Wednesday, March 13, 2013

Spontaneous order in the health workforce

David Henderson talks about it here.

Let's be clear about three things that would still exist if we did away with residency requirements tomorrow: the M.D., the AMA, and (for now at least) private HMOs. Even if you don't have private HMOs public insurance serves about the same purpose in what I'm about to say (I know that may bother some people, but I'm not interested in talking about that facet of health care right now - I anticipate private and public insurance would do about the same thing in this situation).

If I were an HMO I'd differentiate strongly between an M.D. that the AMA approves of and one that it did not approve of. If I were a patient I would too, but let's be honest: often HMO trumps patient. If I were an HMO, I might not cover non AMA approved doctors at all or if I did I'd cover a lot less. Over time we'd learn (this is the essential thing that spontaneous orders do better than planned orders - not that planned orders don't learn, but they aren't as quick to) exactly who needs what kind of scrutiny. HMOs would probably never pay for a non-AMA approved surgeon but they may pay for pediatricians that have intermediate approval levels. We see a lot of efficient division of labor now between doctors and nurses, but you'll see more of that.

One thing I don't think you'll see - so long as we have a substantial third party payer presence - is a free for all where the AMA does not play a role in very closely monitoring the skill sets of doctors. But this would be a situation of certification rather than licensing.

If the AMA was too restrictive in handing out these certifications (not an odd thing to anticipate) you would probably slowly see alternatives developed. HMOs might get into the certification business themselves (what better way to eliminate the information asymmetry?). Even if the AMA was still too restrictive, you would have ways of solving the current problem of too few doctors without resorting to unqualified doctors (although some people would, and we'd have to think about what to think about that).

I strongly prefer this certifications regime over a mandated licensing regime, with a few quibbles. I don't think it's especially illiberal to think there's a public interest in ensuring that no one - no matter what dire straits they're in - goes to a quack surgeon. That sort of thing might justify a certain type of licensing regime for certain types of doctors with a mechanism for keeping an adequate supply of surgeons. But even if we justify a certain type of licensing like this, two facts are still pretty clear:

1. The cases where licensing may be preferred to certification are few, and
2. We still need to worry about adequate supply where we might like licensing

In any case, the system needs to be dynamic. Medicine is getting more capital-intensive which may presage a deskilling of the profession (at least in certain areas). It's bad enough that licensure limits supply and provides unnecessary rents to doctors. At least we get pretty damn good doctors in that bargain. If we still had these sorts of supply restrictions after medicine was largely automated we'd be paying a lot of the same kinds of costs for little benefits at all.


  1. btw - anyone know a good book on the economics of the health workforce?

    Not a libertarian book on why the licensing is bad - just a more general book on the economics of that labor market.

  2. Daniel

    It seems to me that you make several implicit assumptions that you ought to question.

    First, you assume that there are no Pavlovian responses in the purchase of health care. However,to the contrary, it has been shown by even simple studies of patient satisfaction increasing substantially if the physician wears a white coat that the patient response to all health care is mostly Pavlovian and little "spontaneous order" is involved. Doctors sell the invisible.

    Second, you assume that patient information will lead to change but its doesn't. The best example is Lewis writing Liar's Poker. Lewis thought that the publication of the book would so expose the securities industry that customers would stop doing business or demand changes that the industry would fail. Instead, the book became a how to do it manual for fraudsters and Goldman Sachs is more powerful than ever.

    If one doubts such, look at the weekends revelations about GS and the fact, again, that nothing happened.

    Last, and this you wholly miss. Life is such that at the end of it everyone is a potential victim of a fraudster, who will promise a miracle cure at his or her clinic in Hot Springs or where ever. Licenses for health care are strong because all of us are so potentially weak.

    You never saw the power, for example, of Laetrile.

    In sum, you might reflect on the truth Every System Is Perfectly Designed To Get The Results It Gets

    What the United States spends on health care as a % of GDP and how the system is regulated are as they are because our system of governance is that broken. If you want to change health care here, you have to change the Constitution in fundamental ways which isn't going to happen.

    Remember, everyone promises, "you get to keep the doctor you want." Everyone wants an AMA doctor.

  3. Hasn't the AMA seen a decline in membership of late?

  4. The revolution is already underway:

  5. Well Daniel, this book isn't specifically dedicated to the economics of the health work-force, but it does have a chapter on the subject - albeit from a global perspective, instead of an American perspective.


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