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News Link • Healthcare Industry


• Jacob Hornberger --

After all, the term "free enterprise" means enterprise that is free of government control. Freedom from government control is certainly not how anyone could describe America's healthcare system.

Everyone is familiar with the problem on the demand side of healthcare — Medicare and Medicaid. These are two major socialistic programs that involve the forcibly taking of money from people to whom it rightfully belongs in order to pay for the healthcare costs of people to whom the money does not belong. It shouldn't surprise anyone that government-provided healthcare is a primary feature of such socialist countries as Cuba, North Korea, and China.

It's not a coincidence that healthcare costs began to soar after Medicare and Medicaid were enacted. When doctors and patients realized that government was paying the bill, the incentive became to spend as much money as they could on healthcare procedures. Decade after decade, the situation has only gotten worse and worse, with new reforms only producing new crises.

Less attention is given to the supply side of healthcare and the role that government plays there to produce America's never-ending healthcare crises. On the supply side, we're talking about medical licensure, a governmental system that artificially reduces the number of healthcare providers in society.

What's the purpose of keeping that number artificially low? It increases the amount of money that doctors are making. Less doctors means higher incomes. More doctors means lower incomes. It's just supply and demand.

Medical licensure provides the means by which doctors, acting in concert with the government, are able to restrict the number of doctors entering the profession. In his 1962 book Capitalism and Freedom, Milton Friedman explained how the process worked in a section on medical licensure:

In the first place, licensure is the key to the control that the medical profession can exercise over the number of physicians…. The American Medical Association is in this position. It is a trade union that can limit the number of people who can enter. How can it do this? The essential control is at the stage of admission to medical school. The Council on Medical Education and Hospitals of the American Medical Association approves medical schools. Control over admission to medical school and later licensure enables the profession to limit entry in two ways. The obvious one is simply by turning down many applicants. The less obvious, but probably far more important one, is by establishing standards for admission and licensure that make entry so difficult as to discourage young people from ever trying to get admission.

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