Physician Shortage in America: Unpacking Incentives and Impact on Healthcare

Tennessee leads the charge on medical experimentation

You’ve probably heard this 1000 times, but we have a physician shortage in America. Would you be surprised to hear that the same people decrying the shortages are often the same ones imposing the shortage?

Let me explain a little thing we call incentives. An inventive is something that induces behavior in a person. This can be based on fear, money, ease, or whatever. For example, if someone pays you to stay home and not go to work you’re less likely to work.

In this article I’m going to explain the incentives (and disincentives) to becoming a doctor, and how that affects our system.

Supply

In the early 1900s, the Flexner Report came out and discredited entire branches of medicine. Osteopathy, homeopathy, chiropractic, and others were all thrown under the bus and described as quackery. This left Allopathic medicine as the one and only legitimate source of healthcare, according to the report.

As you might imagine, this significantly limited the supply of health practitioners. To be fair, it probably put some legitimate quacks out of business. But it also put a lot of good health practitioners out of business. Many of these fields are still suffering from the reputational losses they suffered due to the Flexner Report.

At the same time, the Flexner Report significantly limited the supply of upcoming physicians. It forced many medical schools to close their doors. It also tightened the restrictions on practicing physicians, forcing many to quit medicine altogether.

Both of these decisions cut the (at the time) supply of doctors and slowed the future growth of doctors in training.

The accreditation agencies have maintained the spirit of the Flexner Report. They control which hospitals can have residencies, which schools can open, and how many residency spots are available. As you might imagine, they protect their own and keep the numbers pretty low.

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Cost

The healthcare field isn’t immune to the basic laws of economics. When the supply of physicians is low and demand is high, doctors can be paid more.

It’s not uncommon for physicians to earn high 6 figure salaries, depending on the specialty or location. If they are an owner in the practice their earning potential goes up. If they are politically connected and are hooked up with speaking gigs or consulting, the sky’s the limit.

Since physicians command such a high salary, they pass the cost on to the patient. This means higher *insurance premiums, higher deductibles, and higher costs overall.