Human Inputs: The Health Care Workforce and Medical Markets

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Abstract
Arrow wrote his classic article in simpler times, as those who chance upon this article forty years hence will say of today. It was a new era in science and medicine, soon to be fueled by new resources from Medicare and the National Institutes of Health. Fiscal constraint was a stranger, physicians were in short supply, and information asymmetry was pervasive. In the intervening years, Americans have become more comfortable with health care issues. Fatal illness, which was rarely discussed with patients in 1960, is now researched by them on the Internet, and greater attention is paid to patient rights. Nonetheless, concerns about quality have, if anything, increased. Indeed, it is public concern about quality that has invited governmental regulation and induced a defensive posture among medical organizations, which are rushing to establish their own instruments of quality, and it is these same public concerns that have facilitated the ability of managed care to offer itself as the guarantor of quality. However, center stage is now held by another issue: health care costs. As a result, the focus has shifted from resolving information asymmetry by enhancing quality to controlling national health expenditures by changing the size and composition of the health care workforce. Licensure, which was restrictive in 1960, is more relaxed today, thereby reducing the entry barriers for the NPC disciplines, several of which were just beginning when Arrow wrote his article. The entry of NPCs into the realm of physician's services partially counterbalances the constraints that have been placed on physician supply, although the major contributions of NPCs are skewed to the primary care end of the spectrum while the major constraints on physician supply affect specialists. The growing presence of NPCs creates a dynamic market in which practitioners in various disciplines both compete and collaborate. It is, in fact, the perfect market that Arrow reluctantly longed for, in which providers who have different levels of skill offer their services at varying prices. But consumers have little upon which to base their choices. And while many of the services offered by NPCs replace physician services at a lower price, others represent additional services, which add to aggregate spending. Arrow sought to explain how a market replete with uncertainty could function. He saw that licensure, entry rationing, and educational subsidies could work to enhance quality, but they did so at the expense of the market. The market has seen it differently and has usurped these tools for its own purposes, leaving quality to look for other sponsors. Has it done so wisely? We have yet to see how well a multidisciplinary workforce of autonomous providers will function, but both successes and failures abound. What is more apparent is how entry rationing and restrictions on educational subsidies have capped the supply of physicians and limited the production of specialists at a time when there is increasing demand for their services. Arrow identified potent tools for affecting the characteristics of the health care workforce. They now must be redirected to the needs of the future.

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