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Comment by koolba

5 days ago

Someone should try this with medicine. Instead of subsidizing insurance (demand side), let’s spend the money to bring doctors to the USA from all over the world and have them work in free clinics (supply side).

we also could just stop having the federal government limit the number of residency slots so we could have enough doctors trained in the US.

You basically can’t or it won't have the same effects because medicine doesn’t really follow the same dynamics as most other markets: the supplier (doctor) has an information asymmetry and thus makes most of the decisions, while the buyer (patient) is not usually the payer (insurance) so aren’t really incentivized to save.

Kenneth Arrow famously analyzed the healthcare market and made the above insight: https://assets.aeaweb.org/asset-server/files/9442.pdf

I know he was a Nobel Laureate but not sure if this is the work that won him the Nobel.

Updated: I should qualify my statement by pointing out this is for the US healthcare system.

  • > the supplier (doctor) has an information asymmetry and thus makes most of the decisions, while the buyer (patient) is not usually the payer (insurance) so aren’t really incentivized to save

    Counterfactual: patients in India routinely shop around for second opinions and negotiate fees.

    • Completely fair point. I should have prefaced my statement with US based healthcare system is structured this way. I don't know how the dynamics are in other countries -- though I do suspect it's similar in term of information asymmetry. I imagine doctors everywhere have some pretty advanced and specialized knowledge. I don't know enough about India to know how they overcome this issue or if they do or not.

  • Fixing a severe shortage is actually likely to have some impact.

    For instance, if there's a lot more doctors, the payer may be able to negotiate lower prices. We already have insurance mechanisms that drive patients to the providers that the insurer has negotiated with...

  • It's even worse. This isn't a simply supply-demand curve. Supply here often increases demand (patients live more and longer; They need more care).

  • He said free clinics.

    • But then you're just shifting the cost somewhere else. The doctors aren't working for free. Someone is paying them. It's just not the patients in the case of free clinics.

      In addition, doctors aren't the only cost centers in health care either. Even if they're free, which is sort of already the case or fairly inexpensive for the insured in the US, the overall cost of healthcare will still be high.

      Plus if you want completely free clinics (everything from doctors to medicine, etc), then you're not talking about a market solution to the issue, which is completely fair too. No one said you have to use a free market solution for this problem.

      My point is that we can't expect a free market to solve this issue. It isn't as simple as supply and demand.

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You don't even need to import foreign doctors: just increase the number of residency slots.