My new CIS paper (pdf) on mismatches in the graduate labour market is getting off to a rather slow media start (only the Courier-Mail so far, though a couple of other papers requested opinion pieces as well). The Australian and The Age are however running different stories on foreign doctor recruitment – and there is no better illustration than these of the problem I am talking about.
In fact, doctors provide a double tale in what goes wrong when governments intervene. This story starts in 1984, when the then Hawke government introduced the Medicare system, and in so doing ensured that the government picked up most of the tab for visits to the doctor. This in turn led to concern about escalating costs, on the (plausible) theory that if you charge people nothing or very little to go to doctor they will be more likely to do so.
In the early 1990s, the government formed the view that an over-supply of doctors was part of the problem. According to one report (no. 12 in the link)
doctors in an oversupplied market may be more inclined to comply with patient expectations of referrals, prescriptions, and other health services, in order to reduce the likelihood of patients going to another practitioner.
They also thought that doctors were encouraging repeat visits rather than longer consultations, in order to maximise their bulk billing income. Note that few of these problems would have developed except for the fact that there were no price signals, except in lost time, for patients.
Because the federal government also controlled the supply of new doctors, ie the universities, they decided to cut medical school intakes (see figure 11 in this report). From 1330 commencing students in 1992, it went down to 1304 in 1993, 1217 in 1994, 860 in 1995, before starting to recover again. It’s only in the last few years – after it was realised what a huge mistake had been made – that comencing numbers have been above 1992 levels.
All this was going on while other arms of government were aware of demographic trends toward an ageing population and reacting to them, such as the major extension of superannuation in 1992. You don’t need a medical degree to work out that an ageing population will increase demand for medical services.
The consequence of this failure to provide enough local doctors is a reliance on doctors from overseas. As this report (pdf) on skilled migration shows, our net importation of medical practitioners has averaged nearly 1,000 a year since the mid-1990s.
While doctors from overseas are keenly welcomed, thousands of Australians who want to be doctors are every year rejected by medical schools (see figure 5 in my paper). This includes many with good school results (see table 7 in my paper).
Though the Australian higher education system is centrally controlled, it is generally not centrally planned. For the most part, history guides the allocation of places. But the medical workforce has been centrally planned, and this produced far worse results than the benign neglect applied to other professions. It’s been good luck in being able to recruitment so many medical professionals from overseas, rather than good management by government, that has avoided a shortage of doctors that would have had disastrous consequences for the health of many Australians.