Fewer Physicians Move, Research Paper Example

Introduction

The function of this economic analysis is to determine whether in the current economic climate, it would be a responsible financial decision for a high school student to enter college with the intent of eventually studying medicine. Since a majority of students are required to make their career decisions during their senior year of high school, they fail to take into account the finances that will be required in order to allow them to achieve their goals. It is important to consider that careers in medicine yield high salaries, but the path to becoming a physician is both long and expense. Therefore, it is necessary to conduct a microeconomic analysis to determine whether my niece Jenny would benefit from studying to become a doctor in the long run.

Relevant Information

A student who wishes to eventually attend medical school has a variety of decisions that must be made as a high school student. Firstly, they must consider which college they should attend and the likelihood that this attendance will look favorable to their medical school admissions committee. To do so, it is essential to determine which schools have historically had the greatest number of students graduate to go on to medical school and other types of graduate programs. In addition, it is necessary to balance the likelihood that the student will get into medical school after attending a particular college with the price of the school. Ultimately, to increase her likelihood of attending a good college which will contribute to her success as a medical student, it is likely that she will have to attend an Ivy League college or an academic equivalent.

In order to get into a college or university with high academic standing, it is essential for Jenny to continue to have high grades throughout the remainder of her high school career, and to score well on college placement exams such as the SAT, ACT, and SAT II. To ensure that Jenny is able to maintain her grades, it may be necessary to hire her a tutor. Furthermore, each standardized exam costs a fee to take and additional fees to send scores to schools. It is recommended that college bound students apply to and send scores to at least ten schools to ensure that they able to obtain a seat in at least one. After these additional steps, there will be a need to pay for the college application fees for each of these 10 choices.

After Jenny is accepted to the college of her choice, she will have to pay a deposit in order to hold her spot. She will then need to pay tuition, in addition to living expenses such as rent for housing and money for meals. She will also need money for textbooks and related supplied, including calculators and laptops. Throughout her time as a college, Jenny will need to spend a majority of her time volunteering, conducting laboratory research, and shadowing physicians. It is unlikely that she will have much time, if any, to work on the side. Once she reaches her junior year, Jenny will have to repeat a similar process that she did in high school while applying to medical school. At this point, she will need to decide whether to go to a school in her home country or abroad. Schools abroad are less expensive but result in a lesser chance of obtaining a residency in the home country, which is necessary for obtaining proper licensure to become a practicing physician. She will have to take the MCAT, a standardized test, and send these scores to at least ten medical schools to increase her likelihood of success. Lastly, she will need to provide an application fee to these ten schools and provide the school of her choice with a deposit upon acceptance to hold her seat.

At this point, she will have to take out a loan to cover the cost of tuition, living expenses, and textbooks. She will still have little to no free time to work on the side and therefore not be able to make any income. To achieve her MD degree, she will be required to pass her boards exams, which also cost a fee. After obtaining her degree, she will need to intern for one year in a qualified hospital and then enter her residency stage for two or more years depending on her specialty of choice. Once Jenny is licensed, she will need to decide whether to begin a career as a hospitalist or whether she should establish her own private practice. Becoming a hospitalist is the most cost effective initially due to a lack of overhead costs, while opening a private practice is initially expensive but has higher payout over time.

Relevant Economic Principles

According to “Fewer physicians move, a sign of career caution”, the field has reported a move rate of 11.3%, indicating that jobs in the medical field are relatively stable despite the weakened economy (Berry, 2011). Since physicians do not need to move to find new positions, there is still a high demand for these professionals. However, it is also important to consider how these trend will continue into the future. Since Jenny is currently in high school, it can take anywhere from 12 to 18 years for her to finish medical school and complete her residency. Thus, it is important to determine what the supply and demand of medical professionals will be in the future. It is also important to consider the supply and demand of college, medical, and residency students to determine the likelihood that she will be able to follow this career path.

The determinants that will impact the demand of physicians include population constraints, economic constraints including income and prices of health care, technological and medical innovation, health insurance plans, and public perceptions and expectations of health care. There are currently about 340 active physicians before every 100,000 members of the population. Since the population is expected to grow and health insurance plans will become more inclusive due to recent legislation such as the Affordable Care Act, public perceptions are expected to shift in a manner that is more supportive of health care as a whole. Therefore, the need for physicians will increase into the future. In Jenny’s particular situation, it is necessary to determine what the demand for physicians will be between 2026 and 2032.

According to figure 1 below, the demand for physicians will increase between 2026 and 2032 because the population is expected to increase. Although these figures are projections for the state of Hawaii, the United States government expects that these growth increases will be consistent for major cities in each state (The Lewin Group, 2010). Since there are currently 340 active physicians per 100,000 people in the community, we can expect that the need for physicians will increase by 50% by the time that Jenny would be fully licensed after her residency.

Figure 1 The resident population is expected to increase between 2026 and 2032

An additional consideration that is necessary in the demand related to physicians is the likelihood that more members of the population will have medical issues that need to be treated. Since obesity is on the rise, and this condition is a risk factor for a variety of diseases such as heart disease, there will be a greater need for physicians in the future. Furthermore, the price elasticity for demand is dependent upon “personal characteristics, use of medical services, and the effective price paid for anadditional unit of health care” (Ringel et al., 2005). Furthermore, the demands for health care are price inelastic. Therefore, the price asked for these services will be primarily dependent upon the state in which the physician practices in due to a variety of regulatory policies in addition to the particular services that an independent physician is willing to offer.

Figure 2 Graph of health care demand

Figure 2 shows that recent government policies have resulted in doctor shortages. Therefore, there is a growing need for the availability of physicians, but policies make this demand less likely because the compensation that doctors are awarded are not currently as significant as they have been in the past.

The determinants for the supply of physicians include the number of spots currently available in medical schools, the number of physicians currently retiring due to age or policy change, and economic expansion. However, it is important to consider that the cost of producing a licensed physician is rather high. As discussed in the relevant information section, a physician in training must acquire a large amount of education from the nation’s premier institutions, which is costly. Therefore, the average college tuition of a medical school bound student is $240,000, which is matched by their medical school tuition. Thus, the average student who is awarded an MD enters the field at $500,000 in debt, +/- $200,000. During the residency phase, the medical student earns approximately $40,000 in profit per residency year, and is therefore able to pay back $40,000 to $120,000 of this debt based on the length of the residency. Therefore, at this point, a recently licensed physician will be required to either enter a career as a hospitalist or accrue additional debt in order to establish a private practice. The price elasticity for young physicians is about 0.3, indicating that a 10% increase of wage contributes to the quantity of supplied labor by only 3% (Rittenberg, 2009). Therefore, there is a high potential for physicians to work shorter hours and still earn a reasonable salary.

Recommendations

Based on the above analysis, it is reasonable for Jenny to pursue a career as a physician due to the projected availability of jobs in the field after she is expected to graduate. Since the population is expected to increase, the demand for physicians will increase as well. This is supported by the projected increase in obesity related disorders as well. In light of the recent legal regulations imposed on the health care system, such as the Affordable Care Act, current physicians are more likely to require, which would make the need for doctors increase in both hospitals and private practice.

On the other hand, the price require to train and therefore supply a physician is rather high, and Jenny can expect to be $500,000 in debt at the end of her undergraduate and graduate training. Unfortunately, even though the medical training acquired during the residency period is paid, she will be able to pay back approximately $80,000 of this debt. This will require her to select a position on the basis of the debt she needs to pay back rather than on her potential profit. Thus, it is essential for Jenny to consider whether she has a preference of specialty or workplace. If Jenny is willing to work in a hospital setting for a lower salary, she will find a job easily. However, if she wishes to work in a private health care setting and earn more money, this will be difficult.

Ultimately, Jenny’s ability to find a job after graduation will be dependent upon her specialty. If Jenny is willing to work anywhere where specialist in her field is being hired, then she will be able to find a job. However, it will take her a long time to pay off her education debt. Therefore, it is essential for her to balance this likelihood of finding a job and the accumulation of debt that she will incur before deciding to enter medicine. It is likely that Jenny will be able to pay off her debts after several years of employment (approximately 10 years depending on the monthly loan bill payments required). However, she will be able to profit after this period. Since physicians make a larger salary than professionals in most fields, this investment will be worthwhile.

References

Berry E. (2011). Fewer physicians move, a sign of career caution. American Medical News. Retrieved from http://www.amednews.com/article/20110606/business/306069963/7/

Ringel JS, Hosek SD, Vollaard BA, Mahnovski S. (2005). The Elasticity of Demand for Health Care. Retrieved from http://www.rand.org/content/dam/rand/pubs/monograph_reports/2005/MR1355.pdf

Rittenberg L. (2005). Principles of Microeconomics. Flat World Knowledge, Inc.

The Lewin Group. (2010). Current and Future Demand for Physicians in the U.S. and Hawaii. Retrieved from http://www.ahec.hawaii.edu/docs/Dall_HI_presentation_6-29-10.pdf