The trouble with the medical cartel

Not too long ago there was a dentist practicing in Orlando, Florida and his clientèle were the uninsured working poor and others. His prices were very reasonable.  People who could not pay the high prices of the regular dentists got treatment from this man. A licensed dentist turned this man in to the authorities and it was found that he did not have a license to practice dentistry so they put him in prison and left the poor without any dental care. His clients testified in his behalf at trial to no avail. The only people helped in this travesty were the other dentists who were afraid of price competition.

People sometimes wonder why medical care costs so much in the USA and is so substandard. It was not normal in times past to only see the doctor for a few minutes and be charged sky high prices for that quick look over that he gave you. Look at this chart of Physicians’ salaries in the U.S. vs. various European countries and Canada which shows that MDs in the U.S. make about $200,000, which is between 2 and 5 times as much as doctors make in other western countries. That could well be part of the problem, but how did that come to be?

For centuries all professionals have sought to cartelize their occupation which is to say they want to limit competition. The stated reason is always protecting consumers or the general public but the real reason is always to make more money using the force of the state to make people give it to them.

Medical organizations argue that only by state laws and enforcement of licenses can the public be protected from bad doctors or dentists or what have you. But in fact the public is hurt due to higher prices and being less alert to the medical professional’s reputation: after all, the state has cleared him as trustworthy. With specialists consumers are very watchful. Any doctor may legally do plastic surgery but customers look for a highly qualified, well-recommended, board-certified surgeon who specializes in the field. There is no state certificate needed to protect people there — the market rules.

In our system we have restricted the number of medical schools which means that we restrict the number of doctors. A recent study said almost 60 percent of medical school applicants were turned down. The number of hospitals and the number of beds in a hospital is severely controlled and restricted by the government.

Mark Perry wrote:

Bottom Line: One reason we might have a “health care crisis” due to rising medical costs, and the world’s highest physician salaries is that we turn away 57.3% of the applicants to medical schools. What we have is a form of a “medical cartel,: which significantly restricts the supply of physicians, and thereby gives its members monopoly power to charge above-market prices for their services.

In his classic book Capitalism and Freedom, Milton Friedman describes the American Medical Association (AMA) as the “strongest trade union in the United States” and documents the ways in which the AMA vigorously restricts competition. The Council on Medical Education and Hospitals of the AMA approves both medical schools and hospitals. By restricting the number of approved medical schools and the number of applicants to those schools, the AMA limits the supply of physicians. In the same way that OPEC was able to quadruple the price of oil in the 1970s by restricting output, the AMA has increased their fees by restricting the supply of physicians.

Restricting the supply of medical care has a long history. It started as long ago as the fourth century B.C. with the school of medicine that Hippocrates founded on the Greek island of Cos. In more modern times, England’s Royal College of Physicians which is a state-approved licensing agency has long been a medical monopoly. In 1765 an American tried to start a medical licensing agency in the colonies based on the Royal College of Physicians but it failed due to the laissez-faire beliefs prevalent at the time.

Historian Jeffrey Lionel Berlant has written that in the early part of our nation’s history: “a license amounted to little more than a honorific title.” Unlicensed medical practitioners were common at the time and in the free-market 1830s, one state after another repealed penalties that did exist against unlicensed practice so that by the mid-19th century there were virtually no government barriers to entry.

Economist Reuben A. Kessel:

“Medical schools were easy to start, easy to get into, and provided, as might be expected in a free market, a varied menu of medical training that covered the complete quality spectrum.” Many were “organized as profit-making institutions,” and some “were owned by the faculty.”

But by the middle of the 19h century the American Medical Association was formed to raise doctors’ incomes. The strategy was the establishment of state licensing boards run by medical societies. A board of examination was to sit in judgement and to restrict entry and competition. The Flexner Report of 1910 further restricted entry into the medical profession causing the closing of all remaining non-AMA approved medical schools.

We have seen increasing government intervention in medicine and the AMA has worked in concert with the government on much of the governmental intervention into medical delivery. At all points in the medical system in the US one must be AMA approved or one can not practice medicine. Medical licensure is a grant of government privilege and like all government granted privelge is harmful to the public in many ways.

Now some will no doubt say that without the AMA protecting us that the nation would be over run with medical quacks and that people would die from medical malpractice. To that I simply say that we know from history that was not the case when America had a relatively free market in medical services. It is time to let the free market provide medical services again.

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9 thoughts on “The trouble with the medical cartel

  1. Government at federal and state levels is at the root of the problems related to health care via various laws and regulations. And most of those currently in the health fields, especially the higher fee-obtaining ones, do not want their government-granted monopolies to cease.

    The Internet enables growing numbers of individuals to become increasingly knowledgeable about their own bodies and what it takes to stay healthy, or to resume good health if they’ve previously lost it. It’s up to each individual to understand that his/her (hir) own body is more important to hir than anyone else, even that physician who gets a large fee for treatment of a mostly preventable disorder. Therefore it is up to the individual to become knowledgeable and to recognize that the responsibility for hir own health IS hirs, not some doctor or government agency/bureaucrat. If s/he discards hir own personal responsibility, the individual also loses hir authority to decide, to make the choices.

    The AMA and the other similar organizations are definitely problematic, BUT only because the various state governments grant them monopolies. They would be nothing more than voluntary mutual-benefit groups like any other fraternal organization, if not for government with its enforcers who make all the copious legislation more than ignorable words.

    Mark, you write: “Medical licensure is a grant of government privilege and like all government granted privelge is harmful to the public in many ways.” So very true. And it is Gov Enforcers who are the key to those words of privilege created by the vast amount of regulations and laws, making them more than just scribbles on paper or electrons in digital media. With far fewer individuals willing to be Enforcers (domestic and military), governments can actually do much less harm – actually none at all if no Enforcers.

    Immediate action? Be personally responsible in all your actions. Discourage those in and considering being part of Government enforcement in any manner while encouraging personal responsibility. Preferentially associate voluntarily with those who are personally responsible and encourage others to do the same; reduce and even withdraw voluntary association with those who do not act responsibly, especially those Gov Enforcers who do not respond positively to reasoned logic by ceasing those roles. These are the grassroots starting actions towards a full withering away of government, not a necessity for social order though all politicians would have everyone thinking it is.

    I realize this is a long comment, Mark, but I wanted to get to the root, the Enforcers that make all of Government (everywhere and back through time) possible.

    • I agree about the enforcers being a big part of the problem and I have written and tweeted about the uniformed goons many times. But, the citizen who thinks his government is legitimate in spite of all evidence to the contrary is also a huge part of the problem.

      As a market anarchist, I hope someday soon the people will start withholding their support of the government. That is basically what happened to the old USSR. I pray that happens here.

  2. Kitty,

    It is not just the government. It is groups that develop business models dependent on the government.

    The first step to breaking the cartels is to create new business models that are not dependent on the government. Only after having a model for free market businesses in place can we start to address the question of governance.

    Trying to address this problem from the top-down doesn’t work. When conservatives try to limit government in a economy that’s been socialized, all that we get for the pain is austerity measures and decline.

    The political reform we need must start with the creation of a network of free market oriented businesses. Then we can go after the cartels and demonstrate why they are destructive.

    This is the direction I’ve been taking with The Medical Savings and Loan ( http://medicalsavingsandloan.blogspot.com ). The goal of this program was to attack health reform from the money end. The MS&L is simply an argument that self-funded care would deliver more and better care than group funded care. Unfortunately, in the last four years, I’ve been unable to find anyone interested in Free Market Health Care reform. I am actually despairing that there are no patriots willing to actually stand up for freedom.

  3. Pingback: Real Liberty Media News Blog - 2012-10-31 | Real Liberty Media

  4. Pingback: alert medical services

  5. The core biomedical sciences, medical sciences, behavioral sciences and clinical competencies form the basis of system-based teaching and learning in the Junior and Intermediate Cycles. The two Senior Cycle years concentrate on the delivery of clinical medicine and its subspecialties.

    • Fine, but that has nothing to do with the US medical system being controlled by government interventions. The AMA often is part of the intervention and sometimes it is not — but government intervention is at the root of our problems.

  6. There are several medical schools in this populous nation. Amongst the best are: Nnamdi Azikiwe University Awka Anambra state,Bayero University Kano,University of Benin, University of Nigeria, University of Lagos, University of Ibadan, Obafemi Awolowo University, Lagos State University College of medicine, University of Maiduguri, Obafemi Awolowo College of Health Sciences (Olabisi Onabanjo University- former Ogun State University),University of Port-Harcourt, University of Ilorin, University of Calabar, College of Medicine Enugu State University of science and technology,University of Jos, Ahmadu Bello University and the Niger Delta University Wilberforce Island Amasomma, Bayelsa State. Entrance into these schools is highly competitive. Candidates graduating from high school must attain high grades from the West African Examination Council’s (WAEC) Senior School Certificate Exam (SSCE/GCE) and high scores in four subjects (Physics, English, Chemistry, and Biology) in the University Matriculation Examination (UME). Students undergo rigorous training for 6 grueling years and culminate with a Bachelor of Medicine and Bachelor of Surgery (MBBS/MBChB). The undergraduate program is six years and one year of work experience in government hospitals. After medical school, graduates are mandated to spend one year of housemanship (internship) and one year of community service before they are eligible for residency.

  7. “Medical cartel” has an organizational name—“Pilgrims Society,” Miner Warner, second generation member in NYC, president. This is the British Crown’s network for recapturing its “colonies” here. The USA President is an “honorary” member—see on Google images “President Pilgrims Society.” This is history’s most dangerous organization with no other even in tenth place behind it.

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