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Supply-Side Medical Reforms

Summary:
Whatever one thinks of the recent health care bill passed by the House of Representatives, one of my biggest disappointments is the lack of discussion of supply-side initiatives among even health economists who know many of the facts. One refreshing exception is Dean Baker of the Center for Economic and Policy Research, who advocates allowing more doctors to immigrate. Back in February, in a short post titled "Why Do Proponents of More Immigration Never Mention Doctors?", he wrote, in response to the question in his title:It really is hard to understand, the potential gains are enormous. If we got the pay of our doctors down to the levels in other wealthy countries it could save us close to 0 billion a year. Our doctors average more than 0,000 (that's after paying for malpractice

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Whatever one thinks of the recent health care bill passed by the House of Representatives, one of my biggest disappointments is the lack of discussion of supply-side initiatives among even health economists who know many of the facts.

One refreshing exception is Dean Baker of the Center for Economic and Policy Research, who advocates allowing more doctors to immigrate. Back in February, in a short post titled "Why Do Proponents of More Immigration Never Mention Doctors?", he wrote, in response to the question in his title:

It really is hard to understand, the potential gains are enormous. If we got the pay of our doctors down to the levels in other wealthy countries it could save us close to $100 billion a year. Our doctors average more than $250,000 (that's after paying for malpractice insurance and other expenses), with doctors in places like Germany and Canada getting about half of this amount.

The barriers may not be as large in other highly paid professions (we prohibit foreign doctors from practicing here unless they complete a U.S. residency program), but the economy would benefit enormously from exposing all the highly paid professions to international competition. It is bizarre that this topic never gets raises even in pieces like this one in the NYT touting the virtues of immigration.


I'll match him and raise him. How about even letting more people already here become doctors, nurse practitioners, etc.? Does it really take 8 to 10 years of school and training after high school for someone to learn to be a good proctologist? Hard to believe. How about letting people get certificates certifying that they know how to do certain things? We can have competition of certificate providers who have an incentive to establish a reputation. Look at almost any doctor's office wall today and you'll see that we already have that--certificates that they are trained in certain areas. But let's cut out the requirement that they go to medical school and allow competing certifiers.

Milton Friedman wrote about this long ago in Capitalism and Freedom. There's just as strong a case for it now.

And while we're at it, let's get rid of the certificate-of-need laws that say that companies have to get government permission to start hospitals, expand hospitals, build stand-alone surgery centers, etc.

Do all these reforms, and you could well cut health care prices by 50% or more.

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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