Tuesday, August 11, 2009

What is the optimal cartel for health care?

Many years ago, I was walking down the street with Pete Colwell, a professor for many years at Illinois and a delightful guy. He said that he looked forward to the day when doctors would peddle their wares on the street--he imagined ads that went something like, "I'll take your pulse for $5!"

Needless to say, Pete is a libertarian, and as such, resents the barriers to entry for becoming a physician. The conversation came to me this morning, because I asked my wife, who has been teaching at the USC Keck Medical School for about eight months now, how the medical students there were. Her answer: "they are very good. After all, they are medical students!"

And so it is that medical students in all US medical schools are very good--because it is hard to get into medical school. When I was the MBA Dean at GW, I did some research on admissions standards at various types of professional schools, and I found that for medical schools, they are extraordinarily rigorous. The typical med student went to a selective college and earned a 3.7 GPA in a science. To say this is rationing would be an understatement.

But is it a bad idea? Like most economists, I have an instinctive aversion to barriers to entry. But when a friend, a family member, or I see a doctor, I have to know that she is really good. The barriers to entry to becoming a physician may indeed be too high (maybe a 3.5 in the sciences should be good enough). But as consumers of health care, we are not in a position to make judgments about competence. I also really don't think we want to glean information about physicians via much larger variations in mortality and morbidity than we currently observe.


Morgan Price said...

Another way to limit the "cartel," without changing med school admissions, is to expand the range of procedures that non-doctors can perform. For example, physician assistants and registered nurse practitioners can already do much (most?) of what general practitioners do...

Anonymous said...


Matthew said...

The idea that a fairly high standard of undergraduate work means that a doctor is "really good" is just crazy.

I'd like to see some evidence that correlates doctor quality-of-treatment to some measure of educational performance as an undergraduate, but my intution is that any connection would be tenuous--the qualities required in a premed don't obviously have much to do with the qualities needed for patient care.

The logical place to weed out doctors is in their training as doctors. And I also agree with Morgan Price that lots of kind of treatment should not require doctors at all, and the fact that they do is basically pure cartelization.

Richard Green said...


"the qualities required in a premed don't obviously have much to do with the qualities needed for patient care"

Hmmm. I think one key to good patient care is having a physician who actually knows stuff. I have been teaching for a long time, and the fundamental difference between a good student and a bad one is that good students know stuff (and care about knowing stuff) whereas bad students don't.

Of course, the hypothesis isn't testable, because bad students don't get into medical school.

Uncle Bill Cunctator said...

"Of course, the hypothesis isn't testable, because bad students don't get into medical school."

It sounds like you might not have encountered the Caribbean medical school doctor yet.

Example 1) Attended school on a tiny island. Graduated. Had to do internship and residency in Illinois because California did not recognize the school. Money was paid to a politician (hearsay) to get CA to review the school. Review done, the school was approved and so were the students who graduated from it retroactively back to a certain year. Student, having graduated a year previous to the cutoff was still verboten in CA. Student then began campaign of tears. This did not work. More "discussion" with the politicians and presto-magico, student was granted an exception. This was someone who got b's and c's in high school. So, first thing they do upon moving back to CA? Go to work with a relative who then passes their practice on to them. Immediately there's a cash flow problem. What's the problem? 1/2 of the practice is geriatric care, but the new doctor thinks old people are "icky." Once they find out how profitable they are, however, the practice gets back on track. Really, for the young doctor, the only downside to this whole story is that they never had a chance to open the chain of med-spas they had planned on, due to the downturn in the economy.

Example 2) Even more depressing than the first.

Anonymous said...

19% of Caribbean medical school graduates pass national boards [USMLE].

English speaking international medical graduates have a 54% pass rate.

95% of US and Canadian medical school graduates pass national boards.

Knowledge is important.

Professor, US Medical School

homer said...

One might differentiate between the cognitive and technical skills of a physician. Technical skills such as surgery have much more to do with innate abilities (much like a carpenter)and may actually be inversely proportional to academic achievement. Whereas the cognitive functions will likely correlate more closeley to academic achievement.

David Barker said...

Is there any evidence that U.S. and Canadian medical schools produce better doctors? A study of 127,275 Canadian patients in the Archives of Internal Medicine (2005 Feb 28;165(4):458-63) finds no risk-adjusted mortality difference between Canadian and foreign medical graduates. A review of the literature in 1997 (Medical Care Research and Review (54(4):379-413)) concludes that “As concerns are raised about IMGs (International Medical Graduates) in the U.S. physician workforce, there are suggestions that IMGs do not deliver care equal in quality to that of USMGs. The review of process and outcome studies finds little support for this claim.”

I wrote a paper that is still under review on the relationship between hospital procedure volume and outcome. I briefly considered using data on the use of IMGs as an instrumental variable for hospital quality, but there is no evidence I am aware of that demonstrates that IMGs have inferior abilities.

Peter Colwell is right!

Anonymous said...

The problem with current licensing practices is that they are abused to limit competition. There is a tremendous physician shortage in the nation. This shortage increases job security and wages, but is very hard on consumers pocket books.

Texas doctors are just as good as California doctors, but Texas doctors are forbidden to practice in California. This is nonsense. The same for Canadian doctors being forbidden to practice in the US.

You say that consumers don't know enough about medicine to evaluate doctors. Neither do most politicians. How does it help to have politicians license doctors, when most politicians know nothing about medicine?

Unknown said...

In affirming Pete Colwell's ideas that barriers to entry in medicine are not needed because studies show no difference in the care given by foreign and Canadian practitioners, Mr. Barker missed an important line [the last] in the abstract for the AIM paper he mentions. The more complete line in the paper itself is: "One of the reasons to explain a lack of difference in care between I[nternational]MGs and C[anadian]MGs may relate to the careful screening and training process before licensure is granted to all physicians in Ontario." The paper also notes that "All physicians in Canada must be the equivalent of 'board certified' in the United States before receiving a general practice license, which acts as an important filter for ensuring that physicians in Canada are of high quality." Seems like a rather high, and appropriate, barrier to me, and hardly supportive of Pete Colwell's position, if that is indeed his position. You might be happy with YOUR neurosurgeon or airline pilot having gotten his job 'without barriers', but I wouldn't, thanks.

David Barker said...

Answering Rob: The AIM study finds no mortality difference for patients of foreign graduates and Canadian graduates. The authors guess that the reason might be careful screening of IMGs in Canada, but this is not tested. The other study I cite finds the same thing in the U.S. Other posts here suggest that foreign graduates are less qualified, and I have heard the same from many doctors, but there is no evidence that IMGs provide worse care.

At the very least, this result suggests that we should investigate expanding the number of well-screened foreign medical school graduates practicing in the U.S. in order to increase supply and lower the price of doctors.

I would go further, and argue that we can't afford to have every doctor meet the highest standard of quality. This simply raises the price of care and causes many to receive no care at all.

We should continue to license doctors until we reach the point where the marginal benefit of additional medical care (assuming a negative relationship between quantity and quality) equals the benefit of no additional care at all. The studies I cite suggest that we are not yet close to that point.

The issue reminds me of a story Richard once told about fire codes. I think he argued that fire codes can be too strict because they raise the price of housing, and at some point the marginal benefit of fire safety becomes less than the marginal increase in housing costs. Doctors are the same - it is possible to have standards that are too strict, and I believe that ours are.

Uncle Billy Cunctator said...

We should poll non physicians -- ask them to what degree we should open or close the floodgates, if at all, then compare their answers with their income and net worth.

Unknown said...

Back to David: Methinks your logic is wrong. Finding no difference between IMGs and CMGs in care given is NOT the same as saying that any unscreened IMG will also give similar acceptable care. Unscreened IMG is not equivalent to screened IMG. I don't disagree about having more qualified IMGs in the system. But the key word is 'qualified'. If we have access to enough qualified people, why on earth would you want to lower standards? You might be happy with a less-qualified practitioner, but I suspect you're in the tiniest minority ("Well, my doctor's not very qualified, but that's fine by me.") Really??
Also, "...meet the highest standard of quality." is unclear. Do you mean our entry screens should be lower? 'Quality' is a VERY poorly defined term in medicine and is probably best not used. It's too subjective.
The only reason many receive no care at all is the way the system is structured. We have plenty of practitioners in the system to provide care for all.
We developed standards to be sure certain professionals knew what they were supposed to know to act as competent professionals. Let's not turn our back on that unqualified success.

David Barker said...


I don't agree that quality is so poorly defined in medicine. Measures aren't perfect, but we can look at mortality statistics, HQA scores, disciplinary actions, patient ratings, etc. Besides, if quality is so poorly defined, why screen at all? By advocating screening you are granting that we can measure quality in some way.

You seem to be saying "only the very best will do." But only one doctor in the world is the very best - is he/she the only one that you would allow to work on you? Wouldn't you settle for the second best? Tenth? My point is that we have to set some threshold, and it is possible that our current regulatory threshold is too high. If we import more doctors, prices will come down and more will receive care.

You say "The only reason many receive no care at all is the way the system is structured. We have plenty of practitioners in the system to provide care for all."

You are saying that we have plenty of doctors, but many receive no care. If so, it must either be the case that doctors spend a lot of time doing nothing, or they spend too much time with some patients. The former is clearly not the case, and if the latter is true, then reform will require many to give up care - which will produce very bad politics.

Unknown said...

I'm clearly not making any progress so I quit.
If you want to pursue this, please write my e-mail: RobertL39@gmail.com

Unknown said...

Sorry. Posted under "Ben" and should have posted under "Rob". Two people using the same machine! Yikes!

Mudah said...

Technical skills such as surgery have much more to do with innate abilities (much like a carpenter)and may actually be inversely proportional to academic achievement. Whereas the cognitive functions will likely correlate more closeley to academic achievement.

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