Medical Specialists in Australia

1
Medical Specialists in Australia

• Do they operate a cartel? Possible policy
  responses. Joseph Jeisman (15 mins)
• Leave the system as is, by James Curchin (10
  mins)
• Dismantle the cartel, by David Curchin (10 mins)
• Group Discussion

2
Quick Lesson in Cartels

• In a perfect market, different product providers
  charge different prices and compete. They may
  differentiate on the basis of quality which are
  then accredited (like cars).
• A cartel tries to get a higher price for its
  product by restricting access to becoming a
  producer in that market. It can only do this if
  it somehow controls entry into the cartel.
  Governments can be co-opted by either outlawing
  non-cartel members from producing for that
  market, or by subsidising the members of the
  cartel in various ways, such as via paying for
  their education or giving them extra money.
• In a market with many individual service
  providers, a cartel can really only form when it
  is government supported.

3
Structure of Medical Cartels in OZ

• There is a professional association that
  restricts entry to their cartel via their control
  of education standards.
• High standards high failure rates
• Expensive to join membership fees, assessment
  fees, training fees
• Difficult for overseas trained specialists (OTS)
  to gain full recognition in Oz.
• The government supports this in a number of ways
• It guarantees the professional association a
  monopoly on certain services
• You can only operate as a private specialist if
  you are a fellow of a Specialist College
• You can only run a pharmacy if youre an
  accredited pharmacist
• It limits the number of recognised training
  positions, thus limiting the number of possible
  new entrants to the cartel.
• To become a specialist a prospective trainee
  generally needs to obtain a recognised trainee
  position at an accredited training hospital.
  These positions are almost invariably in the
  public system and the number that are made
  available is determined by the government.
• It gives members of the professional associations
  monetary subsidies
• Wage supplements for emergency specialists
• Parking rights for doctors

4
Becoming a Medical Specialist in Australia

• First degree (usually in Science, 3-4 yrs)
• GAMSAT exam
• Bachelor of Medicine Bachelor of Surgery (MBBS)
  post-grad entry, 4 year course
• Specialist colleges each have own requirements
• intern year
• two to three years as a resident within a
  teaching hospital (and then first set of
  examination),
• further two to four years in advanced specialist
  training (at the end of which there is a
  fellowship examination).
• List of colleges http//www.amc.org.au/colleges.a
  sp

5
Whose interests are being served?

• The government and the specialist colleges would
  argue that the restricted supply of specialists
  is necessary to keep quality high
• Ulterior Motives
• Government
• wants to limit public expenditure on health
  services
• political pressure from Colleges to limit numbers
• Colleges
• if can limit number of new specialists, then
  existing specialists can charge higher prices
  (extract rent)

6
Evidence of Rent

• Is there any? What are the wage levels of various
  specialists, and what is the wage level of
  similar people elsewhere?
• Evidence in the US suggests that specialists make
  very high rates of return (http//www.econ.yale.ed
  u/seminars/strategy/st03/nicholson-031002.pdf)

7
Possible policy responses

• Government can increase the number of trainee
  positions in makes available - evidence in US
  suggests that some trainees would be willing to
  pay to hold such a position
• Most specialist training done basically as an
  apprenticeship. Colleges could be forced to
  consider other training models.
• Force the Specialist Colleges to provide more
  transparent and open procedures for recognising
  the qualifications of OTS. Some moves being made
  in this direction
• Review of Specialist Colleges by ACCC in July
  2005 http//www.health.nsw.gov.au/amwac/ahwoc/pdf
  /review_colleges.pdf

8
Leave the system alone (James)

• High quality specialists
• Do specialists really extract rent?
• More doctors larger public health bill. Whilst
  patients want more health service, they dont
  bare the full cost of them, so it is not in the
  public interest to provide for all the demand.

9

• Dr. Death!!!
• nuff said.

10
High Quality Specialists

• Restrictions apply to OTS who do not have
  comparable training
• Different cultural valuing of life leads to
  different levels of care
• Certain level of talent is required, doctors
  arent mechanics of a different type of motor.

11
Doctors dont extract a rent

• Requires enormous commitment, sacrifice of time
  and money
• 7 years university study
• 1 year intern
• 1 year residency (normally)
• 9 years (or more) in training
• Approx. 40,000 non tax deductible expenses.
• Study for one year for 5,000 entrance exam, and
  one third fail.

12
More doctors larger public health bill.

• Position are government funded
• Limited to public teaching hospitals
• Members of college donate teaching and
  invigilating time
• People dont win elections on tax hikes

13
Smash the cartel (Dave)

• Consumers are being ripped off through exorbitant
  price of specialist medical care.
• Dangerous levels of understaffing in some states
  (eg Qld).
• Current undersupply of specialists and difficulty
  for OTS to gain full recognition leads many OTS
  to get partial recognition which means they can
  operate as specialists in supervised positions
  (ie. not in private practice) but arent a fellow
  of the Colleges. This sort of system leads to Dr
  Death type incidents.
• It is unfair of the government to give rents to
  some professions and not others.
• How? Send some patients abroad for treatment
  (foreign competition in services) have
  government decide on overseas qualifications
  have minimal requirements for being a specialist
  which are government-determined, and then let
  specialists grade themselves into degrees of
  specialisation