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Affordable Care Act Success Could make Existing Healthcare Problems Worse

doctors_shortage iStockWhen there’s not enough of something to go around, who loses out? The rich and powerful? Doubtful.

Vulnerable populations are least able to command scarce resources.

When there’s not enough healthcare to go around, people with money or power get first choice. The leftovers go to those without either.

For example, Medicaid, our country’s largest program – healthcare or otherwise – for the poor, is known for extra-long waits and a limited selection of providers.

I believe the Affordable Care Act took exactly the wrong approach to expanding access to healthcare. The lines at Disney World are already long. Imagine if you started giving out discounted tickets. The answer isn’t providing cheaper tickets, but building more rides at the amusement park – or altogether new amusement parks.

There is a limited supply of “healthcare” – doctors and other professionals, hospital beds, machines and other technology, medicine. Since vulnerable people can’t command scarce resources, the best way to make sure they get the healthcare they need is to make healthcare less scarce.

The primary accomplishment of the Affordable Care Act is increasing demand for healthcare through subsidies for health insurance, expanded Medicaid eligibility and mandates that require more expensive coverage. People who couldn’t previously afford healthcare now can. People who could previously afford some healthcare can now afford more of it.

The problem is that supply is not going up to match the increase in demand. Why not? Because healthcare supply has been strictly controlled by government for more than a century. Restrictions on who can become a doctor (licensing), what other medical professionals can do (scope of practice regulations), where someone can build a hospital or nursing home (certificate of need) all limit how much healthcare is available.

These limits come in degrees. Should the state require doctors to be trained? Sure. But how much training and education is necessary? People can and do disagree about the tradeoff between supply of doctors and quality of doctors within a certain range.

The combined effect of these supply restrictions leads in part to the ongoing trend of higher prices that the ACA arguably was intended to fix.

The ACA set out to fix a symptom, but not the underlying diagnosis. The ACA logic is this:

  1. Many people can’t afford healthcare.
  2. So let’s help them pay for it.

I would replace it with this logic:

  1. Many people can’t afford healthcare.
  2. Why? Because prices are rising faster than incomes.
  3. Why? Because the supply of healthcare is constrained (among other reasons).
  4. So let’s allow/help supply to expand.

The expansion of supply has a few benefits from the perspective health equity advocates. First, expanding the supply of healthcare is a no-lose proposition. The expansion of supply helps all healthcare consumers by lowering prices (or at least constraining the rate of price increases). While all consumers benefit, the largest benefits will go to those who previously got inadequate or low-quality care.

A few small groups lose out if supply expands, those who profit from the status quo of extra-limited supply: some doctors, some hospitals, and medical schools.

Instead, with the ACA, we are getting more people with insurance without any more capacity to provide care. This is going to lead to price increases. Since “time is money” some of those price increases will be longer wait times and others will be increased charges.

So how can we reduce healthcare disparities by increasing the supply of healthcare?

In no particular order, we can:

  • Eliminate the certificate of need regulation on hospitals, nursing homes and medical imaging
  • Expand the scope of practice for medical professions that don’t require an M.D.
  • Increase Medicaid reimbursements and/or make the program indistinguishable from private insurance
  • Streamline the training of doctors and allow more people to earn M.D.s
  • Reduce the barriers for doctors trained abroad to practice in the U.S.
  • Prevent hospitals from gaining market power by consolidating

Changing the rules to make the ingredients of healthcare more plentiful will help all consumers, especially those who don’t get enough healthcare.


Image credit: iStock

About Zachary Janowski

Zachary Janowski is an investigative reporter for the Yankee Institute for Public Policy, Connecticut’s free-market think tank, and a 2012 Phillips Foundation Robert Novak Journalism Fellow writing about government’s contribution to the rising cost of healthcare. Learn more about Zachary here.

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