Doctor Give Me The News

Dr. Tutfe has explained this week the power of a monopsony or single buyer. One example he cited was teachers of secondary education in the United States. These teachers staunchly advocate for the government but do not realize that the government is the main source of their compensation. Privatizing education would actually help teachers be compensated more fairly because it would reduce the power this single buyer has in the market. Which is why I was surprised to read this article in Business Week, that stated the majority of doctors are now in favor of a single government-sponsored medical insurance. I can see only two logical reasons for their rising support. The first would be the doctor’s ethical responsibility to help low-income people in this country get the proper health care. The second is more self-interested. Many people now just do not visit the doctor because it is too expensive; however, with the government-sponsored insurance more people will be more inclined to see the doctor. With increased patients doctor’s offices are able to earn more despite the projected lower earnings resulting from a national insurance.

1 comment:

Dr. Tufte said...

The economics here isn't too sharp.

We did discuss monopsony in this class, but the health care and K-12 education systems in this country are better thought of as third-party payer systems.

In these, patients face something like a price ceiling: the co-pay that the insured fork over at the doctor's office. Contrary to what Lily says, we actually go to the doctor more than ever before, in large part because these co-pays are so much less than the actual cost of service.

It's well-known that a price ceiling will create a shortage. A third-party payer system compounds this by offering to pay suppliers whatever they need to make that shortage go away. The combination of these two means that both the price and quantity are higher than at equilibrium.

This is why we spend so much on health care, and K-12 education, and why doctor's offices and schools are so full of people who really don't want to be there, but can't pass up a very cheap product.