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The AMA Monopoly
While most people believe that our healthcare industry is one comprised of free markets, it is anything but. It is completely distorted by government manipulation.
To start with, the American Medical Association (AMA) has had a government-granted monopoly on the healthcare system for over 100 years. It has intentionally restricted the number of doctors allowed to practice medicine so as to artificially raise physician incomes. The primary way it does this is by using the coercive power of the state to restrict the number of approved medical schools in operation. After the AMA created its Council on Medical Education in 1904, state medical boards complied with the AMA’s recommendation to close down medical schools. Within three years, 25 schools had been shut down, and the number of students at remaining schools reduced by 50%. After three more years, 10 more schools would be closed. Since that time, the U.S. population has increased by 284%, while the number of medical doctors has declined by 26% to 123. In, 1996, the peak year for applications, only 16,500 candidates were accepted out of 47,000. While high rejection rates can be common in most schools, applicants to medical schools are usually among the brightest and highest quality students who have put themselves through a very costly admissions process. High rejection rates are why so many people attend medical schools in the Caribbean, where they prepare students to be American doctors. The medical monopoly also marginalizes or outlaws alternative or slightly alternative (i.e., competing) medical practices, along with nurses and midwives, who could perform many of the tasks doctors due today.
The AMA also has monopoly power over the state boards which issued licenses. A physician can practice only by having a state license (licenses in general exist primarily to prevent competition). Each state has licensing boards consisting of AMA members who decide which applicants, according to them, are competent and morally fit. The boards also have police and enforcement powers to monitor their own kind, and keep as many nasty incidents as possible out of the public eye. The state medical boards are presented to the public as a means of protecting them, and masquerade as consumer protection agencies. Instead of presenting competition as something that lowers doctor’s incomes, the AMA and medical boards present it as something that must be stopped in the name of keeping patients safe.
As a further understanding of the intertwining of government and our healthcare system, consider the following explanation from Henry E. Jones, MD:
Most members of the state medical boards are appointed by the governor. State and county medical associations, medical specialty societies, large medical group practices, HMO’s, health insurance companies, chain and wholesale pharmacies, and large hospital chains contribute heavily to the campaigns of candidates for governor and attorney general. Thus, the governor appoints to the state medical board those desired by the medical monopoly. Doctors selected by the medical monopoly for appointment to the state medical board can be counted on to cooperate. And it works the same way with the State Board of Pharmacy.
The medical monopoly contributes heavily to congressmen and maintains one of the best-financed and most effective lobbying programs in Washington, D.C. It is important that the AMA, the state medical board, and the state attorney general in each state work hand-in-glove to further the interest of the medical monopoly.
Do We Need To Be Protected?
One might retort that restricting the supply of doctors is good, because we need only the smartest, most knowledgeable, and safest people to be responsible for our very lives. But under this argument, we could ask “why stop at the doctor-limiting threshold at which we currently operate?” Why not restrict the supply further so that we have only the top thousand or even the top ten doctors in the nation to take care of us? In that case of having only the most qualified doctors, even more people would die each year for lack of affordability as well as lack of opportunity to actually get in to see the doctor.
Look at it another way, in terms of assigning grades to the quality and capability of the doctors: what if we should restrict the number of doctors to those who are grade B and above, but we have already placed restrictions at a higher level such that we only accept A+ doctors?
As yet one more example, what if we limited the number of automobiles in the same way? What if we were only allowed to produce cars with the quality and safety of the top Mercedes, BMWs, and Rolls Royce’s, as well as prohibiting cars older than three years old (since they are less safe)?
Just as a Saturn Astra or a used Ford Escort deliver a valuable service to many, so would a B- or even a C grade doctor, particularly for non-life-threatening issues. There are many of us who would pay, say, $30 to visit a C grade doctor for a cold, versus $100 to visit an A grade doctor.
In a free market, any doctor could practice medicine. But would we then have any and everyone hanging out shingles calling themselves doctors only to kill someone due to misdiagnosis or by removing ones’ heart instead of their spleen? No, we wouldn’t. Even if that did happen on rare occasion, the number of deaths from such an event would likely be much less than the number who die from current doctor’s mistakes (see below), or from the number who die from a lack of affordable healthcare (I know of one such person who couldn’t afford treatment for his Parkinson’s disease; he committed suicide last year). Besides, in those terrible rare cases, individuals would have at least had the opportunity to choose what they thought was best for them.
In reality, the doctors who would practice would be those who are educated to do so. Besides, any unqualified doctor who did bad work would lose clients and go out of business, as word gets around; and, there would without question be private ratings agencies comparable to other consumer reports services telling us how various doctors rank, and which doctors are suspect.
At the least, why not allow competing medical associations? We could have 4 or 5 other associations with the same criteria of competency as the AMA. We could allow an absolute rather than a rank-ordered threshold to be met in order to practice medicine. Or, why not permit many more less qualified people to practice medicine, and then let individuals choose between higher-priced AMA-certified and lower-priced non-AMA certified doctors.
Healthcare “Insurance”
The other major problem with our healthcare system is our third-party payer system, where we rely on someone else to pay most of our bills; namely, we use “insurance” that is funded mostly by corporations and the government. Though this system originated with the Blue Cross and Blue Shield entities early last century (which obtained government-supported advantages over competing private systems), the third-party payer system really took hold with the advent of government regulation during WWII. Since prices were rising due to the government’s printing of money that paid for the war, politicians imposed price and wage controls. Since businesses could not compete for labor by bidding up the wages they were offering, they began competing by offering special benefits, including paying employee’s healthcare costs (which socialists now see as something that large companies should be required to do).
When something is free or mostly free, people demand more of it. With someone else paying their bills, people make more trips to the doctor. This constitutes more demand for the services of healthcare providers, and who thus raise prices, not only to take advantage of their increased pricing power, but to try and reduce their workload, since more people start to demand healthcare than providers have the time and resources to address. Prices are used to equate supply with demand.
With a restricted supply of doctors on the part of the AMA, and increasing demand for relatively free healthcare on the part of consumers, prices began to rise more rapidly, and waiting times to see doctors became longer.
Since healthcare then became unaffordable to many (whereas previously it was not), politicians, in the name of helping people in order to get votes, set up government agencies to offer Medicare and Medicaid to pay for the healthcare costs of those who could not afford it. With the government spending additional billions of dollars to compete for the limited amount of healthcare service, prices began to increase much more. With every new instance of government paying for citizen’s healthcare, such as the Medicare Part D program enacted in 2003 to pay for prescription drugs, healthcare costs rise still further. Had the companies facing price controls in the 1940’s chosen to pay for employee’s food instead of their healthcare, we would likely have grocery prices rising at phenomenal rates today, causing a “foodcare” crisis supposedly brought about by free market failures.
Each year, as costs rise due to increased spending on healthcare, private insurance companies simply raise the costs of premiums so as to cover these increased expenditures they pay on our behalf. The more we spend, the higher are our premiums. But as prices rise, fewer people can afford premiums.
On top of the two primary issues discussed above, doctors and hospitals are subjected to unbelievable amounts of burdensome oversight and enforcement agencies, bureaus and commissions. As Jones states: “Rules, regulations, and laws are duplicated, redundant, multiplied, magnified, and contradictory. Laws and regulations covering doctors and hospitals plus all the other parts of our healthcare system now account for over half of all the words, sentences, and paragraphs in our entire body of law.”
The Quality and Cost of Our Regulated Healthcare
With all this regulation and expensive healthcare, Americans receive only a mediocre quality of care. For instance, the U.S. is far from achieving the lowest world infant mortality and death rates; fatalities from incorrect healthcare treatment are the third-leading cause of death in the U.S., after heart disease and cancer; and over 225,000 people die each year from doctors’ mistakes: 12,000 deaths occur each year due to unnecessary surgery, 7,000 deaths are due to medication errors in hospitals, 20,000 deaths are due to other hospital errors, 80,000 deaths are due to infections in hospitals, and 106,000 deaths are due to the negative effects of drugs.
For this level of quality, we pay about $6,000 per person each year in the United States. How is it that we do not realize that we are paying this much since we don’t see that amount subtracted from our checking accounts? Because individuals, on average fund only about 20% of their annual healthcare costs since employers and governments pay the rest. But in truth, we all still pay the remaining amount, because all money eventually comes from individuals (or at least those who work and produce).
The dollar amount of healthcare that employers pay on our behalf is in fact subtracted directly from our paychecks; if companies did not have to pay healthcare costs, those monies would instead be paid to workers, or to machines that would increase the productivity and thus paycheck of workers (as explained in Chapter 1). The dollar amount of healthcare that government pays for on our behalf is taken directly from our paychecks in the form of taxes or indirectly through inflation. Additionally, the Cato Institute estimates that the cost per household of medical providers’ compliance with health services regulation was $1,546 in 2002. It also estimated that roughly one out of every six uninsured persons was uninsured because of the cost of regulations. All of this regulation exists, yet most people still believe we have a free market in healthcare, and that that is the root of our problems.
Socialized Medicine
Socialists thus want us to turn to nationalized healthcare, where the state will pay for our healthcare (as though we will not still be paying for it). But this will not work either. When medical care is free, people consume more of it. The costs would continually rise, as they currently do in the United States. Since national governments have limited budgets, governments with socialized medicine impose cost controls and limit spending to a particular amount. But since nothing limits individuals from going to the doctor, waiting lines grow longer and longer. At this point governments limit doctor visits or limit the types of procedures which can be done.(see note below) For example a particular treatment might only be able to take place given the existence of particular set other symptoms. Or surgery might be denied for patients who are over a given age.
After getting sick, famed British record label owner, radio and TV presenter, nightclub owner, and journalist Tony Wilson (about whom the film 24 Hour Party People was made) faced death due to the fact that Britain’s National Health System (NHS) refused to fund a key cancer drug he needed to stay alive. He stated “I’ve never paid for private health care because I’m a socialist. Now I find you can get tummy tucks and cosmetic surgery on the NHS but not the drugs I need to stay alive. It is a scandal.” Wilson died not long after in 2007.
Additionally, in countries with socialized medicine, physicians and researchers incomes are limited, which offers them no incentive to compete or to be innovative with new forms of technology or treatments. Innovation is also limited, as it inherently must be under a government bureaucracy. For these very reasons, Canada’s healthcare system has taken the first step towards privatization, due to Quebec’s lifting a ban on private health insurance. As the New York Times Stated:
The Supreme Court decision ruled that long waits for various medical procedures in the province had violated patients’ “life and personal security, inviolability and freedom,” and that prohibition of private health insurance was unconstitutional when the public health system did not deliver “reasonable services.”
Only Free Markets Can Solve the Healthcare Crisis
Every election cycle, we hear politicians talk only of cost controls, electronic medical records, and preventing lawsuits in order to solve our medical crisis. Some pundits argue that technology increases medical costs, not of discussions of the real problem of government-paid insurance and medical boards. Though technology lowers costs in other industries, they think that it somehow increases costs in the healthcare industry. Similarly, Paul Krugman claims that healthcare costs rise simply “because of medical progress.” With these kinds of backwards notions, our “leaders” set out to implement yet more regulation and price controls, which will only exacerbate the problem.
What we need are truly free markets in healthcare, which would bring about an increased supply of doctors and healthcare facilities, and lower costs. By bringing free market profits to the industry, the quality of care would improve due to providers competing to make the most money by trying to please the most consumers. Healthcare costs used to represent 5% of national income, now it’s 17%. Under free markets, healthcare prices would fall in real terms (if not also nominal terms), and the cost of staying in a hospital would approximate the costs of staying in a hotel plus the additional marginal costs of the labor services of nurses and doctors, and the costs of the use of the tools and technology. In total, costs of healthcare would be affordable to everyone in the same way that food, televisions, and tools at Home Depot are; they would be just another average cost that we pay.
For those who still doubt such an argument, think seriously about whether the supposed high costs that would occur in a free market would really outweigh the costs we incur today where healthcare costs rise at two to three times the rate of inflation. And consider whether the supposed physical harm that would occur would outweigh the deaths and physical suffering that occur today due to the fact that millions can’t afford access to healthcare. Additionally, if licensing is so important in order to reflect competent and qualified service providers, shouldn’t we, in the same vein, require all politicians to go through years of training in the areas of philosophy, history, economics (including free market economics), industrial production, accounting, and management before they are permitted to pass laws that affect the economy and our lives?
Note: Leftists currently say that we already have rationing. Indeed, insurance companies try to limit what things they shell money out for, because otherwise they would be nickled and dimed and would incur losses. But this does not compare in the least to the true rationing that would occur under socialized medicine. In today’s market, for the most part, insurance companies continue to pay for what we spend (thus prices rise at 15% or per year). Under socialized medicine, governments would have an absolute amount of money to be spent and would ration in order to limit spending to that amount only. Thus, people would not have the choice and the opportunity for what they want. Even in our current screwed up system, whatever one wants they can get it if they pay for it.
Kel Kelly @ August 12, 2009
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