The restriction of market forces in the US Health Care Industry

Look at the staff that all doctors’ offices need to have.  Everyone there except for the nurse that assists the doctor is there to comply with the mountain of regulations that have been imposed on your doctor by government and paperwork requirements by the Health Insurance companies or HMOs.

Since the first mention of O’Bomber Care, I have always wondered how they were going to screw health care up any more than it was already screwed up. My good friend, Robert Spencer, does an excellent job of tracing the history of health care in the uSSA  which reveals how we ended up with the mess we have today. — jtl, 419

How did we get forced into this trap of high prices for medical care, health insurance becoming important and finally mandatory and regulations enough to fill a small room?  Was it always this way?  No, this issue runs much deeper and I don’t want to just rehash what you can read in the paper regarding Obamacare.

Instead lets take a look at how this industry has died the death of a thousand cuts.

In 1910, the Flexner Report was funded by the Carnegie Foundation and strongly supported by the AMA.  As a result of the report as many as half of the medical schools in the country were closed and the number of doctors graduating the new system dropped to around half.  The interesting part of the story for me is that Canadian schools of medicine saw no similar change.

The report gave the government the excuse they needed to take control of educating doctors with the help of the AMA.  No medical school can be opened without the permission of the state government now and even the size of the school is tightly regulated.  While potentially there may have been some increases in quality, costs under this model have been driven up significantly.

In the 1920s, some hospitals started offering services to people on a prepaid basis which lead to the Blue Cross organizations.  HMOs started around 1929 and increased in prevalence during the 1930s and WWII.

During World War II, The War Labor Board ruled in 1943 that certain work benefits, including health insurance coverage, should be excluded from the era’s wage and price controls. Using generous health benefits then to draw workers, employers began to bolster group health insurance plans.  It was not until 1954 that federal law excluded employers’ contributions to health benefits from taxation (treating them as business expenses), which created the foremost incentive to offer job-based health coverage.

In the 1950s President Eisenhower established the Department of Health, Education, and Welfare.

In July 1965 President Johnson with Truman by his side signed to include Medicare and Medicaid into the Social Security Act.

In 1971, President Nixon instituted wage and price freezes in an effort to curb inflation. (After Nixon closed the Gold window, which will be a discussion for a different time.)  With the implementation of Medicare and Medicaid, health care costs had grown rapidly from 4 percent of the federal budget in 1965 to 11 percent by 1973.  Under the wage and price controls, medical care was singled out for specific limits on annual increases in physician and hospital charges. These were lifted in 1974, over a year after most other economic controls had ended. An era of health care regulation began, leading to certificate-of need programs, state hospital rate-setting, requirements on HMOs(in return for support to help them expand) and health planning to control growth.

In 1973 President Richard Nixon signed off on the HMO Act.  After the Act was signed into law, the health care insurance organization plans faced opposition from professional organizations like the American Medical Association.  Despite individual physician concerns that HMOs would negatively influence the level of medical care provided to patients, HMOs grew in popularity.  Nearly 30 years after the HMO Act was signed into law, HMOs outnumbered private health care insurance plans and enrolled more than 80 million members.

So where does that leave us?  We are at least 12 steps away from a free market healthcare system here in the United States.  Look at the staff that all doctors’ offices need to have.  Everyone there except for the nurse that assists the doctor is there to comply with the mountain of regulations that have been imposed on your doctor by government and paperwork requirements by the Health Insurance companies or HMOs. Even if you pay the doctor cash he is not really working directly for you because his behavior is regulated by the Local, State and Federal government, the AMA and fear of being sued at some later date by a trial lawyer.  We are nowhere close to a free market where you and your doctor agree to what service is to be provided and how much you will pay.

Since you don’t pay directly for your healthcare, market forces and the ability to pay are not factored into providing care.  ObamaCare cannot regulate you out of the mountain of regulation and ignoring laws of economics will not make them go away anymore than ignoring the law of gravity will keep you from falling when you step off a cliff.

Compare this to the free market influence on computers and all computer related electronics.  The cost has come down dramatically while quality and function has increase exponentially.  All the time more and more people have become able to pay for and rely on the service provided by computers and electronics.  This was all done largely without interference by the government but of course not completely without government intervention.

What can we take from this?  If you want control of your healthcare you must be able to purchase your own insurance and/or care.  If you are making all choices regarding your care and are responsible for the costs then and only then does it become possible to reintroduce market forces and make the medical system live within the patients ability to pay.

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Land and Livestock International, Inc. is a leading agribusiness management firm providing a complete line of services to the range livestock industry. We believe that private property is the foundation of America. Private property and free markets go hand in hand—without property there is no freedom. We also believe that free markets, not government intervention, hold the key to natural resource conservation and environmental preservation. No government bureaucrat can (or will) understand and treat the land with as much respect as its owner. The bureaucrat simply does not have the same motives as does the owner of a capital interest in the property. Our specialty is the working livestock ranch simply because there are so many very good reasons for owning such a property. We provide educational, management and consulting services with a focus on ecologically and financially sustainable land management that will enhance natural processes (water and mineral cycles, energy flow and community dynamics) while enhancing profits and steadily building wealth.
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2 Responses to The restriction of market forces in the US Health Care Industry

  1. Obed Morley says:

    I had two lab tests done at MDAnderson and it was $1500. The digital was a couple hundred and you know how long that takes. The batch of people you see spend most of their time typing on computer.

    Date: Tue, 24 Jun 2014 16:16:04 +0000 To:


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