In an earlier article we examined how the US health care system fares in comparison to the world. This comparison was aimed squarely at free market statistics, namely supply and demand. Supply was measured by the number of doctors per capita and demand was measured by dollars of health care spending per capita. We found that the countries of the world are all over the map by this measure, but if free market logic ruled this industry we’d expect that places with a high demand would also have a high supply. Surprisingly the US fell into a strange place of the highest demand but below average supply.
But the United States is a large country and variations from state to state may be significant. Indeed, many US states are as large as individual European countries. To add this perspective, we’ve replotted the previous graphic adding the individual states in the US to the mix. The source for the state data comes from 2 places, the Health and Human Services website provided the data for the health spending per capita by state and an excellent outside source, Statemaster provided the data for the doctors per 100K of population. Since this source is not the same as the source for the previous graph, the positioning of the US average in each is not quite the same. The graph below shows both entries for the US average, but the difference is relatively minor.
mouse over items for more info
One Apple Fell Far From the Tree
One thing that’s obvious is that most every state is reasonably close to where the US average is on the original graph; all are above the international mid-point of per capita spending, and most are in the region I earlier identified as “Restricted Markets” (lower right). But one state is way out there. If you mouse-over that state you’ll see it belongs to the District of Columbia, our seat of government. It is so far out there that one has to wonder if the unique circumstances that contribute to DC being such an outlier will adversely color our legislators’ attempts to craft a health care reform bill. So let’s examine this for a moment.
Both dimensions are out of whack here, the doctors and the spending. The District of Columbia is a small ‘state’ and it could be the case that doctors that would otherwise be located in the neighboring states of Maryland and Virginia have decided to set up shop in DC. However, if we reduce the number of doctors in DC to the national average and put the extra doctors into Virginia or Maryland then these states would have a noticeably larger doctors per capita and also be above the national average, so it doesn’t appear that DC is “stealing” doctors from the neighboring states. Another possibility is that DC may directly employ a large number of doctors that wouldn’t be employed in a city that’s not our nation’s capital (think Armed Forces doctors). However Statemaster classifies this statistic as “Non-Federal doctors per 100K of population”, so this doesn’t appear to be the explanation either.
It could be that the “per capita” part of both the doctors and the spending statistics is the problem. Google cites DC’s population as 592,000 as of 2008. This info comes from the Census Bureau, but when Congress is in session the population of that area undoubtedly grows. It could be that the doctors per capita is based on the resident population. But if the strange nature of DC’s seasonal population swings were the main reason for DC’s outlier nature then you’d expect the doctors per capita and the dollars per capita to be skewed by roughly the same amount. But this is not the case. Indeed the spending per capita is 60% above the national average while the doctors per capita is almost triple the national average. (This should give you pause; DC is getting 3x the doctors per person for only 60% extra cost?)
Cost to You vs Dollars to Doctors
By this measure, DC is screwed up and it appears that there is more going on there than seasonal population swings. This wacky nature of the DC health spending appears to be due, at least in part, to a genuinely unique nature of DC health care. We all should be worried that such a unique model of health care is our legislators’ main example of what health care is like. But is DC screwed up for the good or for the bad? In short it appears the answer is “both”. It’s screwed up for bad because the spending per capita is significantly above the national average. But you might think that the extra dollars that are in the DC system would work their way into the doctors’ pockets. However, that is where DC may be screwed up for the good.
There’s that old saying to “follow the money”. And as we’ve already seen, the money leaving the residents of DC’s pockets for health care is unusually large, but where is that money going? If doctors were getting rich or health insurance companies were getting rich we’d have our bad guy and we’d be done with it. But there is a huge number of doctors sharing the pie in DC so large that the dollars per doctor, believe it or not, is the smallest in the nation.
If you consider that each practicing doctor is perhaps a doctor who owns a small clinic, then the proper mental image to have is that each “doctor” statistic above is more accurately seen as a doctor’s office. These are small companies, a doctor, a few nurses, an administrative clerk. Each of these companies has expenses, they pay taxes, rent for their office space, malpractice insurance, and etc. How much revenue does each doctor’s office bring in? If we examine DC, there are 752 doctors per 100,000 population. This translates into 1 doctor per 134 patients. Since each patient in DC pays (or has the government pay) $8295 in health care each of these small businesses gets 134 * $8295 or $1.1 million dollars per year. $1M/year for a 5 or so person business is a reasonable business. But the net to the doctors’ clinic and then to the doctor him/herself may be much less than this. The $8295 undoubtedly includes some health insurance premiums and there similarly may be other expenses that divert this revenue away from these small doctors’ clinics. However, as a benchmark we’ll take this number as given.
The graph below used the doctors per capita and the spending per capita to arrive at a “Dollars per Doctor (clinic)” statistic.
Compare DC’s number to Alaska’s. With 217 doctors per 100,000 people and per capita spending of $6450 per person the same small doctor clinic in Alaska would net $3.0 million per year. It’s doubtful the staff of this small company would get triple the salaries of those living in DC. It’s doubtful the rent, malpractice and other standard office expenses are triple the rate in DC. So either the owners of these clinics (the doctors) are getting a larger salary or other administrative bodies between the residents of Alaska and their doctor are getting a larger share in Alaska than in DC (think higher insurance administrative expenses).
Again, you personally would be paying more in DC, but your doctor would most likely not be seeing the benefit of that. Something in DC is more efficient than in Alaska, and even though that efficiency doesn’t translate into extra money in your pocket, there may be something there worth keeping.
The District of Columbia is a wacky place for our representatives to be living when they try to craft a health care bill. It does not compare to the rest of the nation. And there is no easy explanation for why this is so. It may be the case that there are some things in the DC area that are good examples of a properly functioning health care system, but the question is will your representative recognize that or will they mistakenly think that some of the bad things in the DC area are the items worth keeping?
As I write this Congress is in summer recess. Many are having “town hall” meetings and are being met with unruly crowds. It is important that you let your congressperson know how you feel about the health care issue. Left to their own devices I’m worried that Congress will think $8000/person in health care spending is OK. I’m worried that Congress will think that 3x as many doctors per person as is the current national average is OK. I’m worried that physicians lobbiests will point out how little doctors in DC make and will convince Congress that spending above $8000 is OK. DC is unique. This summer recess, educate your representatives just how unique it is.