Economists' Favorite Bible Verse – An intro to today’s FREE Insight from the Chairman

If political economists were to pick a favorite Bible verse I suggest it would be Proverbs 4:7. King James Version reads: "Wisdom is the principal thing; therefore get wisdom: and with all thy getting get understanding." 

Alas too many people neglect or discount this Old Testament admonition. One of the contributions of the Obama administration is to foster the search for wisdom and understanding.  In a recent Washington Post column, opinion writer George F. Will explains why (“Obama’s tardy epiphany about government’s flaws,” 12/11/13).

He does so using the analytic leverage of public choice economics. 

Obama...seems unfamiliar with Mancur Olson’s seminal “The Rise and Decline of Nations,” which explains how free societies become sclerotic. Their governments become encrusted with interest groups that preserve, like a fly in amber, an increasingly stultifying status quo. This impedes dynamism by protecting arrangements that have worked well for those powerful enough to put the arrangements in place. This blocks upward mobility for those less wired to power.

Obama, startled that components of government behave as interest groups, seems utterly unfamiliar with public choice theory. It [public choice theory] demystifies and de-romanticizes politics by applying economic analysis — how incentives influence behavior — to government. It shows how elected officials and bureaucrats pursue personal aggrandizement as much as people do in the private sector.

Will also explains why we trust our institutions less and are less trustful of others.  He notes:  "Government’s dignity diminishes as government grows to serve factions of those sophisticated at manipulating its allocation of preferences. Social solidarity is a casualty of government grown big because it recognizes no limits to its dispensing of favors."

There it is, a cogent explanation of America's current malaise. This is a column I would strongly recommend if still teaching public choice to university students.  It captures the essence and application of economics to public policy.  

In today's "FREE Insights", John Goodman, president of the National Center for Policy Analysis, uses this logic to predict Americans access to physicians as the federal government becomes ever more intrusive. 

It complements George Will's excellent piece with a specific application of public choice to one of the maladies of ObamaCare, the expected reduction in availability of medical doctors.  

Wide public understanding is scarce.  The two columns by Will and Goodman could increase it.  This is something to celebrate.  Please join me in doing so. 

-John

What If No Doctor Will See You?

By John C. Goodman

At this point we have no idea how many people will become newly insured under ObamaCare. For the first year out, the number of people with insurance may actually go down! But the administration's goal is to insure an additional 30 million people and eventually a lot of those people will acquire health plans. When they do, the economic studies predict that they will try to double their use of the health care system.

Adding to this increased demand will be new mandated benefits. The administration never seems to tire of reminding seniors that they are entitled to a free annual checkup. Then there are new benefits for women, including free contraceptives. And all of us will be entitled to a long list of preventive services — with no deductible or copayment.

But the health care system can't possibly deliver on all these promises. The original ObamaCare bill actually had a line item for increased doctor training. But this provision was zeroed out before passage, probably to keep down the cost of health reform. The result will be increased rationing by waiting.

Take preventive care. The health reform law says that health insurance must cover the tests and procedures recommended by the U.S. Preventive Services Task Force. What would that involve? In the American Journal of Public Health, scholars at Duke University calculated that arranging for and counseling patients about all those screenings would require 1,773 hours of the average primary care physician's time each year, or 7.4 hours per working day.

And all of this time is time spent searching for problems and talking about the search. If the screenings turn up a real problem, there will have to be more testing and more counseling. Bottom line: To meet the promise of free preventive care nationwide, every family doctor in America would have to work full-time delivering it, leaving no time for all the other things they need to do.

When demand exceeds supply in a normal market, the price rises until it reaches a market-clearing level. But in this country, as in other developed nations, Americans do not primarily pay for care with their own money. They pay with time.

How long does it take you on the phone to make an appointment to see a doctor? How many days do you have to wait before she can see you? How long does it take to get to the doctor's office? Once there, how long do you have to wait before being seen? These are all non-price barriers to care, and there is substantial evidence that they are more important in deterring care than the fee the doctor charges, even for low-income patients.

For example, the average wait to see a new family doctor in this country is just under three weeks. But in Boston, with ObamaCare-type reform, the wait is about two months.

When people cannot find a primary care physician who will see them in a reasonable length of time, all too often they go to hospital emergency rooms. Yet one study found up to 20% of the patients who enter an emergency room leave without ever seeing a doctor, because they get tired of waiting. Be prepared for that situation to get worse.

When demand exceeds supply, doctors have a great deal of flexibility about who they see and when they see them. Not surprisingly, they tend to see those patients first who pay the highest fees. A New York Times survey of dermatologists in 2008, for example, found an extensive two-tiered system. For patients in need of services covered by Medicare, the typical wait to see a doctor was two or three weeks, and the appointments were made by answering machine.

However, for Botox and other treatments not covered by Medicare (and for which patients pay the market price out of pocket), appointments to see those same doctors were often available on the same day, and they were made by live receptionists.

As physicians increasingly have to allocate their time, patients in plans that pay below-market prices will likely wait longest. Those patients will be the elderly and the disabled on Medicare, low-income families on Medicaid, and (if the Massachusetts model is followed) people with subsidized insurance acquired in ObamaCare's newly created health insurance exchanges.

Their wait will only become longer as more and more Americans turn to concierge medicine for their care. Although the model differs from region to region and doctor to doctor, concierge medicine basically means that patients pay doctors to be their agents, rather than the agents of third-party payers such as insurance companies or government bureaucracies.

For a fee of roughly $1,500 to $2,000, for example, a Medicare patient can form a new relationship with a doctor. This usually includes same day or next-day appointments. It also usually means that patients can talk with their physicians by telephone and email. The physician helps the patient obtain tests, make appointments with specialists and in other ways negotiate an increasingly bureaucratic health care system.

Here is the problem. A typical primary care physician has about 2,500 patients (according to a 2009 study by the Centers for Disease Control and Prevention), but when he opens a concierge practice, he'll typically take about 500 patients with him (according to MDVIP, the largest organization of concierge doctors). That's about all he can handle, given the extra time and attention those patients are going to expect. But the 2,000 patients left behind now must find another physician. So in general, as concierge care grows, the strain on the rest of the system will become greater.

I predict that in the next several years concierge medicine will grow rapidly, and every senior who can afford one will have a concierge doctor. A lot of non-seniors will as well. We will quickly evolve into a two-tiered health care system, with those who can afford it getting more care and better care.

In the meantime, the most vulnerable populations may have less access to care than they had before ObamaCare became law.

This article was originally posted on December 17, 2013 at: HTTP://TOWNHALL.COM/COLUMNISTS/JOHNCGOODMAN/2013/12/14/WHAT-IF-NO-DOCTOR-WILL-SEE-YOU-N1762672/