards done by any number of politicians as an example.
As for the part I think you’re half-right on, we’re agreeing about the concept, you’re just saying that people care about all this certification stuff. I’m not saying they don’t, I’m only saying that it’s fairly clear that the influence of these lobbies and special interests are the overriding cause that no reform occurs, and one need only look at education for an example.
The teacher’s unions mobilize vast amounts of money to thwart any type of action that will make them work harder or be more responsive to the consumers. Corporations tend to do the same thing if their interests are affected. This is unfortunate because when government stays out of things and these parties pursue their own interests, everyone tends to win. Only when government grants favors, whether it be by license or tariff, do people lose.
your third paragraph i a hundred percent agree with you on. your first paragraph i don’t understand. i’m saying campaign contributions, and connections as well, don’t translate into personal wealth (ie. money in a politician’s private pocket), but rather p.r. that earns votes to seize/keep power for the recipient. you’re saying people don’t care about certification, i’m saying you’re wrong. i’m notright to care, only that they’re buying what those contributions are being used to sell.
whoops.
*i’m not saying they’re right to care…
Slade, to quote my comment:
“we’re agreeing about the concept, you’re just saying that people care about all this certification stuff. I’m not saying they don’t”
Notice the “not” in “I’m not saying they don’t.”
So, to respond to yours, no, it’s quite obvious that I’m not saying they don’t. I’m saying it’s not a causal factor in what is going on here, although if people did in fact know the research regarding medical licensing (great MR post is around showing it doesn’t improve medical care) or teacher licensing (I possess some research on that), then it would be a great help because they’d realize the public benefits, if any, are minimal, and seem to most likely damage the system as well as limit access to it.
gotcha, i misread and was confused.