Monday, July 4, 2011

Observability and Controllability

There are two concepts in systems theory that frequently come to the fore. They are observability and controllability. Observability means simply that by observing the outputs we can determine what the system is. Controllability means that by controlling the inputs we can get the system to a specified end state.

Now Posner has written an interesting piece on the shortage of primary care physicians. He states that if this were a normal economic process if supply was lagging demand that by normal price adjustments the system would stabilize. Well it is stabilized but at a shortage so what do we observe, Government regulation sets a new stable point.

Posner states:

The underlying causes of the shortage of primary-care physicians are licensure and third-party payment. I do not think it is a mistake to require that physicians be licensed, rather than allowing anyone to provide medical care, as we allow anyone to dig ditches, wait on tables, or for that matter start a new online business. Patients are in a poor position to evaluate the quality of medical care, and without licensure of physicians would doubtless be highly vulnerable to quacks. But licensure inevitably reduces supply. Primary-care physicians have to spend four years in medical school and then three years as a resident paid little more than a subsistence wage. The number of medical schools is limited, as is the number of residency programs; it has been argued (whether rightly or wrongly I don’t know) that specialists control the approval process for residency programs and use that control to throttle the expansion of primary-care medicine by limiting the number of new residency programs in primary-care medicine. Many U.S. physicians are foreigners trained abroad, which is fine, but we make them jump through loops to be licensed to practice medicine in the United States; the hoops may be justified to ensure that foreign-trained physicians are competent, but make it difficult to make up a physician shortage by recruiting foreign-trained physicians. 


Third-party payment is a pervasive feature of American medicine. Why anyone should want health insurance other than “major medical”—that is, insurance against catastrophic medical bills—is a great mystery, as is the fact that Medicare subsidizes routine health care of upper-middle-class people. Since disease and injury tend to be unpredictable, health insurance smooths costs over time, which is efficient, but a person could achieve that smoothing simply by saving the money that he now pays in health-insurance premiums and investing it to create a fund out of which to pay future health expenses as they occur.

First as to licensing, that has always been a sticky problem. One takes a set of exams as well as having been educated in an approved institution. The exams are putatively meant to test knowledge related to the practice. Take anatomy, often the anatomy is best learned by doing as well as study. For example, a pain in the knee may be referred pain, not knee pain, and an old time Doc could determine that without  an MRI. Today one may have 3-5 MRIs of the knee never looking at the hip! What does that tell one?

Second, payment has always been an issue. The primary care doc is left at the end of the payment schedule. Yet using my knee example a good Doc would not spend the time and money on the knee since they would have identified the hip as the problem. The specialist just all too often piles on tests, that is how they make money.

The system is broken, broken because of the rules and more rules mean more breaks.

Posner makes another point in the second paragraph. Insurance should be catastrophic, not something that covers everything. We have large deductibles for our cars, most at least, why no be incented to do the same for health care, especially Medicare.