The $64 Billion Physician Cartel Got a Free Ride

1. According to a 2007 study by McKinsey Global Institute: "U.S. physicians are more highly paid than their counterparts in other developed countries. U.S. generalists make 4.1 times per capita GDP, compared with 2.8 times per capita GDP in other OECD countries. Across all U.S. physicians, higher earnings add $64 billion in costs to the U.S. system."

2. "How has the American Medical Association managed to get away with such princely remuneration that ordinary mortals in other professions—even ones such as law and engineering that also require arduous training—can only dream of? After all, in a functioning market, a profession offering such handsome returns would become a magnet for more people who, over time, would bid down "excess" wages.

But that's not how it has worked in medicine since 1910 when the Flexner report, commissioned by the AMA, declared that a surplus of substandard medical schools in the country were producing a surplus of substandard doctors. The AMA convinced lawmakers to shut down "deficient" medical schools, drastically paring back the supply of doctors almost 30 percent over 30 years. Few new medical schools have been allowed to open since the 1980s.

~Shikha Dalmia

3. There are 131 medical schools in the U.S. (data here), which is 21% fewer than the number of medical schools 100 years ago (166 medical schools, source), even though the U.S. population has increased by 300%.

By restricting the supply of medical schools and physicians, the AMA has "enforced cartel-like restrictions on entry that benefit physicians at the expense of consumers, and which have created significant barriers to effective, cost efficient health care."

4. Here's one recent example of the "AMA Cartel's" attempt to restrict competition:

NASHVILLE -- St. Jude Children's Research Hospital won unanimous state legislative approval to bring foreign-trained physicians onto its Memphis staff without the one- to three-year U.S. medical residencies required for a Tennessee medical license.

The bill won 97-0 approval in the House Thursday and it passed the Senate 33-0. Although it won unanimous approval, the Board of Medical Examiners voted in January to voice its opposition, out of concern it will open the door for other institutions to seek exemptions.

"While the board acknowledges and fully appreciates the wonderful work done at St. Jude, we are gravely concerned about the precedent-setting nature of the bill and thus unanimously oppose it. It is the board's view that should this well-intentioned legislation become law, it would open the door for any institution whose physicians cannot otherwise qualify for licensure ... (to) seek legislation that would create similar special licensure," the examiners' letter said.

5. And the AMA Cartel doesn't just want to restrict the supply of physicians, it also wants to restrict competition from other health care providers, like retail health clinics. For example:

MedPage Today -- Retail clinics first came on the scene in the middle of the last decade, and there are now some 1,200 of them operating in 32 states, according to the Convenient Care Association, a retail clinic trade association founded in 2006.

Not surprisingly, retail clinics have been targeted nearly from their inception by physician organizations, which charge that the clinics disrupt continuity of care and provide lower-quality care than physicians' offices or hospitals. In a 2006 policy statement, the American Academy of Pediatrics (AAP) said flatly, "The AAP opposes [retail clinics] as an appropriate source of medical care for infants, children, and adolescents and strongly discourages their use, because the AAP is committed to the medical home model."

6. Another example: "Midwifery, once a robust industry in this country, has been virtually destroyed, thanks to the intense lobbying against it by the medical industry. In 1995, 36 states restricted or outright banned midwifery, even though studies have found that it delivers equally safe care at far lower prices than standard hospital births."

MP: The $64 billion estimate of higher health care costs resulting from excessive physician compensation in the U.S. is just part of the story. The AMA's aggressive turf-protection against competition from retail clinics, midwives, pharmacists, and chiropractors have added additional medical costs that go way beyond just the $64 billion. In all of the discussions about health care costs and health care reform over the last year, the cartel power of physicians and their excessive compensation was barely mentioned.