Professional associations and the cost of health care

Do associations of medical professionals, such as the American Medical Association (AMA), make health care more expensive by restricting the supply of doctors who can provide health care? An economics and finance blog hosted by the American Enterprise Institute (AEI) recently gave some perspective on this question with a post titled “American Medical Association: the strongest trade union in the U.S.A.”

The post looked at actual number of doctors graduating from medical schools and compared it with the number of doctors we would expect to see graduating from medical schools, based on the rising demand for health care services from a growing and aging population. The accompanying chart shows what that comparison found: The actual number of new doctors in America does not reflect what we would expect a free market to produce.

According to the blog post, the famous late economist Dr. Milton Friedman documented how professional associations like the AMA can restrict the number of new doctors that can practice in America through their power to approve (or not approve) new medical schools and hospitals. This led Friedman to label the AMA the “strongest trade union in the United States.” Though it’s not conclusive proof, the data from the AEI blog would seem to support Friedman’s assertion.

The data on new doctors, the AEI blog, and Friedman’s analysis all hint at a bigger point: The government overregulation of almost every aspect of health care has mutated the once-free market for health care into an overwhelming abyss of bureaucracies (government, insurance companies, hospitals, etc.) competing for power and money primarily in the world of politics, rather than in the health care market. Evidence supporting this assertion is found in scholarly research on the returns for health care businesses’ “political investments.” The legislative and regulatory monstrosity of Obamacare, and the political payoffs required to enact it, are logical end results of what overregulation has done to the market for health care.

What is the alternative, and what does that alternative look like? The alternative is a truly free market for health care, and it looks like a scenario in which the sick and those in need of health care are empowered to control their own health care.

In a free market for health care, people who need health care services have control of, and responsibility for, money being spent on their health care. Rather than two faceless bureaucracies bickering over the cost of health care services (government/insurance companies vs. hospitals) to get every last penny that they can, in a free market for health care, sick people and health care providers determine the cost of health care services. Further, in a free market for health care the person needing health care has the upper hand, because he has the knowledge and power necessary to choose the health care provider that provides high-quality services for a reasonable cost. There would be no government program or insurance company to restrict access to such doctors – only the limits on that doctor’s time and resources would limit whom she could treat.

And the only way to arrive at such a free market in health care is to have the freedom to leave behind federal health care regulations that undermine the free market and empower special interests over the sick. In other words, perhaps the only way to realistically arrive at a free market in health care is through the Health Care Compact.