I learned something new the other day - something I'm surprised I didn't know before. It came up in an article in Bloomberg:
With a shortage of doctors in the U.S. already and millions of new patients set to gain coverage under President Barack Obama's health-care overhaul, American medical schools are struggling to close the gap.So let me get this straight. Currently, the Federal government fund about 90% of the cost of training new doctors at a cost of $12 billion per year? The health care industry itself only picks up 10% of the cost?
One major reason: The residency programs to train new doctors are largely paid for by the federal government, and the number of students accepted into such programs has been capped at the same level for 15 years. Medical schools are holding back on further expansion because the number of applicants for residencies already exceeds the available positions, according to the National Resident Matching Program, a 60-year-old Washington-based nonprofit that oversees the program.
....
The cost of training one new resident, meanwhile, has grown to about $145,000 a year, said Atul Grover, chief public policy officer for the Washington-based medical colleges group.
There’s no easy solution. Boosting the number of taxpayer-financed training slots beyond 85,000 would require Congress to allocate money at a time of contentious budget debates. Adding private financing means tapping new sources of cash, such as from health insurers. Importing doctors from overseas is controversial. And training doctors is long-term work, taking as many as 10 years.
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Teaching hospitals pick up the funding for about 10,000 positions annually, Grover said in a telephone interview.
I would love to know how this state of affairs got to where it is. I can't think of another major profession - other than those that are exclusively government professions (military, police, firemen, etc.) where the government pays such a huge amount of training costs for its key personnel. It's actually kind of mind-boggling.
I have two other questions. I am assuming that the bulk of these costs are compensation paid to the residents, such as it is. According to this website, resident salaries range from $40k to $67k in New York City. I would imagine they are lower elsewhere in the US. And as a rule of thumb, benefits may be another 25% to 30% above that. What makes up the difference between this and the $145k average cost cited in the report?
And second, don't hospitals actually charge for the services of residents? Are those revenues just nothing but pure profit, since the costs are picked up by the government?
And the only answer they have to solving the doctor shortage problem is to have the government fund more of the costs of residencies.
I will say that some of the loudest harumpfers I know in response to the "you didn't build that" meme are doctors.
Yeah, right.
Welcome to the wonderful world of medical economics, where all the market incentives push the wrong way, where all the profit is privatized, and where all the subsidies that socialize the risk are hidden.
ReplyDeleteMissing from your quote (first sentence): "...Barack Obama’s health-care overhaul, American medical schools are struggling to close the gap." Not sure how that disappeared!
ReplyDeleteAs for your analysis -- these are very good questions.
Hospitals can't bill insurance companies for work that residents do, because they're not yet full-fledged doctors. Residents do most of the work, then they do a cursory review of their diagnosis and recommendations with a physician supervisor. The supervisor is the one who submits the bill.
ReplyDeleteCutting corners on the supervision can be disastrous. The University of Pennsylvania paid a $15B fine to Medicare in the 90's after submitting fraudulent claims with no physician supervision, the largest Medicare fraud fine ever until the HCA mess.
Hospitals only bill for the costs directly incurred by the facility, such as rent for the hospital bed and the supplies used for care. The physician sends a separate bill for his or her services performed while attending the patient. Most physicians have their own practices outside the hospital, and only come to the hospital when attending to patients they have been assigned. So much of the funding gap covers infrastrucure costs the hospital must provide for residents that don't have anyplace else to work.
Residents are fully licensed physicians and hospitals bill for their services.
DeleteOne more government-subsidized profession: The airlines industry, too, is heavily populated by ex-military pilots.
ReplyDeleteAnd let's recall when Ronald Reagan (who was very afraid of socialized medicine as a paid spokesman and rightwing rabble-rouser) became a federal government employee, he didn't have his own family doctor paid for out of his own free-market, ruggedly-individualist, after-tax income. Instead he had 6 Navy doctors compete to remove his rectal polyps. More proof that the right wing loves government, but they want to exploit it for themselves, not anybody else.
Well, it should be noted that if the teaching hospitals didn't get the %90 of cover from taxpayers, it would get funded with higher costs of service to patients everywhere. It really isn't the amount of money, its how efficiently it can be sourced.
ReplyDeleteSecond, this bottleneck may be pinned down by deficit hawks today, but it hasn't always been, and the doctor shortage has been growing for years. As long as there is a shortage, those already in the profession can demand exorbitant fees and salaries. Not hard to see how the AMA views that.
In anything as complex as health care financing, there are all sorts of theoretical incentives that you could hypothesize are critical in determining pricing. But most of these mechanisms are only theoretical, there is no evidence they determine the high prices we pay in the US for medical services.
DeleteIt's true that the number of MDs the US churns out every year is decreasing, but that doesn't mean that there's a doctor shortage that allows MDs to charge more by way of supply and demand. We actually have more MDs per capita than just about anywhere. If the AMA were engaged in restraint of trade to increase what MDs can charge by limiitng the supply of MDs, the AMA is being pretty damn unsuccessful in that evil endeavor.
And you can't appeal to maldistribution of specialties within the MD force to resuce the idea that high prices in the US stem from artifical MD shortages. We actually do have fewer primary care MDs per capita than some developed countries, and way higher specialists per capita. That imbalance is undoubtedly a big part of why US prices are out of control, but supply and demand are not the mechanism. It's exactly where we have the shortfall in MDs, primary care, that MD remuneration is lowest, while all those glutted out subspecialists get paid much more than primary care providers.
We pay much more for less in this country in the way of medical services because we tolerate monopolies and cartels, both horizontal and vertical. Supply and demand only works inside such an economy to the extent that the monopolists find it convenient to let it. Since they only find it profitable to let market forces squeeze primary care, their managed care revolution only squeezed primary care. The utterly predictable higher costs of providing medical care via subspecialists over primary care aren't a disincentive to the monopolists, because the insurance arm of their cartels collects higher carrying charges the higher fees balloon at the same time the hospital chain arms of their cartels collect higher carrying charges off the providers who work in their hospitals.
Consider as well the doctors who are educated at public colleges and universities.
ReplyDeleteNot only do we pay for their training, many of them choose specialties that have no public benefit at all like cosmetic surgery for only patients that are able to pay cash, botox injecting etc.
ReplyDeleteWe import software engineers easily but doctors with great difficulty.
ReplyDeleteA lot of post-graduate education is government funded. Doctors are so vital, I can't see how paying for their training is anything but a good idea.
ReplyDeleteI'm not sure this is quite the same thing as graduate education. You can bet the residents don't think so - they work like mad.
DeleteI tend to view the residency as a kind of apprenticeship. And from what I've seen in the comments, the hospitals seem to making quite a profit off of their apprentices. These are profitable businesses that are employing the residents.
We spend over 15% of our GDP on health care - well over $2 trillion dollars, most of which ends up in the hands of the providers, the drug companies and the insurance companies. You mean these guys can't afford to pick up a measly $12 billion?
And, even assuming that this is something the government should be doing (and under a different system of paying for health care -like single payer - I might agree that it makes sense), why is this being paid out of Medicare? Isn't that money supposed to be paying for the medical costs of retirees? Isn't the medicare trust fund supposedle teetering on the edge of insolvency? Why isn't it paid out of general revenues?
To support the comment above: people who get PhD's in science, math, and engineering fields in general do not pay for those degrees. Their tuition is usually covered, plus a $15k-$25k per year stipend and partial health insurance subsidies, by "teaching assistant" and "research assistant" positions. Teaching positions are funded by the universities (which may themselves be gov't funded to a greater or lesser degree) because paying a graduate student to grade papers and lead lectures is cheaper than paying a full professor to the do the same. Research positions, on the other hand, are typically funded out of research grants from agencies like the NSF, NIH, DARPA, etc. Full professors are expected to apply for and win funding for research projects from these agencies (typically winning funding like this consistently is a condition of getting tenure), and then they pay graduate students to actually do the research, which they supervise, out of those funds. The graduate student eventually writes a thesis based on this research, and earns a PhD.
ReplyDeleteTo figure the cost of educating a grad student, you could include just the stipend plus health insurance, or add in the tuition which is being covered as well -- something like $30k per year at my university -- but then, after my second year in grad school I was not taking any classes, so I'm not sure the cost to the university of having me there was anywhere close to that -- or you could add in the salary of the person who supervises the PhD, maybe dividing by the average number of graduate students per professor to get a per-grad-student cost (but that's kind of cheating, since professors also teach undergraduates) or you could say that the research the student did to earn their PhD itself cost a lot of money, and add in the cost of all the equipment and overhead for that research. But there are other outcomes to that research besides the students getting their PhDs. And some research (conducted by post-doctoral researchers, professors, and "research professors" who do not teach classes and do not have tenure) is funded which does not earn anyone a PhD. So the results have value which does not get counted if you pretend that all research costs should count as costs of education.
I suspect there are similar issues in tallying up the cost of medical residencies, though I don't really understand how that works.