Out of Control Policy Blog

Breaking the AMA Monopoly

Milton Friedman warned back in 1961 that the American Medical Association was a government-sanctioned guild or trade cartel that would raise health care costs and diminish quality. Today, most economists agree with him. That's because the costs of AMA's aggressive tacticts to keep physician wages up by, among other things, imposing onerous licensure rules, capping the number of new doctors, and harassing nurses, midwives etc. who can treat certain routine conditions more cheaply than doctors have become painfully obvious:

According to a 2007 study by McKinsey&Company, physician compensation bumps up health care spending in America by $58 billion annually, on average, because U.S. doctors make twice as much as their OECD peers. And even the poorest in specializations like radiology and surgery routinely rake in around $400,000 annually.

Doctors--and many Republicans--constantly carp about the costs of "defensive medicine" because it forces providers to perform unnecessary procedures and tests to insulate them from potential lawsuits. But excessive physician salaries contribute nearly three times more to wasteful health care spending than the $20 billion or so that defensive medicine does. "While the U.S. malpractice system is extraordinary," the study notes, "it is only a small contributor to the higher cost of health care in the United States." Meanwhile, other studies have found that doctors' salaries contribute more to soaring medical costs than the $40 billion or so that the uninsured cost in uncompensated care--the president's bete noir.....

But still the Obama Administration and Democrats continues to "pal around" with the organization while reviling town-hall protesters as "evil-mongers" and "unAmerican." If they were serious about bringing health care costs under control, instead of demonizing opponents, they would be looking for ways to break AMA's choke-hold on the medical labor market.

Whole column here.

Shikha Dalmia is Senior Analyst


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