There have been a variety of news articles about the possible recession that we are in and how it is affecting every industry. Airlines, transportation, and shipping are obvious industries that continue to be affected. But what about the medical profession?
One longstanding belief about medicine is that it is a recession-proof industry. While our friends in business, real estate, and corporate life are all making their riches and buying their bigger and better homes, many physicians are still in medical school, training, or fellowship. At the end of this training the income finally starts rolling in just in time to start paying down those loans.
When a recession comes, medicine, for the most part, is relatively insulated from the downturn. While our friends in corporate life and business are bearing down for the tough times, physicians typically go about their business as usual. Granted, most physicians are not completely insulated because their investments are all at risk during a recession. However, the disposable income usually does not change much.
Of course, this can differ among specialties. Doctors involved in the cosmetic industry, such as plastic surgeons or dermatologists, are more likely to be affected as their clientèle typically pay out of pocket for their procedures and treatments. Other specialists typically continue to have good business – people continue to get sick, need their heart bypass surgeries, need their cancer removed, and need to be taken care of acutely.
One of the main reasons for this insulation is that the medical industry has a rare economic model in that the consumer (the patient) is not the payer (the insurance company). To make matters even more complicated, the provider (the doctor) actually tells you what you need. It is kind of like the patient is a child and the insurance company is a parent. The doctor is the toy store telling the child what toys he needs to be happy. Thus if you let a child loose in the toy store he will usually walk out with lots of toys that his parents paid for. And the toy store continues to make out fine.
Maybe that analogy sounds a little strange. The truth is that the medical industry is largely recession-proof because patients continue to get sick. Additionally, doctors continue to mandate that their patients receive good treatments and procedures, regardless of their cost.
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I beg to differ. Colonscopy is way down in my area and the doctor’s offices on my floor are pretty empty. I am in a middle class area of Queens NY but our building contains 10 of the top practices. Everyone is hurting. When people are unnerved by externalities, the last thing they want to do is to visit a doctor or dentist who might tell them bad news. Also, right now, people are so squeezed financially that the co-pays for a few visits and tests can be $200 that they can’t afford. Today someone with a fine job walked in, learned that he had a $500 deductible for surgery and walked out without ever seeing me. Insurance companies here have been selling HSAs and not educating the patients who don’t understand that, in exchange for a lower premium, they have to front the first $500-2000 of their own bills. I myself am about to go under the knife and had no trouble getting an appointment with one of the top surgeons in NYC on 2 days notice. So, amateur economist, you really are an amateur.
While this topic can be very challenging for most people, my opinion is that there has to be a middle or common ground that we all can find. I do appreciate that you’ve added relevant and rational commentary here though. Very much thanks to you!