Coming: A Two-Tiered Health Care System
I believe we are moving toward two different health systems.
In one system, patients will be able to see doctors promptly. They will talk to physicians by phone and email. They will have no difficulty scheduling needed surgery. If they have to go into a hospital, a “hospitalist” (who reports to them and not to the hospital administration) will be there to make sure their interests are looked after. They may even have an independent agency that reviews their medical records, goes with them when they meet with specialists and gives them advice on every aspect of their care.
In the other system, waiting times will grow for almost everything ― to get appointments with physicians, to get tests, to obtain elective surgery, etc. Patients may find that they don’t have access to the best doctors or the best hospitals. They may find that the facility where they are treated does not have the latest technology. In terms of waiting times and bureaucratic hassles, health care for these patients may come to resemble the Canadian system. It may become even worse than the Canadian system.
The evolution toward a two-tiered system was already under way before Barack Obama became president. But ironically, the Affordable Care Act (ObamaCare) is accelerating the pace of change. It is doing so in four ways.
New doctor hours: 9 to 5
First, ObamaCare is supposed to insure 32 million additional people by this time next year. If the economic studies are correct, these newly insured will try to consume twice as much medical care as they have been. In addition, most of the rest of us will be forced to have more generous coverage than we previously had. There will be a long list of preventive services that all plans will be required to cover ― with no deductible and no copayment ― and commercial insurance will be required to cover a great many services previously avoided (including, everyone must know by now, contraception). These two changes alone will boost the demand for care considerably.
On the supply side, there is really no provision under ObamaCare to create more doctors. In fact, the supply of doctor services is likely to decrease because of two more features of health reform. Doctors, who are already weary from third-party interference in the practice of medicine, will step up their retirement dates as they contemplate the prospects of even more bureaucracy. Also, hospitals are acquiring doctors as employees at a rapid rate. Indeed, more than half of all doctors are now working for hospitals. When doctors quit their private practices and start working for hospitals, they reduce the number of hours they work. (Forty hour work weeks and golf on the weekends replaces 50 and 60 hour work weeks.) Since they have a guaranteed income, they also become less productive.
These four changes add up to one big problem: we are about to see a huge increase in the demand for care and a major decrease in the supply. In any other market, that would cause prices to soar. But government plans to control costs (even more so than in the past) by vigorously suppressing provider fees and the private insurers are likely to resist fee increases as well. That means we are going to have a rationing problem. Just as in Canada or Britain, we are going to experience rationing by waiting.
Consider how much waiting there already is in the U.S. health care system. On the average, patients must wait three weeks to see a new doctor. In Boston, where we are told they have universal coverage, the average wait time is two months to see a new family doctor. Amazingly, one in five patients who enters a hospital emergency room leaves without ever seeing a doctor ― presumably because they get tired of waiting.
All this is about to get worse. Waiting times are going to be especially lengthy for anyone in a health insurance plan that pays providers below-market fees. The elderly and the disabled on Medicare, low income families on Medicaid, and (if the Massachusetts precedent is followed) people who acquire health insurance in the new health insurance exchanges will find they are financially less desirable to providers than other patients. That means they will be pushed to the end of the waiting lines.
Those who can afford to will find a way to get to the head of the line. For a little less than $2,000 a year, for example, seniors on Medicare can contract with a concierge doctor. These doctors promise prompt access to care and usually talk with their patients by telephone and email. They serve as an advocate for their patients, in much the same way as an attorney is an advocate for his client.
But every time a doctor becomes a concierge doctor, he (or she) leaves an old practice serving about 2,500 patients and takes only about 500 patients into the concierge practice. (More attention means fewer patients.) That means about 2,000 patients now must find a new physician.
Because the two tiers of health care will compete with each other for resources, the growth of the first tier will make rationing by waiting even more pronounced in the second tier. As a result, waiting times in the second tier could easily exceed those in Canada.
I also believe all this is going to happen much more rapidly than anybody suspects.
Hopefully this time people will recognize that these government policies hurt the poor and middle class.
@JD
I wouldn’t hold your breath. I’m sure that down the road some people will still find a way to blame this disaster on capitalism.
@Dewaine
If they win, then I’m sure we’ll end up with single payer.
One can only hope!
“Two-tiered” health care can be found in every country with government-dominated health care. In Britain, the upper class is treated by private doctors in private hospitals and pays with private insurance. The National Health is for those who can’t afford better. In Canada, the upper class jumps the queue or takes a holiday in the States — where they can receive treatment in private hospitals with private doctors. Everyone else waits for care.
Why do these countries allow two-tiered health care, when the thrust of government policy is egalitarian? Because as long as their egalitarian healthfare doesn’t personally affect the politically and economically powerful, they don’t care a whit.
This is simple economics, if supply goes down and demand goes up, then price goes up. If there is a price ceiling, then there is a shortage. Poorer people will have to rely on the black market for timely care.
Two tiered healthcare systems are useless. Its a shame that we are leaning towards a European style system.
“These four changes add up to one big problem: we are about to see a huge increase in the demand for care and a major decrease in the supply.”
– Sounds like long waits to me!
Waiting times are already bad… I cant imagine how much worse a two-tiered system would be.
I don’t see the alternative being much more egalitarian either. As long as others are profiteering off of another person’s health, we’ll have some being able to afford better quality care than those with less resources.
As long as scarcity exists we will always have richer and poorer. The question is: how can we optimize our welfare inside a universe with scarcity? Capitalism. Capitalism allocates resources efficiently. Unfortunately, we don’t have a capitalist world.
You clearly are following your logic based on an old capitalist economic mindset. I don’t think any economic system man has created thus far is even close to being egalitarian or objective. Pure capitalism also discards many externalities that aren’t accounted for by market forces, which is why we won’t ever have to worry about living under pure capitalism nor any other pure idealistic system. In terms of scarcity, does it really exist as perceived by literature? Or do we create much of it? Unfortunately, we live in a world filled with greed and self-interest.
“In terms of scarcity, does it really exist as perceived by literature?”
Forgive me if I am misunderstanding your question, but the answer is yes, scarcity is the fundamental problem of economics. As technology improves we keep moving toward a society with “less” scarcity, but we can never attain no scarcity. Capitalism doesn’t create scarcity and we can never achieve true egalitarianism because scarcity can never be completely alleviated.
Economics operates under a myriad of assumptions. Give me clear examples of this so-called scarce world we live in?
? All of our resources are finite (i.e. scarce).
But at an even more fundamental level, time is a scarcity issue. Even if we didn’t have material scarcity, it takes time to utilize those resources meaning our desires are not being fulfilled immediately.
Even if the universe is infinite with infinite resources, every single thing in it is scarce because we cannot attain it instantly. Work is always required in satisfying our wants and needs and, thus, we will always have to choose a way in which to allocate ourselves to achieve our goals.
That’s the way you choose to view the world and this scarcity issue refers to material needs and the appropriate timely distribution. Nobody expects to get an apple at the blink of an eye, even though technology in the future may make that possible through nano-tech and quantum field theory. You have no real evidence over resources and time being finite, and the concept of time being finite is based on your perception. Take the duality of time where physical law deems it time-reversal invariant while our perception at the macroscopic level is not time-reversal invariant. So to go back to the main point, we should be cautious when attributing absolute truths to anything, especially to something that alters our reality directly.
Time.
Income.
De jeur power.
De facto power.
Debt limitations (you can only borrow so much, or inflate away so much, or tax so much).
Revenue limitations (you can only tax 100% of all incomes).
Essentially, the notion of scarcity is the inability to satisfy all of our wants given what we have. It holds for governments (being able to do whatever it can, while ensuring no “struggles” for control at the top and a minimum lifestyle to allow this), to corporations, to individuals.
My comment above can also allude to your assertions. We can get very philosophical and scientific about this, but in conventional terms, scarcity as we think about it is a human-created concept and can easily be used to corrupt power over the less informed.
It’s more than a human-created concept. You cannot create energy. It must be scarce.
Believe it or not, scarcity is a fundamental rule. It holds for each and every human and organization on this planet, as well as every living organism.
Perhaps future knowledge or technology will loosen the constraint it imposes on all of us, but it’s a fundamental rule, and not something that is simply used to corrupt those who are less informed.
I disagree that it’s a fundamental rule. What makes it an absolute truth? You seem to be very sure about this. Actually, energy and matter has been created out of nothing in labs already. One day I am sure they ‘ll be able to sustain it for longer than plank time (10^-43 seconds). Life and nothing in it is intrinsically scarce as we know it thus far — we haven’t yet discovered the limits of life.
Absolute truth? That’s silly, based on the level of human knowledge. It’s likely we find exceptions to things we previously thought were absolutely true as we learn more and more about our place in the universe.
A fundamental rule based on what we know, our empirical observations, and our theoretical knowledge? Absolutely.
I also respect that your knowledge of physics (astronomy, perhaps?) is much greater than mine.
We disagree about the nature of scarcity, and no reason to really continue to quibble (I think we’ve both learned something).
Richard: A fundamental rule cannot be altered unless you consider breaking “fundamental rules.” That is why it’s not any different from an absolute truth, which I agree is a silly concept. I haven’t found any “real” empirical evidence suggesting a concern for scarcity that is unaltered by human behavior. Anyhow, I agree that we disagree with the nature of scarcity, but hopefully we can both learn and open our minds from this conversation. Thanks for your time and insights.
Ron,
Part of the problem is that we likely have slightly different definitions of terms that need to be nailed down.
Fundamental rules, in my opinion (and what I’ve learned), are a function of the current state of human knowledge. To the best of our knowledge, they are true. But they may be found to be wrong (or partially wrong) as our knowledge evolves.
Happened in biology and the fundamental rule of what centrosomes were (until a roundworm was found that didn’t have one).
There are also looser uses of the term that may lead to a bit of difference.
Again, take care.
Oh, I know that. I just don’t agree with the semantics attributed to that term, but I do understand your point and the way it’s used. But even if we follow that term with that concept, from what we know and have observed thus far, I continue to contend that there is no evidence to deem that scarcity is a fundamental rule in our world. In fact, I think there is more to show the opposite so far. Some fields may be limited and assert this, but I like to view things from an comprehensive (multi-disciplinary if you will) approach. Anyway, it all comes down to disagreeing on the premise of the argument. Thanks to you for your time.
“When doctors quit their private practices and start working for hospitals, they reduce the number of hours they work. (Forty hour work weeks and golf on the weekends replaces 50 and 60 hour work weeks.) Since they have a guaranteed income, they also become less productive.”
– sounds like a great life to me!
There is nothing wrong with a two-tiered health care system or a health care system with multiple tiers. In other markets there is an infinite variety of tiers of goods and services. People needing food can stop by a convenience store, the Dollar Store or a high-end grocer. The problem is when advocates for the poor worry that medical care is not entirely equal and try to regulate the type of care that can be provided. How come low-income patients cannot see dental technicians without paying a dentist? How come most states disallow dental hygienists from practicing independently? Why can’t patients choose to see who they want — including corporate medical practitioners, unlicensed foreign medical graduates and anyone else people choose? It’s partly because of protection from the industry dominated by doctoral-degreed practitioners with the blessing of public health experts, who worry about the poor turning to poor quality care.
Boston went to far as to attempt to prevent MinuteClinics from opening locations because officials did not think a retail clinics could provide services of high enough quality to operate.
John,
Excellent analyses, and yes I have also witnessed all of the elements you outline in your article. One matter, regarding persons not seeing physicians in emergency room, may be due to nurse practitioners ability to dispense with their primary complaint before a physician is necessary, or redirecting to ambulatory care if not critical or acute. Nevertheless, waiting room times in ER has increased, to your point?
It’s important to note that not only will supply decrease, but there are significant barriers which make the supply of doctors fairly inelastic. Meaning that increases in cost will rise far faster than normal. I’m inclined to agree with John that this is all going to happen quicker than normal.
Buster, there may be a minor difference between rent-seeking and requiring licenses for physicians.
Small caveat:
“If the economic studies are correct, these newly insured will try to consume twice as much medical care as they have been”
This will be a short term effect. In equilibrium they will use less than that maximum that occurs right after they obtain insurance.
And price controls are an interesting phenomenon. Wage controls during WWII helped lead to non-wage benefits that weren’t as prevalent before (employer-sponsored health care, for instance).
Price controls, with a massive influx of demand, have other problems. If you can’t scale up operations to meet the new demand (meaning that if costs increase as you produce more), to increase quantity, you have to skimp elsewhere (namely, quality).
Also, with the price controls, you may not be able to cover capital costs of expansion anyways (more plants, bigger plants, etc.), even if your operation is scalable. Electricity pricing has limited price controls, but are able to charge differential rates that cover capital costs, if need be.
The USSR experienced problems with price control. Although they were mainly focused on the ability to meet their quota (or go beyond it), quality inevitably suffered. While we won’t face the same level of problems, it is potentially inevitable that we could end up there.
And, our nation’s maternal mortality rate (MMR) will probably become even worse than it is now. As noted in the UN/WHO report of 2012, we would need to reduce our nation’s maternal mortality rate by 80% to rank among the top 10 developed nations of the world. Think what it will be in 5 years when uniformly available Primary Health Care becomes even worse. Among the 43 developed countries of the world, our nation’s MMR has actually worsened since 1990.
John–this is so true and will be ignored by policy-makers, who continue to believe that they can screw around with healthcare regulation and it will have no effect on doctor supply or behavior. Not so.
Going back a few decades, there is a live demonstration of the two tier effects of government medicine. Many of our states and counties had hospitals for the poor, such as San Francisco General, where waiting times are extremely long. As the supply of doctors in the hospital was determined by the goals of the UCSF teaching program, and community doctors did not practice there, people could wait 12 hours in the ER, and all day in outpatient pharmacy. Most county hospitals in this state closed after Medicare and Medicaid, but those that stayed open in large cities- SF, LA, Santa Clara, and others, nearly immediately went into a competitive mode to get more private patients, to offset the poor reimbursement from government patients.
There is a third way that might emerge. Some larger health plans may purchase their own hospital with an existing supply of hospitalists and a medical group partner. The turning point will be the retirement of the 25% of doctors of Boomer age, which begins—NOW. Then, there can be disintermediation as large self-insured employers contract directly with this integrated system, to mirror the success of Kaiser.
The Feds are becoming more alarmed about the formation of hospital systems, because it harms, they think, competition, not recognizing how their own law drives providers together to stand strong against the gale force risk contracts that come from HHS.
In California, we are beginning to see doctors refusing to take insurance at all.
In return, they charge only half of their regular fees. As I said, patients, at least, should be aware that the government is manipulating the medical profession in potentially damaging ways.
And they should be wary of the exchanges as they are not apt to offer the savings that have been touted. Several large plans and several large healthcare systems in California have chosen not to be part of the exchange system. Meaning that their present clients will have to find new plans, doctors and hospitals.
There are some very bright commenters on todays comment list.
Wanda J. Jones, MPH
President
New Century Healthcare Institute
In the preceding months, I have not only spoken with physicians about establishing concierge practices – – but nurse practitioners are also looking to structure their healthcare delivery in the same way. Dr. Goodman was pronouncing this transition last year – – what a prognosticator!
John
I actually think that a two-tier system is desirable. In a recently published book, “The Evolution of U.S. Health Care Spending,Post-WWII *1948-2009)” I show -using an econometric model- that the lion’s share of spending growth is attributale to insurance driven, ever-incresing, percentage of health spending as as part of consumption. My conclusion is that the first tier of health spending should come from Goodman’s own ‘health savings accounts’ (plus catastrophic coverage), and that, because there are people in our society that literally cannot care for themselves, single payer coverage should be available as a safety net. We should not abandon market forces as the primary allocator of resources, nor should we abandon the most needy among us.
Al Peden
That’s very interesting, as someone who’s training to become a health economist.
Without looking at the book right now (it’s in my queue), do you take into account the Baumol explanation, i.e., of the lack of labor-saving technology innovations in health care that we are seeing? Perhaps looking at labor- and capital-shares in this sector over time?
I am working on some models as to why we are seeing this rise in health care consumption, coupled with seemingly worse health outcomes (in terms of preventable diseases, say obesity and diabetes), but I look forward to reading your book.