Government Capital Assistance to Physicians: Will it Increase Health Care Costs?

Here’s an interesting problem.  Kaiser Health News  this morning suggests that government loans to physicians will ultimately increase the costs of health care.   Physicians and other clinicians borrowed a total of $2.5 billion as part of the economic stimulus.  This is on top of $19 billion in government funds to help clinicians implement electronic medical records.

Physicians invested these borrowed funds in expansion, and probably did this in areas that have high margin (as would any other business!)

Examples cited:
è $1.5 million for MRI expansion in Florida
è $3.4 million for expansion of physician-owned orthopedic space in Kansas
è $3.9 million for cosmetic dermatology services in Texas

Will this increase the cost of health care?  Absolutely.
Did these loans to clinicians help get the economy moving?  Absolutely.

Here’s the paradox – health care is a major driver of the American economy.  It’s critical to lower the growth in health care, so that we can make investments in other portions of the economy (like education, energy conservation, and road repair).  But it’s awfully painful to make cuts in health care.  In our lackluster economy, health care has been the one portion of the economy that has been reliably growing!