Saturday, November 10, 2012


It is a common misconception that it is the failure of the free market that has left millions of people without proper medical care, when in fact, it is the free market that would deliver the best care at the lowest cost without infringing on anyone's natural rights. The failed system we have in place now is a result of constant government intervention and its manipulation of the market. But before explaining the free market solution, I think it is important to understand the true role the government has played in mismanaging American health care.

The birth of "modern medicine" began in the late 19th century with the introduction of allopathic care, which relied heavily on surgical procedures and the use of medication. This differed greatly from the popular homeopathic care of the time that used natural remedies that were in abundance and available at low cost. At that time, health costs were kept low because both forms of medicine competed against one another on the open market and many doctors were allowed to enter the medical field.

The American Medical Association, which was given the power by the government to give out doctor licenses, knew that with more doctors entering the profession the average salary for a doctor would decrease. In order to increase doctor salaries they needed to limit the number of doctors able to practice. The AMA looked to take advantage of their government induced monopoly on the practice of medicine, and with the financial help of John D Rockefeller, who saw the potential profit that could be earned with allopathic care, financed the Flexner Report.

The Flexner Report called on American medical schools to enact higher admission and graduation standards in the name of the "greater good" but actually began the cartelization of the American medical profession...a cartelization enforced by the American Medical Association and backed by the police power of each American state.

As a result of the report:
  • Tuition for medical school was raised to the point that only upper-class white males could attend.
  • Half of all medical schools were closed, which included medical schools that trained doctors willing to charge patients less, or that adjusted their fees based on what patients could afford.
  • The number of applicants accepted to medical schools was cut in half.
  • Homeopathic care, the cheapest form of treatment, was dismissed as quackery and was not allowed to be taught in medical schools.

With less competition in the medical industry, the remaining doctors began charging more than most individuals could easily pay. To make matters worse, the Great Depression, which was caused by the failure of the government's central banking system, drove people into worse poverty and left them unable to afford medical care.

As a result, Blue Cross, a nonprofit health insurer, was established and insured everyone regardless of age, sex or pre-existing conditions. They were only able to do this though because of governmental tax credits, which later influenced other insurers to enter the market. But by offering low premiums, brought on by these tax credits, the government manipulated the market, creating a surplus in demand that would not have initially been there. The rise in consumption led to a scarcity in resources, which inevitably led to higher premiums and a reduction of coverage.

By the 1940s World War 2 was in full swing and the United States government took control over the economy and implemented wartime wage controls. Since businesses were no longer allowed to give raises, they began to compete for labor by offering health insurance plans. Like the insurance companies, government began subsidizing these company plans with tax breaks. With medical costs rising due to higher premiums from insurance companies, people relied on employment to afford healthcare. As a result, the pairing of health insurance and employment was born. Since large companies tend to employ significantly more young people than old people, the elderly were left uninsured and unable to pay their medical bills. The result was that people who really needed health care had an increasingly difficult time affording it.

People mistakenly did not see this as a problem caused by government intervention but as a failure of the free market. A progressive movement began to form, and looked to Congress to implement a system of socialized medicine for the elderly and the poor. By 1965 Congress created Medicare and Medicaid and overnight millions of Americans lost all financial responsibility for their health-care decisions.

Congress placed no restrictions on benefits and removed all sense of cost-consciousness. While the poor and the elderly were receiving "free" care, they were creating shortages in doctors and supplies causing the cost of health insurance for the rest of America to skyrocket. Within 6 years the nation's health-care bill nearly doubled in cost. To curb some of the cost Congress began to restrict reimbursements to physicians and offered fixed prepayments to hospitals, nursing homes and home health agencies, no matter what costs they incurred. Congress had initiated managed care.

Despite these efforts, the cost continued to rise, outraging Americans who now began to demand socialized health care for all. Why should some get a free ride while others suffer? But the American government was going broke under the current system. So instead of acting responsibly and opening up healthcare to the free market, Congress opted instead for deception and created HMOs. (Once again most people blame the free market for the creation of HMOs when it was actually the government that implemented them.)

The government's long range plan was to take the responsibility of health care off of them and put it into the hands of corporations. But since medical care for the elderly is so expensive, Congress had to make sure that there were enough young healthy people in the HMO system to offset the cost of the elder's medical bills. Through a system of tax credits and subsidies to HMOs, they were able to capture a significant portion of the private insurance market. Once Medicare and Medicaid recipients were herded into HMOs, the organizations would have the flexibility to pool their resources, redistribute private premium dollars, and ration care across their patient populations.

Which leads us to today where corporations now second guess a doctor's treatment so they can refuse medical care, increase profits, and drive a permanent wedge between the doctor and the patient. This is not freedom, this is corporatism placed into power by governmental authority. But even with over 100 years of mismanaged care, people still look to the government as the solution not the problem.