<p>Think about it this way:</p>
<p>Two provisional assumptions:</p>
<p>1.) Rural areas have FAR too few doctors. While this is not in question, I believe we get empirically confirmed predictions if we assume that cities ALSO have noticeably too few doctors. So let’s start with this assumption.</p>
<p>2.) Try this assumption, too: the major deterrent for people visiting doctors, going to the ER, etc., is not monetary price - especially for insured people. The major deterrent is, in fact, time. This is the main reason, I think, why people (again, esp. people with insurance) avoid doctors and such - because appointments take weeks to make, ER visits can take 12 hours, etc. The time cost (once again, for emphasis, this is mostly true of the 85% of the country with insurance) outweighs the monetary cost.</p>
<p>The bottom line: Our country has dramatically too few doctors, cities included. This clogs up the system with time costs, which leads to underservice and dead weight losses.</p>
<p>I believe these two assumptions give us substantially accurate predictions.</p>
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<p>Prediction #1: More doctors, more expenditure</p>
<p>What you’d normally expect: You would normally expect an increase in quantity to decrease price and thus increase quantity, but quite possibly without an increase in total expenditure, and certainly not a dramatic enough increase to upset afan the way it seems to.</p>
<p>**What we see:**Increasing the number of doctors in cities seems to increase quantity of care, dramatically increasing total expenditure.</p>
<p>Why a shortage would explain it: Patients are considerably underserved, and would want more medical care if only they could find doctors to provide it within any kind of reasonable timeframe.</p>
<p>Implication: More doctors does in fact lead to more usage of medical services, but this is not a bad thing - in fact, it’s what patients would do if only they could find the doctors to do it.</p>
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<p>Prediction #2: More doctors, but prices don’t drop.</p>
<p>What you’d normally expect: You increase supply, and prices should drop.</p>
<p>What we see: I don’t really know - maybe somebody else can supply this information. The tone of some of afan’s posts seems to imply that he doesn’t believe prices are falling, which would be consistent with the assumptions I’ve made.</p>
<p>Why a shortage would explain it: Doctors currently charge their patients a very high time cost as well as the monetary costs. If an increased number of physicians reduces the time costs, then they actually are saving patients’ resources, and so cost actually IS going down.</p>
<p>Other factors at work: Medicare’s cost restrictions and fee schedules.</p>
<p>Implication: Doctors are in scarce supply, and patients really do want to see more doctors - it’s just that the time cost is currently prohibitive. Reductions in this type of cost (say, nursing phone staff hotlines?) are crucial, and probably even justify increasing the monetary cost of medical care, if that will actually help.</p>
<p>Why time costs are deadweight loss and worse than monetary costs: At least if you charge patients an extra $1000, that money goes to somebody who can use it. If you force a patient to sit in your office for three hours, then that lost time doesn’t do anything productive for anybody.</p>
<p>On the other hand: Time costs are more expensive for rich patients and less expensive for poor ones; monetary costs are vice versa. It’s currently poor patients who have more underservice problems, so increasing monetary costs to save time costs might generate equity concerns.</p>
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<p>Prediction #3: More doctors, but no expansion</p>
<p>What you’d normally expect: You increase supply in one market, prices drop, and suppliers (physicians) expand to underserved markets.</p>
<p>What we see: New doctors, even after mild increases in supply, seem to continue to congregate towards cities.</p>
<p>Why a shortage would explain it: If cities are 10% underserved, then a 3% increase isn’t going to do it, since doctors will still be able to make a fine living there.</p>
<p>Other factors at work: Highly educated people tend to prefer cities, and med school is a very high level of education.</p>
<p>Implication: Want to push doctors into rural areas? You have to increase the supply by a lot more than we’ve done in the past.</p>