Economics of American Health Care 2015 Case Study

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chief economic principle that must be confronted in the horrifying picture Steven Brill paints in "Bitter Pill: Why Medical Bills Are Killing Us" is the devastating effect caused by economic monopoly. Brill tiptoes around the issue, and basically defines monopoly by the concept of "powerless buyers" -- -but the economic conditions that render buyers powerless are economic conditions that restrict a buyer's freedom of choice, which is precisely the problem with American medicine in Brill's article. Doctors -- or by extension the Medical Industry -- represent a monopoly. There may be a plethora of pharmeceutical companies that exist, and which ostensibly compete under heavily regulated industries (which include a close government supervision on potentially monopolistic new inventions, such that copyrights and patents in pharmaceuticals are guarded under law for a mere fraction of the time that the copyrights and patents, for example, involved with Walt Disney's trademark cartoon character Mickey Mouse. But doctors exist in a different category. Doctors, as the existence of the Hippocratic Oath should remind us, are more like Tenured Professors than they are like ordinary providers in a service economy. This is both a holdover from a medieval (and largely theocratically-regulated, especially in regard to such things as the rate of return on interest) economic structure which now barely exists except in weird historical accidents like the medical profession and like educators with tenure. Although education is a regulated market, it is also to a great degree a competitive market -- however, we have seen that educational enterprises with a pure profit motive, such as online universities, are extremely susceptible to the iron hand of government regulation on the basis that they are practicing consumer fraud. But this is altogether different from medical fraud. We need only Google the phrase "Toxic Tush" to learn what kind of "competition" the medical profession faces from the standpoint of the free marketplace: the so-called "Toxic Tush" case involved a transgendered woman named Oneal Morris, who offered a low-cost alternative to the silicone implants offered by cosmetic surgery: she injected various toxic forms of industrial silicon into the buttocks of her customers, and was consequently convicted of practicing medicine without a license. However, medical licenses are only granted by existing doctors who accept an individual into their medieval guild, and it is possible to lose the medical license for all sorts of infractions. Because the government deems it a public good to enforce the self-regulatory decisions of doctors, the existence of this anachronistic and archaic system is perpetuated in the midst of an ordinary economic climate. And in an America with an aging population, the economic power of this strange entity will only keep growing -- which is the chief ecomic cause that underlies the data presented by Brill.

Monopolistic effects can be understood as the cause for most of the horror stories that Brill describies in "Bitter Pill." For example, the fact that medicine overall accounts for 20% of the American economy. But all of the subsidiary industries of medicine are dependent upon doctors. It may be worth recalling what the legendary economist Milton Friedman had to say about the present state of producing more doctors: Friedman stated "I am myself persuaded that licensure has reduced both the quantity and quality of medical practice. . . . It has forced the public to pay more for less satisfactory medical service." Friedman of course was always the loudest voice in the economic profession urging the sort of government deregulation of industries that accompanied the Reagan administration's push toward free-market fundamentalism, and it is worth recalling that Reagan himself got launched in politics by urging against the adoption of British-style or Canadian-style "socialized medicine" as an economic nightmare. Yet not even Margaret Thatcher, who famously began her tenure as Prime Minister by giving copies of economics treatises by Friedrich von Hayek to her cabinet, dared to attempt to dismantle the National Health Service during her career pushing deregulation of various British governmental monopolies, such as British Rail, British Airways, the British Broadcasting Corporation, and other such relics of Britain's heavily-centralized postwar economic reconstruction. It is perhaps a tribute to the more progressive economics of Keynesianism, however, that Brill shockingly reports that the UK spends only half the amount per capita on healthcare than the U.S.A. does. The notion that a state-monopoly is an economic dinosaur, an idea that should have died with the Soviet Union, is very popular in right-wing economic circles in America is pretty readily disproven by the fact that the so-called "free market" in America ends up costing America twice as much as so-called "socialism" does in Great Britain.

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Not to mention, it has a better overall result in Great Britain as well -- people report receiving better health care overall. So what is the chief problem in America?

The sort of conservative analysis which despises the Affordable Care Act still sticks with Milton Friedman's analysis that the problem is governmental interference in the marketplace. Friedman thought that the system of licensing doctors actually raised costs and lowered quality -- but governments quite rightly consider public health to be a matter of public interest. The various panicked political machinations around the recent ebola virus scare in Texas, New York, New Jersey and nationwide should demonstrate the extent to which the public seems to consider public health to be a matter of frequently-urgent public interest. The alternative to a heavily regulated medical marketplace is the sort of medical marketplace in which "Toxic Tush" transsexuals inject wet concrete into the buttocks of gullible consumers. From Friedman's standpoint, the overall economy would be fine, since those consumers would then be forced to pay the higher price for the better service of having the damage from the fraudulent doctor repaired. Brill notes that in the system we have, part of what drives the ridiculous inflation of medical bills is the cost of malpractice insurance for doctors, arguing for "commonsense malpractice-tort reform." But the existence of malpractice torts are, in some sense, the consumer's only avenue of defense against a monopolistic industry whose monopoly is guaranteed under governmental law. The lack of enthusiasm for malpractice tort reform is not, contra Brill's assertion, due purely to the political collaboration of wealthy trial-lawyers with the Democratic Party: the lack of enthusiasm stems from the fact that doctors exist as a privileged monopoly class, they are both necessary and they are frequently lethal, inept, contemptuous, or figures of our nightmares like Dr. Jekyll, or like the doctor played by Alec Baldwin in "Malice," a sociopath who relishes his own God complex. The public has an uneasy relationship with doctors in the first place -- whenever we consider the idea of market regulation, we should always recall that the marketplace for abortions may be the single most heavily regulated marketplace in America, and it is certainly the one most argued about. But that is because a medically unregulated abortion can, under certain circumstances, qualify as infanticide, which is a capital crime. Doctors routinely cut people open with sharp objects. Anybody else who does this is likely to be committing a felony.

The real problem according to what Brill describes in terms of cost inflation is the fact that a monopolistic industry has attempted to follow pace with other industries of similar size in America. The 4.065 million dollar salary that Brill records for the CEO of a hospital system in the Bronx is ridiculous, but reflects the current market rate for a CEO in a normal industry. In a monopoly, such numbers are essentially made up by the doctors themselves, as is the case with most of the bizarre economic markups that are routinely provided.

But the difficulty here resides in the one place where the medical monopoly most dangerously coincides with the force of governmental regulation, which is the Medicare program. We must imagine that in large regions of America -- like the rapidly depopulating Midwestern or Rust Belt states like Kansas or Nebraska or Pennsylvania -- are actually structured around a de facto form of socialism. Areas in which the vast majority of population are retired senior citizens are areas in which the chief economic engine is going to be the local health care system, and all of its costs are paid by the federal government, which is usually especially solicitous of angry elderly people who vote their feelings when they perceive that these Medicare benefits are being tampered with. Brill tells us that health care accounts for 20% of the American economy -- but what is most terrifying is that so much of this economic activity is directed towards otherwise economically inert individuals, those who add nothing actively to the economy as producers, but only as savers, investors, or beneficiaries of government subsidy like Social Security or Medicare. Brill seems aware of this, but that is the chief reason why the problem is only going to get worse. Yet from an economic standpoint the chief source of the problem is the fact….....

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