When middle class Americans see something is wrong, we can change it.

by Lee Bowers                                                                                            Copyright protected. All rights reserved.

Preface  ·  Monopoly-Building  ·  Self-Regulation  ·  The Blank Check Contract  ·  Price Discrimination and Pricing Secrecy  ·  Consequences: Insurance and Inflation  ·  Options  ·  The Question  ·  Works Cited

PREFACE

For years I've wondered why our health care costs are higher than anywhere else in the world.  It didn't just happen by accident.  Our history suggests that the deliberate, long-term intent of a powerful group of physicians has been a very significant factor.

It's important to acknowledge at the outset that many doctors are selflessly motivated, caring, respectful of their patients, and not in the health care business mainly for the money.  At the same time, this article is about another, historical aspect of the medical profession, and the role that history still plays today among the complex causes underlying our present health care crisis.

MONOPOLY-BUILDING

Competition is essential to capitalism, but greed prefers a monopoly.  Unrestrained, those seeking a monopoly will use unfair methods to eliminate competitors and become the only source for a product or service. 

The more essential a business is, the easier it is for a monopoly to raise prices and increase profits.  Our history shows that doctors organized to establish an anti-competitive monopoly for providing medical care when the modern American health care system was in its early stages of development. 

Worldwide, physicians have practiced medicine for thousands of years.  Local women also practiced the medical arts, serving as midwives and treating illness with medicinal herbs and traditional remedies.  Their skills were valuable assets in their communities, but they were not paid much.

Four factors that emerged from the Industrial Revolution—scientific developments, industrial growth, urbanization, and the rise of a strong middle class—made the practice of medicine more attractive to men during the 1800's, but only if they could charge substantially more than the local women. 

Among several options, one way to accomplish this was to eliminate the competition, establish a monopoly, and cooperate in setting high fees.  According to Roy Porter, author of the book titled  The Greatest Benefit to Mankind: A Medical History of Humanity, our early health care system was intensely competitive:

With a plethora of doctors jostling for affluent invalids and faced by brisk competition from druggists, chemists and hucksters, medicine risked becoming a cut-throat, cut-price trade. 'Overcrowding,' however, was less an objective fact than the gripe of vulnerable practitioners trying to convince legislators to restrict professional entry or ban rivals; many strata of the population rarely saw a doctor in a system in which purse-strings rather than need determined access. Yet professional insecurity was real enough on both sides of the Atlantic well into the twentieth century. [Porter. See "Works Cited," below.]

The American Medical Association (AMA) was founded in 1847, and it was anti-competitive from the start.  A great deal of the 1847 and 1903 editions of the AMA's “Principles of Medical Ethics” contained an extensive set of instructions on how doctors were to avoid competing with each other for patients.  Both editions also included a compensation clause that is a thinly disguised instruction for price-fixing: 

Some general rules should be adopted by the physicians in every town or district relative to the minimum pecuniary acknowledgment from their patients: and it should be deemed a point of honor to adhere to these rules with as much uniformity as varying circumstances will admit. [AMA Ethics]

With this clause, doctors were advised that their days of accepting payment in the form of eggs, venison and horseshoes would soon be over.  Barter is not “pecuniary.”  From 1847 on, it was going to be about the money. 

One method for establishing a monopoly in order to charge high prices is to control the supply by creating scarcity.  The AMA's stated purpose when it was founded was to establish standards and regulations for the practice of medicine—a highly praiseworthy goal—and by the early 20th Century it had achieved the power to do so. 

However, the AMA conflated the standard-setting goal with another purpose:  eliminate the competition. 

They commissioned the Flexner Report, then used it to take upon itself the right to set standards for accrediting medical schools.  According to Melissa Thomasson in the Economic History Encyclopedia, between 1910 and 1922 the AMA's Council on Medical Education closed nearly 40% of the medical schools in the U.S., reducing their number from 131 to 81.  [Thomasson, 1920-1930]

A 2004 article by Andres H. Beck, M.D., in The Journal of the American Medical Association (JAMA), acknowledges this history of medical school accreditation in the early 20th Century, including the fact that the remaining schools excluded most African-American and rural physicians [Beck].  Porter added that the women who had provided local health care were also excluded [Porter].

Beck reported that the process started with an explicit plan for eliminating medical schools, as stated in JAMA in 1901:

It is to be hoped that with higher standards universally applied their number will soon be adequately reduced, and that only the fittest will survive.  [Beck, quoting 1901 JAMA]

The ulterior motive behind those higher standards was stated even more explicitly in the1910 Flexner Report, according to Beck:

The point now to aim at is the development of the requisite number of properly supported institutions and the speedy demise of all others.  [Beck, quoting 1910 Flexner Report] 

The plan succeeded, and in his 2004 article Beck noted its consequences:

Although these reforms raised the quality of medical education in the United States, it concurrently caused a disproportionate reduction in the number of physicians serving disadvantaged communities…[and] promoted “professional elitism….” [Beck]

Improved medical training and high standards helped make America a world leader in the field of medicine, but the AMA could have accomplished this in an inclusive way—by improving the weaker medical schools and increasing the training for rural, African American, and female doctors—or by removing the competition.  According to Thomasson, the physicians' leadership chose the latter.

These increased requirements for physician licensure, education and the accreditation of medical schools restricted physician supply, putting upward pressure on the costs of physicians' services.  [Thomasson, 1920-1930]

During the same period, the newly-formed American College of Surgeons (ACS) demonstrated the validity of the inclusive approach as they set accreditation standards, this time for hospitals.  Thomasson reports, 

Of 692 large hospitals examined in 1918, only 13 percent were approved. By 1932, 93 percent of the 1,600 hospitals examined met ACS requirements [Thomasson, 1920-1930].

Why were below-standard medical schools closed, but below-standard hospitals improved and kept open?  By restricting the total supply of physicians, the AMA helped doctors increase their incomes and established the medical profession as an elite—and wealthy—class.  Hospitals, though, generate revenue for doctors.

SELF-REGULATION

The AMA has been largely successful as an initiator, a significant player, and a powerful lobbyist in creating and preserving the doctors' monopolistic privileges. 

In the 1943 Supreme Court case AMA vs. U.S, the Department of Justice won a criminal conviction against AMA physicians in Washington D.C. for conspiracy to act in restraint of trade by denying hospital privileges and prohibiting doctors from working or consulting for a non-profit prepaid care group of government employees.  [AMA vs. US]  In a 1990 Supreme Court case, Wilk vs. AMA, chiropractors won a private antitrust case resulting in an injunction against the AMA for conducting an illegal boycott against them.  [Wilk vs. AMA]  

Otherwise, the AMA has largely succeeded at preventing government regulation of doctors' business practices, such as local price-fixing and restricting the supply of doctors. 

As their attempt to boycott chiropractors demonstrates, physicians' territorial mind-set for preventing competition extends beyond its own profession.  It has affected me personally. 

For ten years I'd seen doctors and taken courses of antibiotics many times for sinus infections and sinus headaches, but the symptoms kept coming back, always under my right eye.  Meanwhile, dental X-ray's showed that the roots of two molars protruded into the affected sinus cavity.   

I had had a root canal in one of those molars, and with the nerve removed, I felt no pain in the tooth during those ten years.  Then my dentist said the tooth had failed and sent me to an oral surgeon. 

When he pulled the tooth, he said with surprise, “There are three abscesses on this tooth,” and showed me three fleshy protrusions in the tooth enamel.  Two were at the tip of the root, inside the sinus cavity.  They were the source of my recurring sinus troubles.   

The chronic headaches and sinus infections stopped immediately, once that tooth had been pulled, but it wasn't a miracle—I was just lucky the problematic tooth had had to be pulled for reasons other than the sinus infections. 

The problem was that doctors don't deal with teeth—that's the dentists' territory—but the sinus cavities belong to the physicians.  I'd been suffering because the cause of the sinus infections overlapped the sacrosanct boundaries between medicine and dentistry, and neither profession diagnosed or treated the whole problem. 

Territoriality operates within the medical profession as well.  It divides the primary care providers from the specialists, who are paid far more than the front-line internists, pediatricians, psychiatrists, and family doctors.  

Physicians' anti-competitive strategies still permeate the practice of medicine.  The hospital privileges system is an example.  Historically, doctors frequently started hospitals, owned many, and established professional control over most of the rest.  From that position of power, physicians refused permission for competing doctors to treat patients in the hospitals they controlled.   

“Privileges” determine which doctors are allowed to admit their patients to a hospital and treat them there.  Being denied hospital privileges effectively limits treatment options for those doctors and for their patients as well.  According to the American Optometric Association's Hospital Privileges Manual, this is still true today:

Probably the most common reason for denial [of hospital privileges] is that the hospital already has an adequate number of providers to cover the necessary services.  [AOA]   

Who determines the "adequate number?"  The doctors who are already there.  

Like the closure of medical schools, the hospital privileges system serves two purposes.  It maintains high standards for medical care, while it simultaneously keeps out competitors. 

I saw doctors' price-fixing and the anti-competitive hospital privileges system in action in the small, one-industry, blue-collar town where I grew up.  The local doctor was a family friend, and twice, when he visited our home, he was visibly upset.  Each time, there was a story.  

The first time, he'd had to raise his price for an office visit by 50%, because the district’s association of physicians had decided they would.  Although he objected, because he knew it would be a hardship for the working families in his town, he had to go along.  If he didn't, the other doctors would ostracize him.  Professional consultations, cooperation, and collegiality all would cease.  No one would treat his patients when he was away, or call on him to cover theirs.

The second time, our doctor had attempted to visit a personal friend who was in the nearest hospital, 20 miles away, but he was refused entrance at the front door.  The reason?  The physicians of that hospital had denied him hospital privileges.  In fact, they'd been doing this for years to each new doctor in our town.  

Why?  The town doctor was hired by the company who ran the town's only industry to serve in the company's clinic—which was regarded as competition for the hospital.  Competitors were not welcome.  Because they'd denied him hospital privileges, our doctor was barred from entering that hospital at all, even to visit a sick friend, and he had to send his seriously ill patients to a different hospital, an hour’s drive away.

Physicians early on developed both subtle and blatant strategies to establish their exclusive control not only over the practice of medicine, but also over their own patients.  For example, in addition to a using a charming and reassuring bedside manner to win their patients’ trust, they created an aura of having complex, unquestionable knowledge which enabled them to take complete control of their patients' health care.  

Using Latin did transcend language barriers among Western physicians, but it also helped them inflate their terminology and keep their knowledge secret.  Hearing doctors refer to a corpus luteum may sound impressive, but the Latin meaning is simply "yellow thing."

From the AMA's foundation in 1847, through its accrediting and closing of medical schools, to the present day, doctors took and still claim the exclusive right to regulate and oversee themselves, asserting that only they can understand what they do.  For example, the AMA web site stated as recently as 2007 that:

Nothing is more important to the integrity of medicine than the freedom of its learned practitioners to exercise independent judgment, in accordance with informed standards democratically imposed by the profession upon itself, not dictated by others, and to act in the patient's best interest.  [AMA About]

Notice how this declaration mentions the patient's best interest last.  All the rest is about protecting the doctors' self-regulating status.  Self-regulation is self-serving; it does not serve the public.

THE BLANK CHECK CONTRACT

During a medical appointment, my focus is on my own health and the care I'm receiving, which is usually excellent.  But something else is not right. 

Before I can see any doctor, I have to sign a statement saying that I will pay the full price if the insurance company denies my claim (and AARP The Magazine reports that insurers routinely deny one out of every seven claims.)  [Insurance] 

However, this contract that I have to sign in order to get medical care does not tell me what the prices are, not even for a routine office visit or an annual check-up.  If further treatment is needed, the treatment plan is explained medically—again, without mentioning the doctor's prices.  

In order to get medical care, I have to promise to pay whatever amount the doctor might decide, after my office visit, to charge me.  I feel coerced into signing their promissory note—a commitment to indebtedness—because I need the care.  The trust I place in my doctors is being used against me as much as it works for me.  

Doctors' offices shield themselves in other ways from my sticker shock.  In fact it never hits unless I see my mother's Medicare statements, or get a copy of an insurance claim (which rarely happens any more, although it used to be more common).  Those Medicare statements are now the only time we can see what a doctor's prices actually are, and I have to wonder why we don't know the price until long after the office visit—if ever. 

I once called my health insurance company to find out what the doctor's payment would be.  They would not tell me.  I said I'm the one who's paying for the insurance and hiring the doctor, and I'm just asking how my money is spent.  They still refused, insisting that it was 'proprietary information.'

The Boston Globe's Spotlight Team reported in November, 2008, that

One reason patients don't shop for care is that, as a practical matter, they can't.  The pay rates of different caregivers have long been treated as confidential data, veiled by nondisclosure agreements between insurers and hospitals. [Allen]

Hidden prices for medical care are standard policy.  Very few doctors and hospitals give us up front a list of the prices they charge for each service.  Usually we never find out what the stated charges were, or how much less the insurance company actually paid them.  It happens with prescriptions, too.  And I don't think it's right. 

PRICE DISCRIMINATION AND PRICING SECRECY

Doctors have long protected their right to price discriminate, according to Thomasson in the online Economic History Encyclopedia.  [Thomasson, 1930-1940] They claimed the right to charge different fees to different patients based on their personal estimates of each customer's ability to pay.

Discriminatory pricing requires pricing secrecy, in order to prevent patients from comparing prices and complaining if they were charged more than someone else.  Secret prices also prevent competition, by blocking consumers from price-shopping.  

Doctors, hospitals, insurers, and pharmaceutical companies use word games as well as secrecy to conceal the realities of their financial transactions. “Pecuniary acknowledgment,” in the AMA’s Code of Ethics, is a round-about phrase for today’s more commonly used “professional fees,” a term that implies a higher-class kind of entitlement.  But those dressed-up words simply mean the prices doctors charge for their services, like dry cleaners and hair stylists.

Today, most medical providers and suppliers accept insurance payments that are significantly reduced from their actual prices, but we don't hear them talk about prices and payments.  Instead, they call these payments “reimbursements,” as though what they were paid was like an expense check, money due back to them for funds they had already spent—a re-labeling that, again, implies entitlement.

Through negotiated contracts with the insurance companies, all this price and payment information is secret, because the insurers say it's 'proprietary information.'  The result is that different groups of people pay different prices for the same health care services, the same medications, even the same insurance—price discrimination on a grand scale. 

One consequence is that uninsured people are usually charged the full price, far more than the providers would actually receive from the insurance companies for the same services and medications.  When I've asked why, the explanation is that everyone is charged the same price, but those with insurance get group rate discounts.

Maybe so, but the result is still grossly unfair. 

Secret, variable prices make it impossible for us to examine and control our health care costs as individuals or as a nation, because as health care consumers we are not allowed to know what those costs really are.  No wonder our health care system is more expensive than anywhere else in the world.  It’s a very effective strategy.

Secret pricing shields high prices from public scrutiny, helps doctors, hospitals, and drug companies take advantage of consumers, allows and supports hidden price increases, prevents competition, allows collusion and price-fixing, and raises our nation's health care costs. 

Variable pricing is discriminatory.  It allows the providers—and the insurance industry—to use negotiating leverage, favoritism, risk selection, age, and employment status to manipulate how much different groups of people pay for the same health care services, the same medications, and the same health insurance.

According to the democratic principle of the public's right to know, and the capitalist principles of competition and fairness, both pricing secrecy and price discrimination are wrong.

CONSEQUENCES: Insurance and Inflation

The long-term impact of high prices for health care is so very serious that those prices are undermining the health and stability of the national economy.

With reduced competition and self-regulation, American doctors became the highest paid in the world.  Unfortunately for them, they cannot all cater exclusively to the very wealthy.  Because there simply aren't enough rich people, the physicians' primary market is really the middle class.

However, the middle class can't afford their prices.  Health care providers have priced themselves right out of their own market.  How do they get away with it?

Insurance:  The health insurance industry was born in 1929 because the cost of hospital care became more than the middle class could afford.  [Insurance].   It took hold during World War II: wages were frozen, so employers resorted to offering health insurance benefits in order to attract workers.  

Health insurance really took off after the war, when labor unions negotiated for both higher wages and more benefits.  The history page on Blue Cross Blue Shield’s web site reports that between 1940 and 1955, the percentage of Americans with health insurance increased from less than 10% to more than 70%.  [BCBS History] 

People don't worry about costs they don't have to pay for out of pocket when the insurance company pays instead, especially when the employers pay most of the insurance premiums.  Shielded by the concealing buffer of health insurance, doctors and hospitals kept raising their prices.  

Market forces make it inevitable that, when any sector of the economy creates for itself a particularly lucrative niche, it attracts others who will most definitely find ways to seize pieces of that pie.  Over time, the insurance companies found more and more ways to capture and keep sizable chunks of the physicians' incomes.  In the 1980’s, Health Maintenance Organizations (HMO's) and their managed care concept brought the most dramatic changes.  

The doctors were shocked and angry—they still are—and in the battle to regain lost revenue, they started itemizing and billing the insurers for each separate service they perform during office visits, in addition to the office visit fee itself.  Prices and insurance premiums both kept rising.

Physicians were making such good money that the bandwagon effect also kicked in, and others copied their success.  Today pharmaceuticals, dentists, makers of medical technology and equipment, and even veterinarians have all piggy-backed on the doctors' claim to deserve high prices, and adopted the doctors' scale of overcharging. 

And the insurance industry is happily expanding to accommodate them. 

Inflation: The more health care prices increased, the more insurance people needed.  Between 1960 and 2008, the amount spent on physician and clinical care rose dramatically.  Heath insurance prices surged. 

Both rose far more than the overall rate of inflation.  The November 2008 report by The Boston Globe’s Spotlight Team states that,

Most patients don't think about the payments their insurance company makes to hospitals and doctors, but they should: Inflation of those payments is the main reason insurance premiums increased by an average of $1,800 per family during this decade. [Allen]

Inflation compounds itself in the same way that compound interest works, gaining higher amounts over longer spans of time.  When prices double from $10 to $20, the amount of the increase is $10, or 100%.  Two times more is a 100% increase; 10 times higher is a 900% increase. 

According to the Inflation Calculator* provided by the Consumer Price Index [CPI], the inflation rate from 1960 to 2008 was 627.4%, which means that inflation increased the cost of goods and services by more than 7 times (over 600%); 70 times higher would have been 6,900%. 

Tables from the Department of Health and Human Services show that, from 1960 to 2008, health care prices went up significantly more than the national inflation rate.  [HHS Tables]

National Health Care Expenditures ($ billions)

    * The CPI Calculator  says you’d need $727.38 in 2008 to buy what you
       could get for $100 in 1960: 7.27 times more, or a 627.4% increase.
  ** Current dollars have not been adjusted for differences in prices (such as
       inflation) between that year and a base year.
*** Constant dollars are adjusted for differences in prices (such as inflation)
       between that year and a base year (1982-1984 = $100).

The 627% inflation rate for that time span was far less than the price increases for health care and health insurance—which raises a question: since health care prices contributed to inflation, what would the national inflation rate would have been through those 48 years if it had not been driven upwards by astronomical health care price increases?  

We have accepted inflation as normal—but is it?  Or is inflation a red flag that some sector has tilted the whole national economy to its own benefit?  

The Bureau of Labor Statistics and Consumer Price Index reported a 49.9% increase in the cost of medical care services (provided in doctors' offices, hospitals, and clinics) from December 1999 to January 2009, nearly twice the 26.8% increase in medical care commodities, and double the 25% increase in consumer prices overall.  [BLS/CPI]

Clearly doctors and hospitals are still leading the surge in health care costs—and in the inflation rate.  

Pharmaceutical companies were a bit slow to get into the game, only increasing their prices by 344% from 1960 to 1980, about 12 times higher.  After 1980, medication price increases caught up with the doctors and hospitals, even passed them by 2008.   

When medication prices really started to hurt us, the insurance industry stepped in again: now health insurance policies and Medicare both include prescription coverage.  The pharmaceuticals had learned to adopt the doctors’ pricing scales—and their strategies for hiding behind insurance deals to conceal both their prices and their price increases.   

When the cost of essentials has become more than the private sector can bear, the government has had to step in, as it did when curbing the Robber Barons' monopolies in transportation and fuel during the 19th Century.  For health care costs, the federal government stepped in with Medicare for seniors and Medicaid for the poor in 1965.

However, unlike the government's protective action to stop the 19th Century abuses, its health care intervention did not reduce private sector prices.  According to a May 2005 Issue Brief from the Assistant Secretary for Planning and Evaluation in the U.S. Department of Health and Human Services, the government share increased compared to the private sector, but the costs of both continued to grow dramatically:

Growth in National Health Expenditures, 1960-2007 [HHS/ASPE]

Health care costs actually accelerated for consumers, employers and the government after the federal intervention of the 1960's.  Instead of reducing health care prices, the government's share of total health care costs simply doubled, from 25% to 46%.  That must have taken a lot of lobbying—which would be rather interesting to know, if its history could be traced and published.

The causes of our increasing health care costs were not addressed or corrected by the major health care reforms of the 1960's, nor by the 2010 reform legislation.  Since the 1920's, rising prices charged by health care providers have started and still continue to drive the need for both private health insurance and government health care programs.

Providers' prices are the problem—chronic double-digit price increases, over decades.

The early physicians’ highly profitable anti-competitive practices allowed these price increases.  They continue today, and are a major cause of the exorbitant prices we now pay for health care.  They're out of control—which is both the purpose and the result of doctors' early success at establishing an unregulated medical monopoly.

OPTIONS

American doctors were very successful at establishing medicine as a premier profession.  Unfortunately their early success also established a pattern tainted by greed.  They created a system and a model for over-charging, and others in the health care industry have followed their example. 

It's always the misconduct of a minority that makes oversight and regulation necessary in order to stop abusive practices, but unfortunately, that same minority can sometimes take control of an entire industry or profession.  The majority of physicians, for example, do not belong to the AMA.  At the same time, many in this silent majority go along with AMA policies and benefit from them.

We don't want to throw out the baby with the bath, but we do not have to tolerate the present-day consequences of past professional greed.  Instead, we can speak up and use the power the American middle class has always had to demand that our legislators regulate the way any group conducts business in our economy, including physicians.
 
We already have the legal basis for regulating the health care industry and thereby reducing health care costs.  What we lack is the authorizing legislation.  William Sage, in a 2003 issue of Health Affairs, a policy journal, reports that,

The Federal HMO Act in 1973 introduced the principle of competition to the national health policy debate. Two years later the U.S. Supreme Court ruled in Goldfarb v. Virginia State Bar that the professions were subject to the same rules of competition—the federal antitrust laws—as were other trades and businesses.  [Sage]

However, according to reporter Robert Pear, in a November 21, 2010 New York Times article, since the passage of the 2010 health care reform law physicians, clinics, hospitals, and the American Medical Association have been lobbying intensely for further exemptions from the antitrust laws.  [Pear]  

Under the guise of the good idea to coordinate patient care, these players are seeking to form chain-of-care alliances from primary care providers and clinics through specialists to hospitals, a strategy for locking patients into limited nets of cradle-to-grave health care providers—with all their prices still concealed.  Legislators or regulators who succumb to this lobbying will allow us to be led in the wrong direction and will intensify the health care cost crisis.

Coordination of care is a valid objective, best achieved, however, by converting to standardized electronic medical records to permit the sharing of information, not by group monopoly-building, more collusion, and continued pricing secrecy and price discrimination. 

Control of medical records is control of information, which means control of a pool of patients—strategies for monopoly that will restrict consumer choice and prevent competition.  Mandating standardized electronic medical records will disable this monopoly-building strategy.

Secret prices in the health care industry make it impossible for us to examine and control our health care costs, both as individuals and as a nation.  Every other kind of business has to reveal its prices in advance.  There's no good reason for any health care provider to be an exception. 

I'd like to see us require published prices for all health care services and products.  We have a right as consumers to know the real price before we agree to buy.  Open pricing would foster competition and help drive health care prices down, while quality, well-earned patient loyalty, and desire for continuity of care will be counter-weights to pure price-shopping. 

I think we need legislation to make open pricing mandatory throughout the entire health care industry. 

A 1983 AMA Medical Ethics report agrees:

Competition between and among physicians and other health care practitioners on the basis of competitive factors such as quality of services, skill, experience, miscellaneous conveniences offered to patients, credit terms, fees charged, etc, is not only ethical but is encouraged. Ethical medical practice thrives best under free market conditions when prospective patients have adequate information and opportunity to choose freely between and among competing physicians and alternate systems of medical care.  [AMA Code]

We need more than published prices.  We also need uniform pricing laws to end discriminatory pricing, laws requiring that each health care provider, supplier, and insurer be paid the same standard price for the same product or service by all their patients and customers.  For doctors, hospitals, and pharmaceuticals, that price should be no more than the average amount they have actually been receiving from insurers, not their alleged prices, which are much higher. 

Published prices uniformly applied would end discriminatory pricing practices, put a stop to price-setting collusion, and end the practice of charging the highest prices to uninsured individuals.  Publicly known prices would let the market forces of competition and consumer choice not only restrain, but actively reduce our excessive health care costs. 

These changes would likely reduce the doctors' gross revenues.  However, several compensating reductions in the operating costs of their medical practices are also possible, as suggested in the Hearthstones sequel to this article, “Is Health Insurance Hurting Us?”  

THE QUESTION

As voters, are we ready to insist that our legislators put an end to pricing secrecy, price discrimination, and price-setting collusion throughout our health care system?  To prohibit anti-competitive policies and practices, including the hospital privileges system?  To increase the supply of health care providers? 

If so, then we can reduce our individual and national health care costs, significantly cut government spending on Medicare and Medicaid, and thereby reduce our national debt, without cutting health care services. 

When health care prices fall and middle class incomes rise until they meet, and the middle class can afford to pay for our routine health care out of pocket, with no employer contributions and no government subsidies, then and only then will we have a viable, sustainable health care system.

If you want others to know about Hearthstones, send them the web address: http://www.hearthstones.us/

Works Cited

Allen, Scott , Marcella Bombardieri, et al., Globe Spotlight Team, “A healthcare system badly out of balance,” The Boston Globe, November 16, 2008. http://www.boston.com/news/local/articles/2008/11/16/a_healthcare_system_badly_out_of_balance.  

AMA About:   This statement appeared as a link in the web site of the New Haven County Medical Association (an AMA affiliate) in May 2005, but that page (http://www.nhcma.org/about_AMA.htm) is no longer on the Web.  The same statement was still on the AMA web site in 2007, but the quoted text now appears to have been replaced by an update on the “About the AMA” web page.      
     However, as of August 2011, the page ‘About  AMA / Advocacy Resources / Collective Bargaining and Antitrust Relief’ includes the statement that “The AMA will continue to…(3) enhance its activities in standard setting and enforcement, including the pursuit of protection from antitrust and tort liability necessary to facilitate self regulatory activities.” [H-165.942 Negotiation Issue – Current Activities (BOT Rep. QQ, I-92; Reaffirmed: BOT Rep. I-93-40; Reaffirmed: Sub. Res. 110, A-94; Reaffirmation I-98), http://www.ama-assn.org/ama/pub/about-ama/our-people/member-groups-sections/young-physicians-section/advocacy-resources/collective-bargaining-antitrust-relief.page

AMA Ethics. History of AMA Ethics. http://www.ama-assn.org/ama/pub/about-ama/our-history/history-ama-ethics.shtml.  For the 1847 Code of Medical Ethics, http://www.ama-assn.org/resources/doc/ethics/1847code.pdf.  To select 1903 version, http://www.ama-assn.org/resources/doc/ama-history/1903principalsofethi.pdf.  In the 1847 Code, see ART. VII, Of Pecuniary Acknowledgements. [sic]   In the 1903 Code, see Chapter II, The Duties of Physicians to Each Other and to the Profession at Large, Article VI, Compensation, Sec. 3. The word “minimum” was added to the 1903 edition, and the 1847 term “faculty” became “physicians” in 1903.  

AMA Opinion.  Medical Ethics Report, Opinion 6.11 - Competition, Issued July 1983.  http://www.ama-assn.org/ama/pub/physician-resources/medical-ethics/code-medical-ethics/opinion611.shtml.

AMA vs. US.  American Medical Assn. v. United States, 317 U.S. 519 (1943), U.S. Supreme Court, (January 18, 1943), Docket number: 201, 202.  Id. vLex: VLEX-20014677.  http://supreme.vlex.com/vid/american-medical-assn-united-states-20014677.

AOA.   American Optometric Association, Hospital Privileges Manual: Part III: Legal Issues in Hospital Privileging, "Reasons for Denial."  http://www.aoa.org/x5402.xml

Beck, Andres H., M.D., “The Flexner Report and the Standardization of American Medical Education,” The Journal of the American Medical Association, May 5, 2004.  http://jama.ama-assn.org/cgi/content/full/291/17/2139.  

BCBS History, 1950.   History of Blue Cross Blue Shield Association.  http://www.bcbs.com/about/history/1950s.html.  For  complete  Timeline, 1920s to 2000s:  http://www.bcbs.com/about/history/.  

BLS/CPI.  U.S. Department of Labor, Bureau of Labor Statistics Data (BLS), Consumer Price Index (CPI).  http://www.bls.gov/cpi/data.htm.  At the page "CPI Databases," scroll down to Calculators / More Tools / "Create Customized Tables (multiple screens)--a form-based query application which allows you to obtain BLS time series data based on choices you make."  Choose Series Report, and enter Series ID's SUUR0000SAM2 & SUUR0000SAM1 for Medical care services and Medical care commodities,1999-2008 (results are not seasonally adjusted). 

CPI.  U.S. Department of Labor, Bureau of Labor Statistics Data, Consumer Price Index, Inflation Calculator.  http://www.bls.gov/data/inflation_calculator.htm .  

HHS/ASPE.  U.S. Department of Health and Human Services (HHS), Assistant Secretary for Planning and Evaluation (ASPE), ASPE.hhs.gov.  ASPE Issue Brief, "Long-Term Growth of Medical Expenditures — Public and Private 1960-2003," May, 2005.  http://aspe.hhs.gov/health/medicalexpenditures/    (Note:  the tables in this brief go only to 2003 and use 2003 constant dollars rather than the CPI's 1982-1984 constant dollars to calculate medical inflation rates, a change in method which tends to minimize the dramatic impact of medical inflation since 1960.)  

HHS Tables.  U.S. Department of Health and Human Services (HHS), Centers for Medicare and Medicaid Services (CMS), National Health Expenditure Data/Historical, National Health Expenditures by type of service and source of funds, CY 1960-2007,  http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp.  This link downloads the file: National Health Expenditures by type of service and source of funds, CY 1960-2009 (ZIP, 42 KB) .  HHS Tables:  

HHS Table 1:  National Health Expenditures Aggregate, Per Capita Amounts, Percent Distribution, and Average Annual Percent Growth, by Source of Funds:  Selected Calendar Years 1960-2009, "Billions of Dollars" and "Percent of Gross National Product."

HHS Table 2:  National Health Expenditures Aggregate Amounts and Average Annual Percent Change, by Type of Expenditure:  Selected Calendar Years 1960-2007, re hospital care, physician and clinical services, and prescription drugs.   

HHS Table 12: Private Health Insurance Premiums, Benefits and Net Cost, Selected Calendar Years 1980-2009.

Insurance.  See Hearthstones, “Is Health Insurance Hurting Us?”

Pear, Robert.  "With new health law, mergers a concern: Doctors’ groups want older rules relaxed or waived," New York Times, November 21, 2010, as published in The Boston Globe. http://www.boston.com/news/health/articles/2010/11/21/with_new_health_law_mergers_a_concern/?p1=Well_Health_links  

Porter, Roy.  The Greatest Benefit to Mankind:  A Medical History of Humanity.  New York and London:  W. W. Norton & Company, 1997, p. 351. Re the admission of women, pp. 356-358.  

Sage, William M., David A. Hyman and Warren Greenberg.   “Why Competition Law Matters To Health Care Quality,”  Health Affairs, 22, no. 2 (2003): 31-44. http://content.healthaffairs.org/cgi/content/full/22/2/31.  

Thomasson, Melissa (Miami University, Ohio).  "Health Insurance in the United States, Economic History Services, EH.Net Encyclopedia.  http://eh.net/encyclopedia/article/thomasson.insurance.health.us.   Re medical schools, Thomasson cites The Journal of the American Medical Association, August 12, 1922, p. 633.  Re hospitals, she cites Richard Harrison Shyrock, The Development of Modern Medicine. Madison: University of Wisconsin Press, 1979, p. 348.

Wilk vs. AMA. Wilk v. American Medical Association, 895 F.2d 352 (7th Cir. 1990).  UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT: "We affirm the district court's finding that the AMA violated § 1 of the Sherman Act by conducting an illegal boycott of chiropractors, and the district court's decision to grant an injunction against the AMA."  http://biotech.law.lsu.edu/cases/antitrust/wilk_v_AMA.htm


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Created 05/24/05.  Last updated 06/23/11.

See also:
Is Health Insurance Hurting Us?
Erosion of the Middle Class
Graphics (coming): 
     Can We Break This Cycle?
     How Did We Get Here?