“The only function of economic forecasting is to make astrology look respectable.”—John Kenneth Galbraith, 1908-2006.

One of the most enduring myths when it comes to health care is the notion that if we just increase the supply of medical services—that is, if we just had more doctors, more hospitals, more scans—health care costs will come down.  In other words, those same “market forces” that restrain costs for lemonade, toilet paper, and bubble gum would operate no differently when it comes to health care.

I was reminded of this a few weeks ago when I overheard a couple of friends talking.  “You know,” one said.  “If we just had more doctors there’d be more competition, and health care cost would come down.  The American Medical Association (AMA) knows this and that’s why they restrict the number of doctors.  This is all the AMA’s doing.”

There are a lot of misconceptions in this statement, maybe more than can be addressed in a single post, but I’ll try.  First, the AMA isn’t exactly a powerhouse organization.  Barely 15% of American doctors even belong to it (I sure don’t).  The number of doctors America produces is dependent on the number of students who graduate from medical school, and the AMA has nothing to do with that number.  Instead, a group called the Liaison Committee on Medical Education (LCME) accredits medical schools, and must approve the opening of new schools and the expansion of existing schools.  The LCME’s job is to ensure that new and/or expanded schools have the resources to properly educate physicians.

I know all about this.  While I was Vice President for Health Sciences at Creighton University, we expanded our medical school to include a campus in Phoenix, Arizona.  It wasn’t easy.  We had to satisfy the educational requirements of the LCME, the Higher Learning Commission (the HLC—more letters, I know, but who’s counting), as well as the Arizona State Board of Education.

It was meetings, paperwork, and hours and hours of documentation.  But nowhere along the line were we ever told “don’t do this because it might increase the number of physicians.”  In fact, for the past thirty years medical schools have been encouraged to grow and expand.

But during the 1980’s, it was a different story.  Why?  We’ll get to that in a minute.

For now, though, let’s look at the competition issue again—the idea that the more lemonade and hot dog stands you build, the more prices will come down, and that same concept should also apply to doctors and hospitals.

I describe this competition fallacy in Chapter 2 of my book (if you don’t have a copy, see if you can steal one somewhere.  If you buy it on Amazon, I’ll only get a couple of bucks anyway, and the rest will just go toward Jeff Bezos’ next yacht or spaceship).  In a nutshell, the decision to buy or not buy hot dogs and lemonade is pretty straightforward, and the market works fine.  Besides, it’s not like you’re going to die or something if you don’t buy a hotdog.

But that’s no true in health care.  If you don’t get it, you may die.  That puts the patient (or the “consumer,” if you will) in a pretty powerless position.  And because health care involves expensive technology, combined with complex decision-making that even many doctors struggle to understand, those hotdog stand-style market forces of increasing the supply to bring down costs simply don’t work.

You want examples?  Exhibit A—Kearney, Nebraska.  Exhibit B—Grand Island, Nebraska.

For those unfamiliar with Nebraska geography, Kearney and Grand Island are towns of about fifty thousand, about an hour apart, smack dab in the middle of the state.  Both have had active, community-based hospitals for decades.

Then things began to change.  Ownership of both facilities transitioned to a huge national corporate entity.  Some doctors got angry.  So did some of the public.  And in both communities, a competing investor-owned hospital was also built.

For the record, these were full scale, competing facilities, each with their own operating rooms, emergency departments, and medical beds.  Each with its own nursing staff, administrative suite, facilities management, human resources, and overhead.  If we were talking about hot dog and lemonade stands, this competition should bring down prices, right?

But it didn’t.  If you don’t believe me, try this.  Go up to someone who lives in Kearney or Grand Island, and ask them, “Gee, now that you have two hospitals, isn’t health care in your community a lot less expensive?” 

That person will probably stare at you for a moment, then either laugh out loud, or punch you in the face.

No, there’s no evidence that bringing in competing hospitals has improved the quality of care or reduced prices in these Nebraska cities.  What has happened is that resources have been stretched thin, overhead increased, and costs simply shifted or expanded.

Those vaunted market forces failed to deliver.  Just like expanding the number of doctors alone won’t deliver lower costs, either.

But let’s get back to that earlier question of how many doctors do we really need.  And are we doing everything we can to meet that need?  Let’s look at some basic numbers.

From 1950 to present day, the population of the U.S. has basically doubled.  But during that same time, the number of physicians has increased five-fold, because starting in the 1960’s, medical schools expanded significantly.

This expansion occurred so rapidly that by the 1980’s, some economists began to worry that, at the rate numbers were growing, the country might be heading toward a doctor glut.  An excess of doctors, as we’ve seen, doesn’t bring down the cost of health care.  In fact, evidence was showing that by ordering more tests and performing more procedures, a physician glut would add to the already spiraling health care inflation.  You could understand the concern.  Remember, from 1960 to 1980, the percent of US GDP needed to pay for health care doubled.

As a result, medical school expansion dropped off.  Again, this wasn’t because of the AMA or some sort of deep state doctor conspiracy.  Rather, it was an attempt to slow a rapid expansion in physician numbers.

By the 1990’s, though, it was clear that societal need for health care was expanding faster than physician production.  Medical schools started expanding again, and that continues to this day.

So let’s get back to the original question.  Will simply cranking out more doctors and building more hospitals bring down the cost of health care?  No.

But several other questions remain.  How many doctors do we really need?  And what kind of doctors?  Where should they practice?  What should they practice?

How long should it take to train them?  Today, almost all medical training takes at least 8 years after high school, but a few schools have reconfigured their curriculum to do it in 6.  During the second world war, with a need for more military doctors, some schools successfully cranked them out in 5.  

Should we be doing that now?  Could we?  How might that affect our overall health care quality?  And how about those medical school tuition costs?  Why are they so expensive?

Along with many others, I’ve written about the similarities and differences between the U.S. health care system and those of other countries, including what we can learn from one another.

But can we also learn from other countries’ systems of medical education, as well?  Are we really convinced that our doctors are “better” than those of other countries?  Why or why not?

What evidence do we have one way or another that our medical schools are better?  How do other countries compare?  What can we learn from them?

More questions than I can answer in one post.  Maybe more than could be answered in several posts.

I don’t know.  Maybe someone should write a book. . .

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As some of you may recall, last year in the middle of America’s most painful season, the “Oh-gee-call-our-toll-free number-no obligation-we really-really-want-to-help-you, just-look-at-all-of-our-great-benefits, and-whatever-you-do-don’t-look-at-all-the-stuff-we-don’t-cover-if-you-do-happen-to-actually-get-sick” Medicare-Advantage enrollment period, I wrote a post about this stuff.

And since we’re now in the middle of our current 2023 Ho-Ho-Medicare Advantage season, I could certainly warn you about all of that again.

But I don’t have to.  My friend and colleague Dr. Josh Freeman, long-time Professor and Chair of Family Medicine at the University of Kansas, has recently posted a devastating article on the significant risks of signing up for Medicare-Advantage titled The Insurance Company Mafia and Medicare Advantage:  Taking Your Money and Denying You Care   I’d urge you to read it.

See you next time with a new 2023 Christmas letter.