May 11th, 2011

Matt Yglesias channels the CW on medical innovation:

Arguably the rest of the world gets by free-riding on American generosity. We provide the windfall profits that drive innovation and they offer payments much closer to marginal costs and save money.

Cry me a river.

According to the Migration Policy Institute, drawing on hard Census data:

In 2005, 15 percent of all US health-care workers were foreign born. … Of the 10 million persons engaged in health-care occupations ages 18 and above …1,454,883 were foreign born. … The foreign born accounted for 26.3 percent of 803,824 physicians and surgeons.

This army of professionals is very close in number to all the US armed forces put together: 1,445,000 in May 2009. The great majority of these doctors and nurses were educated at taxpayer expense in their countries of origin, which are mostly far poorer than the USA, like India and the Philippines. Not many Swedish or Japanese doctors choose to emigrate to greener pastures. The US health care system is a huge free rider on the developing world.

This regressive transfer of human capital far outweighs the hypothetical free riding on American medical and pharmaceutical innovation – usually overstated anyway.

The French Communist politician Jack Ralite was French Health Minister in 1981-83, during the swan song of the PCF in Mitterand’s early years. (The PCF ministers all quit government when Mitterand was forced into an economic policy U-turn in 1983.) Ralite tried to raise the number of medical students, but gave in to pressure from the professions. (Article in French).

Ralite understood basic capitalist economics better than John Boehner. If the US wants to cut bloated medical fees, it needs to tackle the Malthusian cartel that blocks the opening of new medical schools – and hoovers resources from the Indian poor.

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10 Responses to “Those free riders in the sky”

  1. David says:

    If overpaid doctors are the problem, why is doctor compensation a small percentage of total health care spending? Using the $200k/yr and 800k physicians figures here, doctor comp is $160 Bln/yr. Total health care spending is roughly $2 Trln/yr.

    It is unfortunate that it is easier to depict doctors as greedy rent seekers than to address the real problems of assymetirc information, misalignment of interests, and rigidities in the system due to inflexible laws and regulations.

  2. (James): “Ralite understood basic capitalist economics better than John Boehner. If the US wants to cut bloated medical fees, it needs to tackle the Malthusian cartel that blocks the opening of new medical schools – and hoovers resources from the Indian poor.
    Maybe. Sometimes we agree. For example: your post on the relation between clear title and investment.
    What if understanding of basic economics (people respond to incentives, value is determined by supply and demand) is quite widespread? We agree here on the relation between the AMA, medical schools, and doctors’ fees. Milton Friedman years ago called the AMA a rent-seeking cartel. We disagree, however, that “Ralite understood basic capitalist economics better than John Boehner.” Pay me enough to say “My name is Bond; James Bond” or “2+2=7 3/4″ and I’ll do it (anticipating critics: unless you have survived throwing yourself on a hand grenade, that is, unless your mendacity threashold is above “near-certain death”, you’re in no position to criticize that statement). Boehner gets paid in political support. Sometimes “pay” takes the form of social acceptance. Pay State University Professors of Public Policy to defend the NEA/AFT/AFSCME cartel’s exclusive position in receipt of the taxpayers’ K-PhD education subsidy or to defend minimum wage legislation and many of them will do it. Pay Newt Gingrich enough (someone has, apparently) and he’ll defend ethanol subsidies. Sometimes we call this “recognition of political reality”.

  3. Barbara says:

    The sad thing is that many inside and outside the medical community have such disdain for foreign born medical workers that it never even occurs to them how much we gain and how much others lose by their presence.

  4. David: $10bn saved here, $10bn saved there, and pretty soon you’ll be talking real money.

  5. mendel says:

    convert one of the military academies into a national medical school and we will be on our way to a national health care plan.

  6. wmd says:

    The cited article on cartels keeping the supply of MDs down doesn’t mention programs training PA and NP personnel. Not that they are equivalent professionally but 50 years ago lower tier health care providers didn’t exist. The US should be increasing supply of MDs as well.

  7. Anomalous says:

    The Swedish doctors don’t make as much as most of their American coleagues but they nodoubt wouldn’t want to have to put up with all the BS paperwork imposed by America’s free market bureaucracy. Must be peacful knowing that whoever the patient is the bill will be paid.

  8. wmd: You are absolutely right to think we should pay attention to paramedics as well as to doctors. I was too lazy to find a source on why the US imports so many nurses &c; I’ve not heard that they are hugely overpaid in the USA like consultants. The Wikipedia article offers startling numbers but not theories. Maybe the foreign-trained are simply cheaper. Maybe nursing (&c.) training has low prestige in academia, so universities compete to establish unneeded law schools and ignore the slam dunk of new nursing colleges. Maybe US higher education is just too expensive and prospective nurse trainees find the lifetime sums don’t add up.

  9. wmd says:

    PA is Physician’s Assistant, not paramedic.
    In order health care providers go from (based on time of training, ability to prescribe or dispense under the authority of a Physician):
    QMA (various names – Qualified Medical Assistant) dispense
    LVN/LPN (Licensed Vocational/Practical Nurse) dispense (Associates degree)
    RN (Registered Nurse) dispense (Bachelors degree)
    NP Nurse Practitioner limited prescription (some graduate education, not sure if Masters is required)
    Physician Assistant limited prescription (some graduate education, pretty sure Masters is required)

    Anecdotally QMA and LVN level is often trained by for profit colleges (I have a friend getting her LVN that way at age 50).

    Physician Assistant is a relatively new vocation in the US. I believe there are very few accredited programs (less than 10). It will be interesting to see how the cartel responds to expansion of the number of PAs.

  10. Debbie says:

    My mother was a registered nurse in California in the 1960′s and 1970′s. As the Nurse’s union was organizing for better working conditions, wages and benefits, hospitals began to look outside of the U.S. to begin to import nurses from the Philippines through which hospitals could undercut union protests. At the same time that nursing schools were closed at many local California institutions, programs were organized with the government of the Philippines to train nurses for export. This is a highly coordinated effort. These nurses are not produced for the local market, but specifically to leave the country because that nation is dependent upon remittances.