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Health Care Workforce

PERSPECTIVE

Dreaming The American Dream: Once More Around On Physician Workforce Policy

Workforce Policy In A Centrally Planned Health System

 
Government planning of the physician workforce might possibly make sense in a country whose government effectively controls the demand side of the health sector—for example, in the Canadian provinces, in the United Kingdom, and even under the less centralized but government-controlled social insurance systems of continental Europe and Japan. In principle, health planners in those countries could try to manage the health care workforce on the basis of long-range forecasts, such as the one made famous in the late 1970s by the U.S. Graduate Medical Education National Advisory Committee (GMENAC).¹ Prospective applicants to medical schools and teaching hospitals could be bribed with targeted public subsidies—or compelled through the mechanism of numerus clausus—to fill the slots the planners have provided.² Finally, government could assure the proper spatial distribution of the physician workforce through the fees it pays physicians, or by allowing new medical practices to be established only in the locations targeted as underdoctored by the planners, as is now actually done in some countries.³

Thus, one can at least imagine an earthly setting in which health care workforce planners might make their dream come true. As I had sought to warn in my 1991 paper, "Health Manpower Forecasting: The Case of Physician Supply," however, even in that highly controlled setting, the great uncertainty surrounding the future progress of medical and organizational technology could result in huge forecasting errors that might lead to serious imbalances between the available physician workforce and the force called for by novel technologies.⁴ It has led me to question the whole exercise.

Workforce Policy Under Managed Competition

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The closest the demand side of the U.S. health sector might ever come to the health planners’ dream would be what Grumbach calls a "wholesale market" for health professionals. It would be a system in which clinically integrated health systems, such as Kaiser Permanente, compete on premiums and quality for enrolled members, who then would have their use of health care managed by their chosen plan. It is the medical analogue of higher education, where students have their education managed by competing, prepaid, pedagogically integrated education plans (universities) that procure professors wholesale on behalf of their enrollees.

Ironically, in such a system the education and training of health professionals could proceed entirely without the ministrations of government planners, just as does the training of professors in graduate schools, of lawyers in law schools, of engineers in engineering schools, and so on. A shortage of particular medical specialists would lead health plans to bid up their wages, signaling prospective candidates to enter that specialty. In the meantime, plans would have powerful incentives to economize on their use of these specialists. On the other hand, health plans could effectively bar a surplus of specialists from employment and thereby prevent those specialists from inducing demand for their services. The economic risk of such a surplus therefore would be borne fully by the health professionals themselves, just as they are now borne by lawyers, engineers, architects, and professors. An unemployed physician would be no greater social tragedy than an unemployed engineer.

Workforce Policy In Dysfunctional Retail Markets

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Grumbach observes that Americans have tried and vehemently rejected this "wholesale" market for health care and that the nation "is moving back toward a retail market for physician labor" in which patients transact with self-employed physician-entrepreneurs. I find it difficult to disagree with Grumbach’s proposition that economists are dreaming as well when they wax rhapsodic over this prospect, imagining well-informed "consumers" (formerly "patients") shopping around smartly for cost-effective health care offered by competing, revenue-seeking physicians and hospitals. Although talk about such a market began in this country with President Reagan’s "pro-competitive" strategy for health care in 1981, some twenty years later few, if any, localities in America offer patients systematic information on the prices charged by individual physicians and hospitals for particular services in their locality, let alone information on the practice style (that is, service intensity) of these providers’ treatments or their quality. Indeed, with more than 7,000 items in the American Medical Association’s Current Procedural Terminology, Fourth Edition (CPT-4) fee codes for physician services alone, each item of which the physician can price to private patients at will, how would one actually provide prospective patients with information on the fees charged by individual, competing physicians for particular services in a given locality?

It is fair to challenge those who would base U.S. health policy on price-competitive retail markets for health care to identify localities that now satisfy even the most fundamental conditions of a well-functioning market, as it is taught in freshman economics: the availability of reliable information on the prices charged by competing vendors in the market and on the quality of their wares they offer. If the providers of health care in this country have any say over it, as undoubtedly they will, that information infrastructure is unlikely to come forth soon. To pretend otherwise is, in effect, a cruel joke on the American public, albeit one likely to be played on them in the decade ahead. The question is what implication that prospect has for public policy on the health workforce.

Full Health-Sector Planning At Long Last?

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Grumbach argues that with an uncontrolled physician supply, supplier-induced demand in this retail market will lead to much wasteful health care that patients may be persuaded to desire but do not need and that regulation and planning of the entire health care sector is the "only way to achieve socially desired objectives" of equity and efficiency. His most explicit policy recommendation warrants citation at length:

Congress [should] use a renewed debate about the adequacy of the nation’s physician supply as an opportunity to create a more rational and accountable system of federal physician workforce regulation and funding. The first step in this process would be to tie federal financing of GME much more explicitly to long-term objectives for the supply and distribution of physicians...Congress should next demand answers to the hard questions of whether the current complement of physicians is effectively serving the public’s needs, and what the cost and benefit would be of further increasing the number of physicians per capita (page 25).

These recommendations may seem reasonable at first. Readers will be curious, however, specifically what Grumbach’s "firm regulatory grasp" on physician workforce policy would entail and how it could be made compatible with an unregulated demand side of the retail health care market. Simply to wish away that chaotic demand side, as Grumbach does, in favor of a comprehensively planned health care system as a platform for physician workforce planning is just to continue the health planners’ century-old dream. It is not helpful to concrete, twenty-first-century health work-force policy in these United States.

A Physician Workforce Policy For Twenty-First-Century America

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A realistic U.S. physician workforce policy must accept as permanent a payment system that envisages harsh rationing of health care for upward of thirty million uninsured Americans at the bottom of the economic ladder and lavish, often wasteful care for customers on the upper rungs who are able to pay for what is now called "boutique medicine."⁵ In between will be an entire spectrum of arrangements, ranging from tightly managed health maintenance organizations (HMOs) for low-income workers and Medicaid beneficiaries to relatively more open-ended preferred provider organizations (PPOs) for higher-income families, albeit with high cost sharing at the point of service. Nothing on the horizon suggests an alternative payment system for the next several decades.

A distinguishing characteristic of such a system is that it values the work of physicians so differently in different corners of the market. To illustrate, federal and state legislators may be willing to pay pediatricians $10 to see a poor child covered by Medicaid—or nothing at all for an uninsured child—but to pay the same pediatrician $50 or more to see these legislators’ own children in the commercial corner of the market. U.S. physicians are not obliged to treat patients whose care is assigned a low value by society. In the past, Medicaid patients have had difficulties finding physicians willing to accept them, and some Medicare beneficiaries reportedly may soon find themselves in the same situation, if Congress values physician care of the elderly at much lower fees than those paid physicians by commercial insurers. The tighter the overall supply of physicians, the more likely these access problems are to manifest themselves.

What, then, should a "firm regulatory grasp" on physician workforce policy be in the face of the American approach to valuing the physician’s work? Suppose, for example, Grumbach’s government planners managed somehow to constrain the future supply of physicians to the normative specifications emerging from a future GMENAC report, or from a forecast like that of Jonathan Weiner, who in 1994 predicted a vast surplus of physicians by the year 2000.⁶ How would the planners then guarantee that patients in the low-valued corners of the health care market get access to needed physician care?

One approach might be to abandon altogether the dream of controlling the size and composition of the physician workforce and to search instead for financial levers, other than fees, by which an adequate number of physicians can be enticed into the low-valued corners of the health care market. A good start in that direction would be a reexamination of the premises on which the current public subsidies of medical education and training are based. The commonplace rationale for them is that the education of a physician is a public good, which according to well-established economic principles should be publicly financed. But on what rationale can the education and training of a physician in the American context be declared a public good?

As I and others have argued elsewhere, correctly viewed, the process of educating and training physicians produces "human capital" that subsequently is owned by the graduates themselves and, in the United States at least, can be deployed by them in any manner they choose.⁷ Some physicians may use that capital to establish boutique medical practices. Others might use it to produce goods characterized by what economists call "positive externalities"—that is, benefits in addition to those reaped by the physician’s patients themselves. One thinks here of health care rendered the indigent on a charitable basis or rendered Medicaid beneficiaries at fees far below the physician’s opportunity costs of delivering those services or rendered in less desirable, rural locations.⁸ To encourage the delivery of services with positive externalities, however, it would be far more efficient and powerful to subsidize the production of these services directly. How might this be done in a country that will never embrace the idea of universal health insurance at uniform fee schedules?

Instead of across-the-board subsidies toward the human capital of all physicians, regardless of the subsequent deployment of that capital, a workforce policy more in tune with the twenty-first-century U.S. health system might eliminate these subsidies altogether and establish instead a government-run human capital market in which medical students could borrow the funds needed to pay fully for their own medical education. A graduate’s indebtedness of, say, $200,000 upon entry into medical practice could then be fully amortized over twenty-five years, at an interest rate of 8 percent, with annual payments of about $18,700. If the payments were made tax-deductible, as they should be, the net burden on the physician might be no higher than half that amount. As Main Street enterprise goes, this is not an enormous debt-service burden.

A good case can be made also for eliminating public subsidies toward the graduate medical education (GME) of physicians. The economist’s argument here is that the low remuneration now paid highly skilled residents per hour actually worked is so low that the residents in effect pay fully for the added costs incurred by their employers for their training.⁹ The only reason why at least this economist would be loath to see that sound economic principle on GME (the elimination of public subsidies) actually applied in practice is that the teaching hospitals now divert the public subsidies ostensibly granted them for GME to cross-subsidize the otherwise uncompensated care they render uninsured Americans.¹⁰

If all physicians were forced to debt-finance the full cost of their medical education, then a public physician workforce policy might take the form simply of judiciously targeting tax-financed loan forgiveness to achieve certain desired social ends, be it a desired ethnic or gender mix in the physician supply, a desired specialty or spatial distribution of physicians, or a desired delivery of health services with positive externalities, such as care provided below the physician’s opportunity costs (including uncompensated care). In principle, one could even use the mechanism to modulate the overall size of the physician workforce. In effect, the policy would be a slight variant of the current ROTC program for the military or the National Health Service Corps for physicians. These two programs prepay the cost of the student’s human capital and then hope to collect on it through mandated subsequent service. The program proposed here would force the student to accumulate financial indebtedness first and forgive that debt only in step with actual service delivery.

Limitation of space does not permit more than a sketch of the concept proposed here. Admittedly, it would be a radical departure from conventional physician workforce policy in the United States and in other countries. Unlike the United States, however, most other countries do not treat health care as basically a private consumer good and medical practice as just another form of free enterprise. Instead, they tend to treat physicians as quasi civil servants with explicit social obligations.¹¹ To that end, they think nothing of controlling their physicians’ fees, incomes, and even locations, which then furnishes the economic rationale for granting them fully tax-financed medical education and training in return. Because these countries pay explicitly for all services rendered by physicians, through truly universal health insurance systems whose uniform fee schedules assign the same social value to the physician’s work, regardless of the patient’s socioeconomic class, the distribution of physicians across regions and socioeconomic groups is not driven by differential social valuations of the physician’s work.¹² It is an entirely different context for a public physician workforce policy.

Grumbach delicately ignores a fundamental question now before the nation, namely: Should the number of places in U.S. medical schools be reduced or increased from the roughly 17,000 first-year slots at which the capacity of U.S. medical schools somehow has been frozen for almost three decades now, even as the capacity of other professional schools has increased? Does this capacity constraint make sense for a country whose population increases at about 1 percent per year and one that imports thousands of foreign-trained physicians, year after year? If would-be health care workforce planners are seeking outlets for their energy, let them start on this important question first.

Editor's Notes

 
Uwe Reinhardt is the James Madison Professor of Political Economy at Princeton University, Princeton, New Jersey. Health Affairs invited him to comment on the paper by Kevin Grumbach, which precedes this Perspective.

NOTES

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1. Graduate Medical Education National Advisory Committee, Summary Report, DHHS Pub. no HRA-81-651 (Washington: GMENAC, 1981).
2. This approach is used by the U.S. military, which assigns personnel to specialty slots simply by command. It is used in Germany to assign prospective undergraduates to the slots that educational planners have made available in the various academic disciplines of the nation’s government-run universities.
3. Germany has used this mechanism in recent years.
4. U.E. Reinhardt, "Health Manpower Forecasting: The Case of Physician Supply," in Health Services Research: Key to Health Policy, ed. E. Ginzberg (Cambridge, Mass.: Harvard University Press, 1991), 234–288.
5. If Congress did not cover the uninsured in 2001 when it faced a huge long-run budget surplus but preferred a tax cut instead, it is unlikely to cover the uninsured in the decades ahead, as the federal budget moves back to chronic deficits.
6. J.P. Weiner, "Forecasting the Effects of Health Care Reform on U.S. Physician Workforce Requirement: Evidence from HMO Staffing Patterns," Journal of the American Medical Association 272, no. 3 (1994): 222–230.[Abstract]
7. A.L. Gbadebo and U.E. Reinhardt, "Economists on Academic Medicine: Elephants in a Porcelain Shop?" Health Affairs (Mar/Apr 2001): 148–152.
8. If a busy physician could earn net proceeds, after incremental practice expenses, of $40 by seeing a commercially insured patient, then that is the opportunity cost of treating a Medicare beneficiary.
9. J.P. Newhouse and G.R. Wilensky, "Paying for Graduate Medical Education: The Debate Goes On," Health Affairs (Mar/Apr 2001): 136–147.
10. Gbadebo and Reinhardt, "Economists on Academic Medicine."
11. In Germany, for example, the physician associations assume legal responsibility for assuring an adequate spatial distribution of physician services.
12. There may still be problems of distribution in those countries, of course, because physicians may prefer, for nonmonetary reasons, locations away from the lower-income strata of society.

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