A Microeconomic Analysis of Doctoring
May 25, 2014
Introduction Jenny is a smart high schooler with designs on a future that includes financial security and a challenging career. She wonders about doctoring, and probably harbors some stereotypes about doctors as well-off, but sidled with years of student debt and fewer earning years as they have a lengthy career as students. She may not realize where she wants to settle, and will want to know where her career choice is most financially advantageous, as well as whether she will ever know the flexibility of shifting gears from job descriptions to different cities as she rises in the profession. This paper notes the current state of the profession in terms of supply and demand, elasticity, cost of production, pricing, economic or normal profit or loss. It aims to help students like Jenny make informed choices rather than continuing to rely on guesswork and stereotypes about what it means to be a practicing physician.
Demand determinants for physicians include lower recession incomes, which can lower demand for a future physician, insurance changes which will make it more affordable or less affordable to access medical care, and the number of consumers of health care. For example, an aging U.S. population might drive up demand for health care, particularly in specialties that are common problems for geriatric patients. In this situation, a physician may have an easier time finding clients in cities with the largest aging populations. But at least one essayist debunks the myth that the graying of the U.S. will drive healthcare demand, saying the shift is too gradual though it will affect demand minimally (Reinhardt, 2003). Another source argues that aging citizens will cause 81% of the change in demand for physicians from 2010 to 2020, suggesting a more significant rise in demand (Projecting the Supply and Demand, 2013). Current demand data shows that physician demand is growing and will continue to grow: from 205,000 FTEs in 2010 to 220,800 in 2020 (Projecting the Supply and Demand, 2013). Expectation for future costs can include fear of increased out-of-pocket costs that come with health care reform uncertainties and may be driving up present demand (Galvin & Cutler, 2011). All agree that demand will increase to some extent due to an aging population, and it may also rise due to Affordable Care Act reforms increasing the number of insured people. Further, post-recession incomes may also predict higher healthcare demand in the future compared to recent years. If demand is rising quite a bit due to healthcare reform, an aging population, and increasing incomes, and supply of doctors is drying up more slowly due to retirement but at a lower rate than in the past, the demand will be high (Healthcare workforce, 2011). Thus the price of physicians should rise as their services become more in demand. Demand elasticity is also predicted to be high, as the change in price exacerbates demand for physicians’ services for those with postponed care needs and among the increasingly elderly population. However, the formula is not absolute: healthcare costs can be limited and manipulated by political forces, changes in U.S. insurance norms, and laws governing their ability to work as for-profit organizations. The Department of Health and Human Services predicts demand will grow 14%, from 212,500 to 241,200 (ibid.). Price per capita total, including out-of-pocket expenses in 2010 totaled $2450.83 (NHE Historical and Projections, 2013). By 2020 this spending is expected to increase to $4172.93, a percentage increase of 52.01% using midpoint calculation. Price elasticity can be calculated using percentage figures from midpoint as .1265 (the percentage change in quantity of physicians demanded) / .5201 (the percentage price change) or .5095.…