Chapter 5: HBT Textbook
Chapter Five: The Labor Market for Physicians
5.1 The Training of Physicians
Case Study Introduction: Begins with a scenario where a 59-year-old woman suffers a stroke, presenting challenges for an emergency room physician in diagnosing and making treatment decisions.
Types of Stroke:
Ischemic Stroke: Caused by a blood clot blocking blood flow to the brain.
Hemorrhagic Stroke: Resulting from a burst blood vessel leading to internal bleeding.
Diagnostic Challenge:
The physician must quickly decide on a course of treatment with incomplete information due to the differing treatment protocols for each stroke type.
Treatment for ischemic strokes involves clot-dissolving drugs; for hemorrhagic strokes, these could be harmful, potentially leading to death.
Patient Trust:
The patient, in a groggy state, relies on the physician's qualifications, hoping that decisions are made solely in her interest and not for financial or personal reasons.
There are implicit economic trade-offs related to healthcare regulations and physician supply, raising questions about medical error compensation, quality standards, and the implications of physician monopolies.
Training Processes Across Nations
Consensus on Basics: All nations require education in basic sciences and clinical training before practicing medicine.
Differing Entry Paths:
In most European countries, students enter medical school directly after high school.
In the US and Canada, a bachelor's degree is a prerequisite, requiring completion of premedical coursework (biology, physics, chemistry, mathematics, and English).
Admission Statistics:
US medical schools have an acceptance rate of about 50% (historically as low as 33%). For instance, UCSF had 6,767 applicants for 149 spots in 2011.
Duration of Medical School:
US: 4 years
UK: 5 years
France: 6-7 years
Curriculum Structure:
First Half: Focus on classroom learning in anatomy, physiology, pharmacology, pathology, and biochemistry.
Second Half: Clinical rotations in various specialties (internal medicine, surgery, pediatrics, gynecology).
Cost of Education:
US medical school tuition: between $140,000 and $225,000; heavily subsidized in Germany and France (tuition around €200-€500/year).
Impact on Labor Market: High tuition costs influence the demographic mix of candidates entering medical schools.
5.2 Residency
Post-Medical School Training: Graduates must complete a residency, an essential apprenticeship, before practicing solo.
Specialization Choice: In the final year of medical school, students select their specialties and apply to residency programs.
Residency Conditions:
Long and demanding: residencies often require working 80+ hours per week, with shifts lasting up to 36 hours.
Learning occurs under supervision from attending physicians, focusing on surgeries, clinical decisions, and patient management.
Internship License: Completion of the first-year residency provides the license to practice medicine and prescribe drugs, though many keep training in specialized areas afterward.
Example: To become a cardiologist requires a 3-year internal medicine residency followed by a 5-year cardiology fellowship.
The July Effect: Refers to patient care quality concerns when new residents start in July; substantial evidence of increased medical errors and potentially elevated patient mortality rates during transitions.
Physician Work Hours
Physicians often work long hours, impacting health outcomes due to fatigue.
Example: Surgeons performing long operations (e.g., pancreatic procedures lasting 10+ hours).
Studies of Fatigue Impact:
Shows that sleep-deprived surgeons can take 14% longer and commit 20% more errors compared to well-rested surgeons.
Work Hour Reforms:
ACGME limits shifts to 24 hours and a maximum of 80 hours per week for residents.
Studies on the impact of these reforms show little change in mortality; Shetty and Baccalari identified minor improvements for medical patients but not surgical ones.
Experiment Findings: A randomized study at Brigham and Women's Hospital found traditional schedules resulted in nearly 36% more significant medical errors compared to shorter work weeks, although patient outcomes did not vary greatly since supervising physicians monitored errors.
5.3 Physician Wages
Income Over a Lifetime:
Physician salaries are high in the US but require many years of training, leading to a backloaded income stream as opposed to professions like surfing which allows immediate earnings.
Net Present Value (NPV):
Definition: NPV is the discounted sum of all future earnings. Patients’ discount factors reflect their patience regarding future income (denoted by the formula ).
Internal Rate of Return (IRR):
Definition: The IRR for a career reflects the discount rate for which the NPV equals zero. A higher IRR indicates a worthwhile investment in medical training.
Historical data shows that IRR for medical careers has remained high despite rising interest in medical professions, suggesting barriers to entry prevent oversupply.
Specialization Returns
Specialty Salaries: Fields like surgery and cardiology yield even higher earnings but require longer training periods, complicating decisions for new doctors.
IRR Data: Entry into certain specialties yields access to IRR above 25%, making them desirable despite the demands.
Wage Differentiation: Can persist even in competitive markets if specialists endure longer hours or have rare skills.
Barriers to Entry: These obstacles often justify the income disparities within the medical field.
5.4 Barriers to Entry in the Medical Field
Historical Context: The marketplace for physicians was once unregulated, with competition leading to a surplus of unqualified practitioners.
Regulation Emergence: The AMA emerged to establish higher educational standards and tried to ensure all practitioners met qualifications.
Regulatory Framework: The AMA and the American Association of Medical Colleges now control medical education and training, enforcing strict credentialing.
Licensure Constraints: Physicians must successfully complete accredited medical school and pass licensing exams; foreign medical graduates face additional hurdles.
Implications of Licensure Policies
Impact on Supply: Barriers to entry may restrict the number of physicians and consequently contribute to higher wages (monopoly rents). The average workload exceeds $54 billion annually due to malpractice insurance and legal pressures on physicians.
Call for Alternative Practices: Advocates for expanding roles for nurse practitioners or physician assistants face significant regulatory challenges. Insurers and state laws often limit these professionals’ capabilities.
5.5 Physician Agency and Ethical Dilemmas
Definition of Physician Agency: Patients rely on physicians as agents for their health, expecting unbiased recommendations.
Information Asymmetry: The gap in knowledge creates potential for physicians to exploit their authority for financial motives, termed Physician Induced Demand (PID).
Definition: Physician Induced Demand refers to the extra demand for medical goods and services based on the recommendations from physicians who may prioritize their gains.
Defense Medicine: Physicians may perform unnecessary tests or procedures to guard against malpractice lawsuits, detracting from optimal patient care.
Racial Discrimination in Medicine
Issues in Care: Racial bias or stereotypes in treatment can worsen health disparities across racial lines, with studies revealing differential treatment rates.
Types of Discrimination:
Taste-based: Reluctance to treat patients based on race without medical justification.
Statistical: Presumptions about patient compliance based on race affecting treatment recommendations, with potential for both efficient and inefficient outcomes.
5.6 Conclusion
Market Dynamics: The medical labor market presents unique challenges; supply does not adjust quickly to meet demand due to the rigid training and licensing structures.
Economic Forces: Despite existing barriers benefitting trained physicians with high standards, they also lead to supply shortages that threaten access to care.
Broader Healthcare Context: Physicians' work within a system interdependent with hospitals, insurance companies, and pharmaceutical services will be examined in the next chapter, focusing on the economic principles governing these relationships.