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The new medical economics


THE DOCTOR GLUT is about to collide with the new economics of health care.

For the public, which has the biggest stake in the remaking of American medicine, the big question is whether financially hard-pressed doctors can stand up to the cost-paring tactics of managed care.

More doctors, higher costs

The abundance of physicians has reached the point where two study groups have recently recommended birth control for the profession. The rationale for cutting back is that medical training is not only expensive for society, but, in defiance of the conventional laws of economics, a bigger supply does not drive down prices.

Rather, to keep up incomes doctors induce interest in their services, whether by recommending dubiously necessary return visits or openly advertising wondrous new treatments.

In November, the Pew Health Professions Commission -- consisting of medical educators, economists and insurance executives -- predicted a surplus of 100,000 to 150,000 physicians by the end of decade and urged the closing of some medical schools and the reduction of enrollments by 20 to 25 percent. In addition, it called for requiring foreign-born doctors who train as residents in the U.S. to return to their homelands.

A less severe proposal was just issued by a committee convened by the Institute of Medicine, a non-profit adviser to the federal government. The committee said that supply and demand would be in balance if the foreigners were excluded. The issue is sensitive, since foreign residents serve in many inner city hospitals that American graduates prefer to avoid. The committee said special attention should be given to replace the foreign doctors with U.S. citizens.

These concerns coincide with a great moment in medicine that the profession does not welcome: the first decline in physicians' incomes ever recorded by the American Medical Association. The trend is down, with median income falling 3.8 percent in 1994.

Whose needs come first?

A major cause of the decline is the advance of managed care systems. Managed care, which focuses on the avoidance of services deemed unnecessary for good health, unavoidably arouses concerns about dangerous skimping on necessary services.

The best judges, of course, would be the salaried physicians employed by managed-care systems. But the contracts under which they earn their pay sometimes contain "gag" clauses that prohibit them from telling patients about treatment options not on the managed-care menu. "AMA physicians cannot abide by gag clauses," AMA President Lonnie R. Bristow declared. "Their needs come before our needs and the needs of managed-care plans."

That they should come first is indisputable. But whether they will under the new medical economics is a separate matter.

Daniel S. Greenberg is editor and publisher of Science & Government Report, a Washington newsletter.

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