The High Price of Doctors: A Disease of Regulation

By Bryan Caplan. 

"What’s driving the high price of doctors: market inequality or government entry restrictions?  My co-bloggers’ debate reminds me of a random encounter with some striking evidence: The Digest of Education Statistics‘ Table 294.

If you peruse this table, you’ll discover that total number of new M.D.s per year has been virtually flat for 30 years.  During this period, population increased over 30%.  As a result, the new M.D./population ratio has declined for decades.

 

If you’re not horrified, consider that the senior population – doctors’ best customers – increased by over 50%.  As a result, new M.D.s per senior fell by about a third over the last three decades:

 

This is exactly what you’d expect when government imposes rigid numerical quotas in the face of sharply rising demand: a constant quantity regardless of market conditions.

If you’re still not convinced, know this: Over the last thirty years, new female M.D.s have sharply increased.  How is this possible given the stagnant total?  Because the number of new male M.D.s dropped like a rock!  New male M.D.s per person are down by over 45%.

 

New male M.D.s per senior are down over 50%:

 

In any normal labor market, massive female entry would have led to a large increase in total workers.  But the market for new doctors is anything but normal.  The rise in new female doctors has been almost perfectly offset by a matching fall in new male
doctors.

My point, of course, is not that women have “stolen” men’s places in medical school.  My point, rather, is that that draconian government entry barriers are the only credible explanation of the facts.  Why else would the number of male doctors have fallen so far relative to demand?  Infinitely inelastic demand for medical services?  A massive decline in the talent of male applicants to medical school?!

As our population ages, we have naturally seen a large increase in the demand for doctors.  If the market for M.D.s worked normally, however, we would have fortuitously experienced a large offsetting supply shock: the rise of the female doctor.  Regulation has deprived us of this godsend – and deprived vast numbers of qualified men and women of the right to work in their preferred occupation.  Thanks to government entry barriers, demand has gone up and supply is frozen in place.  Consumers and taxpayers are paying a fortune for medical care.  And the problem is only going to get worse."

Also see Licensing Doctors: Do Economists Agree? by SHIRLEY SVORNY.

"Abstract

IN THE UNITED STATES , STATE LEVEL BOARDS DICTATE RULES for physician licensure and discipline.1 Would-be physicians must complete an approved medical training program and pass a standardized test. Scope- of-practice laws prohibit other health professionals from offering similar services. Given the resources involved in licensing doctors, taxpayers might be surprised to learn that the link between licensing and service quality is tenuous at best. In fact, economists who have examined the market for physician services generally view medical licensing as a constraint on the efficient combination of inputs and a drag on innovations in health care and medical education."