Doctors, Let’s Go to the Market

How Many Doctors Are Appropriate?

When I was a student, I learned in medical sociology that professionals such as doctors create their own demand. There was even a phrase along the lines of “Built beds are filled beds.” The basic argument of medical sociology was this: “In economics, supply increases in response to demand, but in healthcare, when supply increases, it creates demand. Therefore, the supply of medical services should be restricted by the state. If left alone, it will generate its own demand and continually raise social costs.” In other words, as the number of doctors rises, medical spending only increases, so the number of doctors should be kept under government control. But I believe this contains at least two errors.

The first error is that it mistakes cause and effect. Supply is created where demand exists; there is no exceptional law by which supply creates demand. As supply increases in areas where it was previously scarce—and therefore expensive and difficult to access—the hidden demand that existed in the past is simply revealed because people can now access the service more easily and at a lower price. Supply can emerge only because demand has still not been sufficiently satisfied, and this merely makes it appear as if supply is drawing out demand. Even though medical services deal with human life, they are not economically special.

The second error is that it evaluates increases in supply and demand negatively, as though they were simply wasteful spending. If consumers benefit from an increase in supply, then this should not be viewed negatively. If consumer welfare increases, then an increase in healthcare spending as determined in the market should be seen positively.

Since I am an anesthesiologist, I would like to give an example from my own field. In the past, patients with claustrophobia either had to endure an MRI by force or give up on the scan altogether. But these days, with more anesthesiologists available, such patients can receive outpatient sedation anesthesia while their vital signs are monitored. They complete the scan in a relatively comfortable, less anxious state and then wake up. It is also safer because an anesthesiologist is monitoring them. It is true that more money is spent, but because patient welfare has increased, this is a positive development. Looking at this phenomenon, one cannot reasonably say, “There are too many anesthesiologists now, so they’re putting people to sleep for MRIs that used to be done just fine without it, simply to make a living. They’re licensed thieves.” Patients who previously could not even imagine undergoing lengthy scans, radiation therapy, or frightening dental treatment—including children and people with intellectual disabilities—are now receiving successful treatment. The increased number of doctors (supply) has not created unnecessary medical services (demand); rather, it has helped meet medical needs that were previously hidden due to economic reasons or limitations in medical technology. And once all that hidden medical demand has been met, further increases in the number of doctors or hospitals (supply) cannot make patients demand more.

So how many doctors are appropriate? No one can know. If an innovative new way to treat myocardial infarction appears, more doctors may be needed in a particular field. Changes in population distribution may alter needs. As artificial intelligence replaces some of doctors’ roles, fewer may be needed in other fields. Just as Stalin could not predict the proper number of workers in Soviet glass factories, today’s governments cannot know the proper number of doctors. Therefore, if we care about maximizing consumer welfare, the most reasonable course is to leave the number of doctors to the market.

Licenses Granted by the Market

At this point, an objection arises. If the market determines the number of doctors, then who will issue licenses? Wouldn’t anyone who wants to become a doctor be able to do so easily? Wouldn’t unqualified people perform improper medical procedures? Put simply, people worry that quacks might become rampant. But in a free market, new tools for verifying medical qualifications would emerge.

First, let us think from the perspective of patients and their guardians, the consumers of medical services. Even now, before receiving treatment, patients visit hospitals and look into which university a doctor graduated from and at which hospital the doctor trained. They ask acquaintances which hospital gave the most effective treatment. The internet is overflowing with posts in online communities evaluating comparable hospitals and doctors. The same would remain true even if the government did not restrict the number of doctors through licensing and medical school quotas. In fact, authoritative physician associations or consumer groups offering such evaluations would likely emerge. Once a patient has decided to receive the benefits of modern medicine, the likelihood that he or she would seek out a quack is low. Patients and guardians have a desire to evaluate which doctors are qualified, and wherever there is demand, supply always follows. Just as American consumer groups compare the performance and safety of automobiles, credible organizations would emerge to distinguish doctors with appropriate qualifications.

The same is true from doctors’ perspective. They too would manage their competence and reputation. Medical schools with trustworthy faculty and educational resources would join together to form evaluation bodies, assess whether each graduate is truly qualified, and publicly issue certificates of qualification—serving in place of government licenses—for those doctors they recognize as trustworthy. Of course, there need not be only one such physician organization. In the United States, there are college entrance exams such as the SAT and the ATC. Neither is administered by the government. Students may choose one or take both, and colleges evaluating applicants may choose one or the other as well. Likewise, even if the government does not issue medical licenses, private-sector organizations in a competitive market can compete in evaluating qualifications and help patients choose doctors suitable for their treatment.

The market’s evaluation of doctors’ qualifications would also be carried out by health insurance companies. In the case of severe diseases that are difficult to understand even after an explanation, it is extremely difficult for patients themselves to evaluate and choose the relevant specialists. Of course, private companies that assess the capabilities of medical institutions could provide such services, but the insurance companies with which patients are enrolled would probably carry out such evaluations even more actively than anyone else. Insurance companies would evaluate the level of medical services provided by affiliated hospitals and recommend hospitals where insurance payouts can be used most effectively. That would help attract more consumers to their insurance plans. In a society with a free market, health insurance cannot be monopolized by the government alone, so multiple private insurers would participate in the market. As a result, they would work hard to investigate and evaluate which hospitals and which doctors are competent in order to provide useful information that helps patients make choices. In the United States, to open a practice or find employment, doctors must carry malpractice insurance. In that process, insurance companies look at the school the doctor graduated from, the hospital where the doctor trained, and prior work experience. If problems are found, the insurer will refuse to insure that doctor. Of course, a doctor may still choose to practice without accepting that insurer, but would then bear much greater litigation risk. This is a living example of how the free market can play a role comparable to licensing. Therefore, even if the government’s monopoly on issuing medical licenses disappears, there is no need for excessive concern.

What if a medical accident occurs? In that case, the matter can be contested through civil damages. Even if the practitioner did not hold a government license, if a medical procedure undertaken by mutual agreement led to a negative outcome, the practitioner would simply need to prove that he or she had sufficient qualifications and that the act in question was a scientifically grounded and validated medical procedure. In that process, certificates issued by credible institutions could serve the role once played by government licenses.

Of course, some people will still seek out unscientific medical services. But considering that unqualified procedures are already widespread even under the current system—where the state monopolizes licensing and criminally punishes unlicensed practitioners—I do not believe the benefits of the licensing system are large compared with the advantages offered by a free market.

At present, the state-issued license for Korean medicine doctors actually serves to recognize and encourage unscientific medical procedures. The state’s license is guaranteeing practices that harm patient safety. Drugs and medical procedures that have not been scientifically verified are being protected under the name of licensing. In a free market, by contrast, because there would be no state protection, those attempting unscientific procedures would have to worry about civil lawsuits from patients. As a result, pseudo-medical practitioners who cannot rely on the protection of licensing would gradually see their activities curtailed.

Why Leave It to the Market? Only Through the Market Can We Escape the Shackles of Government

Medical school is one of the most popular majors in university admissions, but physicians’ actual job satisfaction is quite low. Doctors’ dissatisfaction stems not only from diminished prospects for economic success but also from the erosion of their professional independence. Once doctors receive a license and open a medical institution, they are at the same time forcibly designated as healthcare providers under the National Health Insurance Service. They cannot set medical fees as they wish, nor can they negotiate with insurers. They also cannot agree directly with patients on the price of medical services without going through the insurer. Because the government controls medical fees, the price mechanism cannot function in the healthcare market. This creates all kinds of misallocation of medical resources and distorted incentives. Moreover, medical judgments are determined not by medical papers or textbooks but by notices issued by the Health Insurance Review and Assessment Service; if a doctor departs from the government’s guidelines, not only are claims reduced, but audits follow. In other words, doctors are not justifying or being evaluated on the basis of scientific and objective knowledge. They have become slaves who must obey the instructions of government bureaucrats and a socialist healthcare system. This is also why many doctors call themselves “medical slaves.”

How, then, can they escape this condition of slavery? Some say that medical fees should be normalized. But simply raising fees is not a solution. No one can know whether 1,500 won is the proper amount or whether 100,000 won is. Just as a 1,500 won copayment distorted the healthcare market, even if the fee were set at 100,000 won, government-imposed pricing would simply create a different kind of distorted incentive. And if the fee for an outpatient visit rose from 10,000 won to 100,000 won, would doctors who previously spent two minutes per patient begin spending 20 minutes? Or would they simply continue seeing 100 patients a day in two-minute visits while collecting 100,000 won? Normalizing medical fees is obviously necessary and right, but the standard for that normalization must be a price determined by the market. (Some compassionate people say that if the healthcare market were privatized, poor people would not be able to receive medical services. But that problem can be addressed by providing those in need with the funds for medical expenses. Forcibly lowering medical fees is not the right approach. If given the chance later, I would also like to argue that a free market can deliver more effective medical services to lower-income groups at lower cost.)

The primary way for doctors to escape this condition of servitude is to free themselves from the government’s compulsory designation of healthcare providers and from the National Health Insurance Service’s monopoly. But if they try to escape the government monopoly, the government will demand that doctors surrender their licenses. It will say that because doctors are protected by the government under the licensing system, they must naturally submit to government control. Thus, if doctors fight to reclaim professional conscience and freedom of thought, a moment will come when they must decide: will they choose licenses, or freedom? (If the goal is merely to fight for higher medical fees, then there is no need to face such a difficult decision—but they must still continue living as slaves.)

Since the rise of liberal thought, it has already been proven that the less state intervention there is—from international trade to welfare systems—the more markets prosper and the greater the benefits individuals enjoy. The healthcare market is no different. Of course, the licensing system will not disappear overnight and be replaced all at once by a free-market system. But just as status hierarchies disappeared, I believe that the current system—under which the state protects doctors under the name of licensing while controlling prices—will someday be replaced by free market exchange. If we move toward a free market, the healthcare market will prosper and poor patients will benefit as well. If we fail to do so, healthcare in South Korea will remain nothing more than a cheap, tattered system. I hope this short essay gives my respected fellow physicians and all those thinking about healthcare policy something to reflect on.

Yoonseong Jang / Doctor

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Original title: 의사들, 시장으로 가자

Author: Yun-seong Jang

Date: 2018-09-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=column&pn=16&idx=11123