Seven root causes for The Health Care Crisis

on Friday, February 25, 2011

Health care is both a luxury and a necessity. Most of us feel that there should be health care for those that cannot afford it, but do not realize that government manipulation is a large part of our failure to make reasonable health care available to the poor.

There are many factors that contribute to the expensive system we have today, most of which are not part of the general public awareness. Here are seven reasons I'm currently aware of:

1. The government mandates what insurance companies must cover. If you want to buy cheap health insurance without all the bells and whistles, you can't. This raises prices when the government, for example, forces all insurance companies to provide Viagra. Without that law the poor could buy cheaper insurance if they select a plan that doesn't cover the drug. (Drug makers lobby to enact laws that force insurance companies to provide coverage for their drugs.)

2. Laws prohibit insurance companies from competing across state lines, which raises prices. (Insurance companies lobby for this law because it keeps profits high)

3. Medical insurance isn't tax deductible unless you're a business.

4. Lawsuits force doctors to purchase very expensive insurance; that cost is passed along to us. (This also reduces quality, because doctors must never admit fault, and are pressured to hide errors from patients and their employer.)

5. Costs are hidden from consumers and the bill is sent to the insurance company. This allows hospitals to overcharge, which forces insurance prices up. (If you had food insurance can you imagine what would happen if restaurants could simply give you a price-free menu and send the bill to your insurance co?)

6. There are legal obstacles that stop or slow employers from providing Whole Foods style insurance, which is a combination of a health savings account and high deductible insurance. It is cheaper and keeps costs low, but government is in the way.

7. The American Medical Assoc. restricts the number of graduating MDs each year, which increases prices by keeping doctors in short supply. (The AMA restricts the supply of doctors in the same way that OPEC or De Beers keeps oil or diamonds off the market.)

Physicians' salaries in the U.S. vs. various European countries and Canada, showing that MDs in the U.S. make about $200,000, which is between 2 and 5 times as much as doctors make in other countries.

Physician Salaries
One reason we might have 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.

In 1963, there were only 135 law schools in the U.S.; now there are 200.

There are 130 medical schools in the U.S., which is 22% fewer than the number of medical schools 100 years ago (166 medical schools), even though the U.S. population has increased by 300%. The number of medical students in the U.S. has remained constant at 67,000 for at least the period between 1994 and 2005 and perhaps much longer.

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.