Now that’s a very good-looking corpse

Posted by Marc Hodak on December 6, 2007 under Unintended consequences | Comments are off for this article

Let’s say one wanted to create a set of incentives for our best and brightest who want to go into medicine to strongly prefer medically superfluous areas like penile inserts, nose jobs, and hair removal while shunning areas like oncology, cardiology, and neurosurgery. How would one approach such a task? Apparently by doing what Europe and Japan do, and what most American politicians advocate doing here–socialized medicine.

In a study of doctors in Japan, Harvard’s Mark Ramsmeyer studied the effects of Japanese health care policy on how prospective doctors choose to invest in their talents.

The Japanese national health insurance provides universal coverage. Necessarily, this entails a subsidy that dramatically raises the demand for medical services. In the face of the increased demand, the government suppresses costs by suppressing prices.

Ramsmeyer figures that this policy will lead to certain economic consequences on investment decisions by doctors in their training and specilization.

Crucially, the national health insurance does not cover services – like elective cosmetic surgery – deemed medically superfluous. Facing price caps in the covered sector but competitive prices in these superfluous sectors, the most talented doctors should tend to shift into the superfluous sectors and there to invest heavily in their expertise.

So, he looked at all the cosmetic surgeons and an equal number from a random sample of other types of medical specialties to see if he could identify where the greatest investment in skills was taking place.

Cosmetic surgeons earn higher incomes than other doctors; are more likely to have attended a national (generally more selective) medical school; are more likely to have served on the faculty of a medical school; and are more likely to be board-certified.

His conclusions are sobering, if not surprising:

The point is not that Japanese cosmetic surgeons earn a premium not available here. The point is that by operating beyond the scope of the universal health insurance, they can profitably do what few other Japanese physicians can cost-effectively do: invest in field-specific training. In most medical fields, the price controls preclude a physician from earning a large enough return to his training to make any serious specialization worthwhile. In cosmetic surgery, however, those controls do not apply. Like their peers here, Japanese physicians respond to the price signals by specializing, training, and certifying their expertise.

Is that the kind of society we want for us? As the author notes, we’ve already moved part way in that direction. Our cosmetic surgeons already earn a premium here. They’re working in a field that politicians ignore. Other areas, unfortunately, appear to be too important to be left to the market.

HT: Larry Ribstein