Supply-Side Healthcare?, Phenomenal World, May 9, 2025, by Adam Gaffney
The politics of hospital care and construction
As some pundits tell it ⊠âsupply-sideâ competition-based expansion is exactly the medicine our healthcare system needs. The root cause of constrained access and rising healthcare costs, the argument goes, is public regulation giving the provider side of the market more leverage, allowing it to extract higher payments from insurers. Greater competition will lead to expanding supply, leveling the playing field between providers and insurers without altering the nature of ownership or public responsibility in the sector. âCall it supply-side economics, but for healthcare,â Matthew Yglesias wrote in Bloomberg, advising that we âfocus less on the way insurance works than on expanding care to increase competition and reduce prices.â The Nikansen Center echoes the sentiment and generalizes it across those service industries at the core of American life. In healthcare, higher education and housing, this bipartisan consensus argues, supply expansion is the solution to rising costs.
Hospital supply expansion surely is needed in many places in the United States; decades of disadvantage, discrimination, and disinvestment have left many communitiesâparticularly those with low-income and minority populationsâdeprived of needed healthcare facilities and resources. The problem is that the new âsupply-sideâ gambit wonât succeed in securing access to healthcare for these populations. Nothing in the existing marketplace ensures that new construction will go where itâs needed. All evidence suggests that it will, rather, be put in the service of gaining market share in already lucrative areas. âŠ
âSupply-side economics, but for healthcareâ misdiagnoses the basic problem, which is not the performance of competition but rather the nature of financing and ownership. US hospitals are increasingly dominated by corporate behemoths and private equity firms who usher in skyrocketing prices and inequities while degrading the quality of care. Any effort to expand supply within the existing US healthcare scene will only accelerate this galloping corporate takeover, making us worse off in the process. Moreover, the nature of healthcareâa service with unique characteristics distinct from other commoditiesâposes profound consequences for the supply-side strategy of harnessing entrepreneurial spirits to expand provision efficiently. Unlike other services, the supply of healthcare induces its own demand, for every human body ultimately fails. Hospital beds, doctorsâ hours, and machines can generally be put to some use. âŠ
Multiple recent econometric analyses have found that when a shift of demand affects the use of care by one populationâfor instance, due to gain (or loss) of insurance coverageâthe change in utilization of care by that population tends to be offset by slightly less (or more) care provided to populations whose coverage does not change. ⊠My research with colleagues has come to similar conclusions. We analyzed health survey microdata before and after implementation of Medicare in 1966 and the Affordable Care Act in 2014, finding little evidence for an aggregate increase in society-wide healthcare use despite a substantial expansion of insurance (i.e. of demand), with some redistribution in use towards newly insured populations. Reviewing published utilization effects of some thirteen universal coverage expansions in capitalist nations over the past century, we found generally similar trends. …
Comment:
By Adam Gaffney, M.D., M.P.H.
As single-payer advocates, much of our focus is on healthcare access, particularly cost barriers stemming from uninsurance and underinsurance. That stands to reason: most of us fight for a better healthcare system primarily because we want to see everyone get the high-quality medical care they need when they need it. We care, more than anything, about health. Single-payer would mean that our demand for care (in economist-speak) would depend not on our insurance or wealth, but rather on our medical needs â it would, that is to say, expand and equalize âdemandâ by removing cost barriers that suppress use of care for the less fortunate.
But how we think about healthcare supply is important as well. Some conservative and even liberal thinkers argue that rather than focus on expanding coverage (i.e. demand), we should expand supply: i.e. more clinicians, more hospitals, and so forth, and thereby drive down the cost of care by fostering market competition. This article (by me) begins as an exploration of these âsupply-wideâ proposals, and argues that they wouldnât accomplish what proponents think they would â indeed, they would cause costs to rise. It ends by making a broader argument about how the essence of medical care is time spent by human beings â time that can be redistributed but not expanded.
Supply expansion would fail as a cost control measure â even if it is needed for some services, like primary care, or for disadvantaged communities that have been left behind in our system â for a variety of reasons, as I trace, including the inefficiencies and redundancies that competition generates. Additionally, in medicine, supply often creates its own demand: ICU beds tend to be used when available, and our clinic schedules can invariably be filled.
That being said, some also envision a world where a supply-side transformation â e.g. from technological advances like AI â reduces the labor inputs needed to provide care (and other services). But in healthcare, I argue, there is zero historical or theoretical reason to believe that this will happen. Indeed, over the last century, as healthcare has been more capital intensive it has also in a sense become more labor intensive. There are more dollars of physical hospital capital assets per hospital bed than ever before, even as the number of nursing FTEs per hospital bed day has risen with the rising technological complexity of care, to give one example. On a more fundamental level, even with new tools and technologies, the time we need as healthcare providers to interview patients, evaluate reems of data, respond to concerns and questions, advocate for services, and formulate treatment plans will not fall â if anything, it will only rise. There will be no magical technological productivity fix to our healthcare woes.
We do need supply-side changes, to be clear, just not the ones that neoliberals envision. As healthcare delivery is gobbled up by corporations, cost and waste will rise even as quality deteriorates; we should think about public and community healthcare ownership along with public financing. Moreover, the simplicities of single-payer financing allow for major reductions in administrative costs, shaving off hundreds of billions of unproductive healthcare spending annually, as advocates frequently note.
At the same time, though, we should recognize that the value of some things we need, and healthcare is a prime example, is very much tied to the time that a human being puts into them. Versions of these services that contain less time â shorter visit lengths or higher patient to nurse ratios in the hospital â often have less fundamental value. Less time is being devoted to our care and health. Such time cannot be manufactured like commodities, it can only be more fairly distributed in society.
https://healthjusticemonitor.org…
Stay informed! Subscribe to the McCanne Health Justice Monitor to receive regular policy updates via email, and be sure to follow them on Twitter @HealthJustMon.
