What freedom in medicine can bring

What we need is not less medical technology, but more.

What amazing treatments capable of ending suffering and promoting health are possible?

If we continue done the current path of strangling innovation, focusing primarily on reducing expenditures, we may never get to find out.

Many blame new expensive technologies for the increasing unaffordability of medical care. This claim is false.

Government price fixing in combination with the insistence that all treatments, no matter their cost, be immediately available to all those in "need" insulates medical care from healthy market forces. Medical goods and services are protected from the pressures of competition, profit and loss. When allowed to function without government intervention, markets take items which start out as luxuries for the wealthy and turn them into nearly universal commodities---even to the point that people begin to consider access to those commodities as essential to modern life. (Witness government efforts to guarantee people access to phones and the internet.)

Not only that, but the cycle time from luxury to mass availability shortens. It took 71 years for half the homes in the US to obtain telephones. This degree of penetration was achieved for electricity in 52 years, and for radio in 28 years. Personal computers took only 19 years, and internet access 10 years.

Even more astounding is taking a look at what the "poor" (household of 4 with an income <$22,000) in American currently own.

43% own their own home

75% own a car

97% own a TV

91$ have a microwave

48% have a cell phone

When allowed to function free from coercive egalitarian standards, the market will raise the prosperity of all. when price, profit and loss signals are manipulated (even if done with the intention of helping the most disadvantaged) everyone suffers.

Arguments are advanced that the health care market is unique and requires government intervention to assure equitability. But it is the degree of government intervention into medical care which has grossly distorted health care:

Physicians have a legal monopoly on the practice of medicine.

Hospitals and doctors are required to treat people for free.

Minimum insurance laws artificially increase the price of health insurance.

Medicare price fixing prevents competition for quality and efficiency.

Patients (health care consumers) are protected from having to consider cost in their demand for medical services.

Fee-for-service, which is the source of efficiency elsewhere in our economy, has perverse incentives when attempting to function within the third party payer system.

This names just a few.

Having removed or distorted normal market functioning in health care, the government finds it necessary to pile on even more intervention via 2700 pages of legislation (which enables tens of thousands of pages of regulations) --all in attempt to micro-manage health care from the top-down. But centralized command and control is not only not necessary, history has repeatedly demonstrated it to be counterproductive at best, and destructive at its worst. And what is destroys is the ability of individuals to live their lives according to their own values and judgement.

For greater access, greater affordability, greater advances--the best direction to take is to get government out of the medical care market.

Our lives, health and freedom depend on on it.

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Fee-for-Service and the Profit Motive

Fee-for-service is frequently and erroneously maligned as the cause of our current health care ills. The denigration of fee-for-service follows from the failure to properly understand the functioning of free market and the beneficial role of the profit motive. Most transactions in our economy are fee-for-service (think of your grocer, plumber, CPA or housing contractor) and are functioning just fine. Free market competition increases quality and efficiency while bringing down prices and costs. The problem we currently face in medicine is the lack of free market competition, not the fee-for-service payment.

Increasing paperwork and administrative hassles, rising health care expenditures, increased demand for and subsequent increased prices of health care goods and services are all consequences of the current 3rd party payment system (in combination with low out-of-pocket costs for patients.) Tax laws since WWII have supported the replacement of medical insurance (catastrophic coverage and high-deductible) with comprehensive pre-paid health care and government entitlement programs---both of which are erroneously referred to as insurance. Understandable attempts on the part of the payer (both insurance companies and government) to control costs and assure quality invariably leads to intrusive bureaucratic management of medical decision-making.

The solution is to neutralize government health care policies and let individuals decide what financial arrangements best meet their needs. Contracts should be enforced, but not designed, by government. Fraud and negligence should be objectively defined and punished. Social engineering through tax policies, government subsidies, entitlement programs and regulations will always have harmful unintended consequences and are an inappropriate use of government force.

Some individuals may find it desirable to receive or provide medical care within an HMO or in a system of capitation—and they should be free to make this choice. Businesses should be free to experiment with health care delivery designs and to compete for patients on price and quality. Fee-for-service is one of many possible valid financial arrangements between physician and patient, and one that demands consistent quality and affordability for a physician to remain in business. As in any other business, the pursuit of long-term profits in medicine requires providing a valued service to one's patients--perhaps even more so in medicine because of the crucial role that trust plays in the doctor-patient relationship.

Fee-for-service is simply one profit-engendering trade arrangement: the physician provides a service for which the patient pays a fee. Profit is simply the money difference between the cost of providing the service and price that is paid for it. In a free market, pursuit of profit is an appropriate motivation for providing excellence--in medicine as in any other economic endeavor. Anyone able to offer a unique or superior service rightly earns the higher profits they voluntarily obtain. When a high profit margin exists, it signals a need for more resources to be directed to that area--not exploitation or gouging. Without free market prices and profits, there are no such signals and no way for resources to be efficiently allocated.

In spite of the fact that the Marxist theory of exploitation has been thoroughly refuted (both in theory and in practice,) our culture retains a suspicion of the profit motive. This is due in part to thinking of our economy as a free market, when in fact it is not free but a mixed economy: a mixture of freedom and central planning--replete with all the special interest influence and political favoritism that central planning promotes. Profits earned in this system are a mixture as well--in part due to voluntary trade of value for value, and in part due to political pull and government coercion.

Fee-for-service in a free market generates justly earned profits. It is the system that promotes win-win transactions and the benevolence of mutually respected individual rights. When externally imposed incentives distort the normal economic relationship of voluntary trade, fee-for-service can lead to an exploitive relationship, but the cause is the artificially imposed incentives, not fee-for-service or the profit motive per se.

So beware of those who disparage fee-for-service, for underlying it is a condemnation of profits, and thus the means of supporting our lives through our productive labor.

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The Unleashing the Lash of License Laws

This ribbon is to raise awareness of the recent damage our government has caused to health care freedom and the integrity of the doctor-patient relationship. Under ObamaCare, physicians will be compelled to base their advice and treatment on politically determined goals, even when in conflict with the best interest of their individual patients.

Yesterday I renewed my medical licence. In California, I have a Class G Physicians and Surgeons licence. In order to maintain my licence to practice medicine, I had to attest to the following:

1. having obtained 50 hours of continuing medical education in the past two years, including 12 hours of pain management end-of-life care within the past 4 years, and if 25% or more of my patients are 65 or older, 20% of my CME must be in geriatrics.

2. the zip code in which I practice, the number of hours I work per week in various types of medicine-related activities, my years of training beyond medical school, board certification-if any, foreign languages I am fluent in, and my ethnic background. (In the last2 categories, I was at least given the option "decline to state.")

3. "the name and address of each health-related facility in which you or your immediate family have a financial interest."

After completing the form, I was given the option of contributing $25 for family practice training. The required license fee for the "privilege" of practicing medicine in California is $808.00--however $25 of that fee is a mandatory contribution to a loan repayment program:

Mandatory - Physician Loan Repayment Program Fee California Business and Professions Code section 2435.2 requires applicants to pay a mandatory fee of $25.00 at the time of issuance or renewal of a physician and surgeon's license to the Physician Loan Repayment Program. The Physician Loan Repayment Program encourages recently licensed physicians to practice in under served locations in California by authorizing a plan of repayment of their medical school loans in exchange for their service in a designated medically under served area for a minimum of three years.

In order to legally practice medicine in California, I am forced to fund other physicians who work in "under-served locations."

I paid my own tuition for medical school, which required taking out loans and which I personally paid back every cent. But this personal responsibility is not sufficient for the state of California. The mere fact of choosing to maintain my licence in this state requires me to help others repay their loans.

With the advent of RommneyCare (the Massachusetts universal health care equivalent of ObamaCare) and the subsequent physician shortage and soaring state deficits, proposals in Massachusetts include threats of price controls--and of linking medical licences to treating patients on the state public access plan.

How long before we see similar requirements imposed from a federal level?

For years, physicians have practiced under the government-protected cartel of licensing laws. When the fiscal disaster of ObamaCare manifests as nationwide physician shortages and soaring costs, it won't take long for the licencing laws which have protected physicians from market competition to turn into a leash for government control of incomes as well the practice of medicine.

A Lesson in Profit

Check out the article "A Lesson in Profit" by Gen LaGreca and Marsha Enright published on 3/31/10 in The Daily Caller. Using the success story of Henry Ford, the authors critique Obama's erroneous disdain for profit, and the free market in general.

Gen and Marsha--

Thank you for this important lesson. Throughout the health care reform debate, I kept hearing the phrase "profits before people" with the implication that the two are in conflict. Similarly, the denigration of "fee for service" in medicine as the cause of rising costs and prices while ignoring that the bulk of economic exchanges in a free market are "fee for service" and lead to increased efficiency and lower prices.

Both of these criticism are at root anti-profit. But as you point out, profit is simply the reward for successfully offering a good or service while keeping your own costs less than the price people are voluntarily willing to pay. To be against profits, is to be against benefiting by offering to others something of value.

Marx's exploitation theories have been disproven in economics (von Mises, Reisman and others) and in practice (USSR, Cuba, S. Korea)--and yet they linger on in the minds and hearts of many. Until people understand the tremendous value and benevolence of profts and the profit motive, we will be condemned to continually play whack-a-mole with wealth-robbing legislation.

Three cheers for profits! And three cheers for your article which shows us why!

UpDate 4/5/10: See also: Profits Are for People by Richard Ralston

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