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Thursday, June 25, 2009

Harvard's Greg Mankiw recently posted the results of a study and his thoughts on physicians' incomes and health care costs. Here are his takeaway questions:

On the issue of monopsony power: Explain how a large government healthcare plan (a "single payer" being the extreme case) could potentially reduce the wages of healthcare workers and thereby national healthcare costs. What are the similarities and differences between this solution to high healthcare costs and a targeted income tax surcharge levied only on healthcare providers (the revenue from which is rebated to all taxpayers)? Are the policies you considered above efficient, using the economist's standard definition of efficiency? Are they equitable, as judged by your own notion of fairness? In your opinion, does your analysis argues for or against a government-run healthcare plan?

On the issue of doctor training: Suppose that in country A physicians get free training through a taxpayer-financed educational system, while in country B physicians finance their own education and then, once trained, are paid higher fees. If country A classifies these training expenses as education rather than healthcare spending, which country would report higher healthcare costs? Is that difference in healthcare costs real or an artifact of labeling? In which country would doctors, once trained, have more incentive to work long hours? In which country would there be more doctors? Which country's system, in your judgment, is more efficient and equitable?

On the issue of inequality: Do you think that the provision of medical services uses more or less human capital than does the typical job in the economy? What does your answer imply about the relative price of healthcare looking across countries with varying degrees of economic inequality? In the United States, the wage gap between skilled and unskilled workers has increased substantially over the past several decades. Other things equal, what does this fact imply about the trend in the relative price of healthcare? If public policy were to try to prevent this change in the price of healthcare without addressing the underlying trend in wage inequality, what effects would the policy have?

Posted by Eleutherian

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