100 Years of Medical Robbery
Our mentor has always been Hippocrates, not Adam Smith --President of a County Medical Society at an AMA meeting quoted in the February 16, 1981 issue of the New York Times.
This weekend (June 11-13, 2004), the American Medical Association (AMA) will celebrate the 100th anniversary of its Council on Medical Education. The medical establishment understandably sees the formation of the Council as a good thing. However, some patients aren't ready to celebrate yet, and their instincts may be good.
The American Medical Association (AMA) was founded in 1847 around two propositions: one, all doctors should have a "suitable education" and two, a "uniform elevated standard of requirements for the degree of M.D. should be adopted by all medical schools in the U.S."  In the days of its founding AMA was much more open--at its conferences and in its publications--about its real goal: building a government-enforced monopoly for the purpose of dramatically increasing physician incomes. It eventually succeeded, becoming the most formidable labor union on the face of the earth.
AMA's initial drive to increase physician incomes was motivated by increasing competition from homeopaths (AMA allopaths use treatments--usually synthetic--that produce effects different from the diseases being treated while homeopaths use treatments--usually natural--that produce effects similar to those of the disease being treated). This competition did serious damage to the incomes of AMA allopaths. In the year before AMA's founding, the New York Journal of Medicine stated that competition with homeopathy caused "a large pecuniary loss" to allopaths.  In the same issue, the dean of the school of medicine at the University of Michigan railed against competition because it made treating sickness "arduous and un-remunerative." 
Apart from reversing rapidly declining incomes, allopaths also wanted to rescue their public reputations, which quite reasonably suffered given their proficiency in killing patients through such crude practices as bloodletting ("exsanguination") or mercury injections (poisoning). A few allopaths desired adulation normally reserved for star athletes and actors. The Massachusetts Medical Society opined in 1848 that physicians should be "looked upon by the mass of mankind with a veneration almost superstitious." 
Shut 'em Down
The curse of medical education is the excessive number of schools--Abraham Flexner, 1910.
To accomplish the twin goals of artificially elevated incomes and worship by patients, AMA formulated a two-pronged strategy for the labor market for physicians. First, use the coercive power of the state to limit the practices of physician competitors such as homeopaths, pharmacists, midwives, nurses, and later, chiropractors.   Second, significantly restrict entrance to the profession by restricting the number of approved medical schools in operation and thus the number of students admitted to those approved schools yearly. 
AMA created its Council on Medical Education in 1904 with the goal of shutting down more than half of all medical schools in existence. (This is the Council having its 100th anniversary celebrated in Chicago this weekend.) In six years the Council managed to close down 35 schools and its secretary N.P. Colwell engineered what came to be known as the Flexner Report of 1910. The Report was supposedly written by Abraham Flexner, the former owner of a bankrupt prep school who was neither a doctor nor a recognized authority on medical education. Years later Flexner admitted that he knew little about medicine or how to differentiate between different qualities of medical education. Regardless, state medical boards used the Report as a basis for closing 25 medical schools in three years and reducing the number of students by 50% at remaining schools.
Since AMA's creation of the Council a century ago, the U.S. population (75 million in 1900, 288 million in 2002) has increased in size by 284%, yet the number of medical schools has declined by 26% to 123.  In terms of admissions limits, the peak year for applicants at U.S. schools was 1996 at 47,000 applications with a limit of 16,500 accepted.  This works out to roughly 64% of applications rejected.  On a micro level, for the last six years the University of Alabama (hardly a beacon of prestige in the medical discipline) has averaged about 1,498 applicants per year with an average of about 194 accepted. This is about an 87% rejection rate. The sizes of the entering classes have been of course even smaller, averaging about 161.
AMA would likely argue that there's nothing necessarily wrong with very high rejection rates. This is correct, except for the fact that these rates are being applied to pools of candidates who are cream-of-the-crop in quality and have put themselves through a very costly admissions process.  Current admissions practices could still be justified by what Milton Friedman (1982, p. 153) refers to as a "Cadillac standard." (Getting away from the pop-culture anachronisms of the 1960s, let's say "Lexus standard" a la the government decides that every driver today deserves nothing less than Lexus quality.) Applied to health care, the benefits of a Lexus standard could supposedly offset the costs of rejecting many ostensibly qualified applicants.
The first problem with asserting the existence of a Lexus standard in health care from very stringent admissions policies are the contradictions introduced by current racial and sexual preferences. The Center for Equal Opportunity found that at a sample of six medical schools, more than 3,500 white and Asian candidates were not admitted in spite of having higher undergraduate grades and MCAT scores than Hispanic and African-American applicants who were admitted in their place. The Center's study didn't touch on sex discrimination but undergraduate science professors indicate that it clearly exists as well. 
The second blowout on our shiny Lexus would be the number of unnecessary/questionable procedures performed on patients every year. Ex-surgeon Julian Whitaker (1995) tirelessly rails against the excesses of angioplasty (PTCA), atherectomy (directional and rotational), and coronary bypass.  Whitaker states that, with few exceptions, all three procedures for heart-disease patients have been empirically shown to be utter failures in terms of solving short-term problems without creating long-term problems which are much worse.
The first complete study of bypass effectiveness was the Veterans Administration Cooperative Study . Between 286 patients who received bypass surgery and 310 who did not, the survival rate at the end of 3 years was 88% for the bypass group and 87% for the control group. In an 8-year follow-up to a second VACS study  among 181 low-risk patients, the bypass group had a much higher cumulative mortality rate (31.2%) compared to the non-surgery group (16.8%). This was among a group of low-risk patients to begin with.
A Rand study  revealed that nearly 50% of bypass operations are unnecessary. Whitaker  notes that the number of bypass surgeries since this Rand study, which should have plummeted, has increased by more than 50%. While the death rate from heart disease declined from 355 per 100,000 in 1950 to 289 per 100,000 in 1990, the amount of bypass operations jumped from 21,000 in 1971 to 407,000 in 1991, a increase of more than 1,838%.  Whitaker states that laypersons are quick to attribute increases in life expectancy to surgery, but the credit clearly belongs to greater exercise and healthier diets.
- 180 patients with osteoarthritis of the knee were given arthroscopic débridement, arthroscopic lavage, or placebo surgery (skin incisions and simulated débridement). In two years of follow-up the surgery group reported no less pain or impaired joint function than the placebo group. Six placebo patients liked their fake surgery so much they wanted it performed on their other knee. For other arthroscopies, knee surgeon Ronald Grelsamer, M.D., states that at some hospitals doctors are performing as many as "ten a week [where] nine are unnecessary." 
- Jens Ivar Brox, M.D., in a Norwegian study compared the effects of spinal fusion surgery with non-surgical therapy for 64 patients with chronic lower-back pain and disc degeneration. The non-surgical treatment was as effective as surgery, but at a fraction of the cost with no complications. With regard to fusions for lower back pain, Nortin Halder M.D., stated, "If this were a pill and I used it, I would probably lose my license and go to jail." Nevertheless, there are about 125,000 fusion surgeries a year at $30,000 each bringing back surgeons a hefty yearly median income of $545,000.
- Stuart Spechler, M.D., studied 247 patients with severe acid reflux in the 1980s and found that surgery was significantly more effective in improving symptoms than lifestyle changes and drugs.  These results reversed in the 1990s after the introduction of proton pump inhibitors (today's Prevacid, Nexium). About 62% of surgery patients still needed drugs to control reflux and had no less incidences of esophageal cancer than non-surgery patients.  Mayo Clinic's Yvonne Romero, M.D., is even more pessimistic, pointing out that in countries where surgery has been performed longer than the U.S. (e.g., Brazil), as much as 85% of surgeries fail after 15 years. Says Spechler, "When you look at data it is hard not to be biased against surgery." Nevertheless, about 65,000 Nissen fundoplications are performed each year at a price of $10,000 each. 
- Hysterectomy (uterus removal) is the probably the best example of an often unnecessary surgery. While a necessity for uterine cancer patients, gynecologist Michael Broder, M.D., found that in a sample of about 500 women, about 70 shouldn't have received the surgery for any reason whatsoever and about 350 hysterectomies had been performed without any diagnostic tests to determine if the surgery was appropriate in the first place. About 70 women with benign fibroids had their uteruses removed without first trying drugs or other treatments that could have been effective. 
A final challenge to the Lexus standard is the number of accidental deaths occurring in U.S. hospitals every year. Harvard University's Lucian Leape estimated that there are approximately 120,000 accidental deaths and 1,000,000 injuries in U.S. hospitals every year.  To understand what staggering figures these are, imagine a Boeing 777-200 with its maximum of 328 passengers crashing every day for an entire year with no survivors. This would add up to 119,720 deaths, still not as many as are killed through medical error in hospitals every year. UCLA Professor of Medicine Robert Brook, M.D., told the Associated Press, "The bottom line is we have a system that is terribly out of control. It's really a joke to worry about the occasional plane that goes down when we have thousands of people who are killed in hospitals every year." 
Certainly not all accidental hospital deaths can be attributed to institutionalized AMA mischief. Errors by nurses, pharmacists, and sleep-deprived residents play a role as well. However, there's also no doubt that AMA-backed restrictions against greater specialization have helped wreak their havoc over time as well.  A later study by Leape  showed that just the presence of a pharmacist on physician rounds reduced adverse drug reactions from prescribing errors by 66%.   Despite some shortcomings, the U.S. system still has some of the finest physicians, surgeons, research, and facilities in the world. However, the best aspects of the system are due to whatever vestiges of market freedom still survive, not some illusory Lexus standard supposedly created by strict statist controls. 
The Exceptional World of the Modern Physician
AMA has built an impressive edifice, one that has completely insulated physicians from recessionary ("cyclical") and until recently, technological ("structural") unemployment. While decade in, decade out, recessions, depressions, consolidations, and (recently) outsourcing have dislocated millions of blue-collar, engineering, computer programming, and middle management employees from jobs and forced permanent career changes, physicians as a class have been almost completely immune. Unlike workers in most other industries, a competent, licensed physician with a clean record who remains unemployed despite months and months of search for work is unheard of in the U.S. 
Restricting labor supply has markedly boosted incomes. Median yearly salaries for primary-care physicians are $153,000, for specialists $275,000.  Another more recent survey across many specialties and 3+ years of experience makes hospitalists relative paupers of the profession at $172,000 and spine surgeons at the high end raking in $670,000.
Restricted supply aside, there's certainly nothing wrong with competent physicians becoming fabulously wealthy at their craft and nothing about a free market that would ever preclude such. Indeed one of the worst transgressions of current system is allowing the most rude, incompetent, and stupid physicians (e.g., Clinton Surgeon General Jocelyn Elders who wanted public schools to teach first graders how to masturbate) to earn incomes relatively close to competent ones.
Of course life is not a complete bowl of cherries for all physicians. Malpractice insurance premiums for some Ob/Gyns are now running as high as $160,000 per year. Some Ob/Gyns have been lucky to have their hospitals pick up the tab. Others have had to move to different states. No one would disagree with AMA that paying $160,000 in insurance premiums is outrageous.
The problem is that AMA's restriction of labor supply has made the problem worse at the margin than it otherwise would be. Plus, exactly how does a thoroughly rent-seeking organization such as AMA lecture malpractice attorneys on the adverse consequences of wealth redistribution? It can't with any convincing credibility, thus it has no effective answer to some in the far Left either, who want to conscript physicians to provide infinite "free" care to them because they claim they have a "right" to it.
Robots to the Rescue?
Two recent articles on the Web show two divergent paths the U.S. health care system can take. A recent story on MSNBC reflects the worsening status quo. It was a report on a new robot ("robo-doc") that roams hospital halls visiting patients in place of a physician (see photos). The robot is controlled from remote location by a physician. The device is an obvious implicit attempt to cope with the artificial scarcity of physicians. Most of the patients, instead of laughing the pathetic robot out of their wing, thought the idea was jim dandy. Presumably they couldn't explain how the armless robot would resuscitate them if their conditions took a sudden turn for the worse.
On the other hand, the great Ron Paul, M.D., has recently discussed the trend of cash-only practices which reject all insurance as well as Medicaid and Medicare. He profiles a Robert Berry, M.D., who charges only $35 for routine visits. (This is about half to a third of what I'm typically charged--with insurance at that--and yet my current doctor, whose income in one year exceeds what I make in five, is moving to another practice because she wants more money.) Cash-only practices of course do nothing to address physician supply, but some relief is better than none, especially when living in a clueless American public that thinks robo-docs represent actual progress in medicine.
A happy 100th birthday to the Council on Medical Education...and for the sake of all our health, hopefully not too many more.
A follow up article is posted at Real Medical Freedom
Dale Steinreich, Ph.D., is an adjunct scholar of the Mises Institute, and contributor to AgainstTheCrowd.com. The author is indebted to Llewellyn H. Rockwell, Jr., for his incisive synopsis of AMA history in the June 1994 issue of Chronicles. Comments by economists L. Aubrey Drewry, Jr., Ph.D., Paul A. Cleveland, Ph.D., and Richard O. Beil, Ph.D., were of great value. firstname.lastname@example.org. Comment on the Blog.
Friedman, Milton. Capitalism and Freedom. University of Chicago, 1982.
Langreth, Robert. "Is Elective Surgery Overdone?" Forbes. 27 Oct. 2003, 247+.
Rockwell, Llewellyn H., Jr. "Medical Control, Medical Corruption." Chronicles. June 1994, p. 17-20.
Starr, Paul. The Social Transformation of American Medicine. Basic, 1982.
Tully, Shawn. "America's Painful Doctor Shortage." Fortune 16 Nov. 1992, p. 104.
Whitaker, Julian. Is Heart Surgery Necessary? What Your Doctor Won't Tell You. Regnery, 1995.
Wolinsky, Howard and Tom Brune. The Serpent on the Staff: The Unhealthy Politics of the American Medical Association. Tarcher Putnam, 1994.
 Rockwell, p.17.
 ibid, p. 18.
 ibid, p. 18.
 ibid, p. 18.
 Chiropractors filed an antitrust suit against AMA and eventually won on August 24, 1987. AMA had dismissed chiropractic as quackery since at least 1925 and began an organized effort to shut it down in 1962. See Wolinsky and Brune, pp. 124, 139-40.
 Starr (1982) asserts that it is a myth that allopaths achieved dominance by crushing homeopaths and eclectics. He claims that once homeopaths and eclectics joined forces with allopaths for occupational licensing and thus began to blur their distinctions, public approval of homeopaths and eclectics died.
 Friedman (1982, p. 152): "To return to medicine, it is the provision about graduation from approved schools that is the most important source of professional control over entry. The profession has used this control to limit numbers." Blocking entry is much more effective than just raising the real price of a medical license; the "far more important" measure is "establishing standards for admission and licensure that make entry so difficult as to discourage young people from ever trying to get admission" (p. 151).
 This actually understates continual declines. Starr (1982, p. 421) reports that in 1965 only 88 schools existed meaning that the Council almost reached its goal of a more than 50% closure of schools.
 The 123 AAMC listed schools include the newest at Florida State University, but not the three med schools in Puerto Rico. Unlike Puerto Rico, 19 states are limited to just one school.
 Assuming 125 schools at the time, including those in Puerto Rico. This works out to about 132 new admissions per school.
 Source: John Ross, President of Ross University Medical School in Domenica, 1997 interview on Westwood One's Jim Bohannon Show. Here for recent stats.
 The admissions process involves sizable application fees and the Medical College Admission Test (MCAT). MCAT can, with practically no exceptions, only be taken twice.
 One chemistry instructor at the University of Alabama told me strictly off the record, "If you're a white male who is 27 (not the usual 21-23), you're an old man as far as med-school admissions goes. They won't take you regardless of how good your GPA or MCAT looks. You have to go to a Caribbean school or forget medicine as a career. For white and especially black women, you can not only have mediocre grades and a mediocre MCAT, but be as old as 35 and still have a pretty good chance of getting into a U.S. school. I've seen it again and again."
 Angioplasty involves inflating a small catheter balloon to clear blocked arteries, atherectomy clears blockages with blades or burr tips in lieu of a balloon.
 New England Journal of Medicine 311 (1984): 1333-1339.
 American Journal of Cardiology 74 (September 1, 1994): 454-58.
 Journal of the American Medical Association 260, no. 4 (July 22/29, 1988).
 p. 26.
 Whitaker, p. 71.
 New England Journal of Medicine, July 11, 2002
 Langreth, p. 248.
 Annual European Congress of Rheumatology, June 20, 2003
 Langreth, p. 248.
 New England Journal of Medicine, March 19, 1992
 Journal of the American Medical Association 2001;
 Langreth, p. 250, 254.
 Obstetrics and Gynecology 95:199, 2000.
 Leape's estimates are variously cited as running the gamut from 44,000 to 100,000 to 180,000.
 These estimates would ironically make hospitals America's deadliest industry. Imagine the government inquisition that would move against the airlines and Boeing if jet travel were as unsafe as hospitals.
 Nurses' duties are heavily restricted in many jurisdictions by state-level acts. By some estimates (Wolinsky, p. 142) nurses could provide up to 80% of the care now delivered by primary-care physicians at about 40% of the cost.
 Journal of the American Medical Association, July 1999
 Despite pharmacists being much more knowledgeable than M.D.s about drugs, AMA not only stands in the way of pharmacists prescribing drugs but destroyed their ability to write refills (Rockwell, p. 20).
 Another worthy topic for Leape might be a study of all the people who unnecessarily die because they don't get to the hospital in time. The estimates might dwarf Leape's alarming ones on errors. Severe restriction of the number of hospitals in the U.S. and the workings of the corrupt hospital cartel is material for another long and depressing article.
 One final possible nail in the allopathic coffin is a fascinating report in the U.K. Independent of the claims by Glaxo Smith Kline geneticist Alan Roses, M.D. that "most [prescription] drugs do not work for most patients."
 Some frictional unemployment certainly exists (e.g., after med-school graduation). There has also been a bit of outsourcing in radiology, although that will come to a quick end if the American College of Radiology gets its way. What does not exist is a "shortage" of physicians despite ample assertions to the contrary (see Tully). A shortage exists in the case of a wage ceiling, where market wages are fixed at a below-equilibrium level. First, physician wages aren't fixed under equilibrium, and they're anything but too low.
 Langreth, p. 254.