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The Poison of Medicare, Medicaid, and Medical Licensure


One of the common myths about America’s healthcare woes is that such woes are rooted in America’s “free-enterprise” system. It’s a myth because America’s healthcare system is actually based on socialism, economic control, and regulation rather than on “free enterprise.”

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.

Last Sunday’s New York Times published an article that provides a real-life example of the point that Friedman was making 20 years ago. The article, entitled “Path to United States Practice Is Long Slog to Foreign Doctors,” points out that thousands of foreign doctors who have been educated and trained abroad and who have come to the United States are precluded from practicing medicine here because of the onerous licensing restrictions on becoming an American doctors.

The article points out:

The United States already faces a shortage of physicians in many parts of the country, especially in specialties where foreign-trained physicians are most likely to practice, like primary care. And that shortage is going to get exponentially worse, studies predict, when the health care law insures millions more starting in 2014.

The article cites the case of Sajith Abeyawickrama, 37, who was a celebrated anesthesiologist in Sri Lanka. He came here to marry but he can’t practice medicine. He’s held a myriad of subsidiary jobs in the medical field, such as entering patient data in a records system.

The process of securing a license is so onerous that only a few foreign physicians are successful. One doctor, Alisson Sombredero, 33, came to the United States in 2005. She finally got her license 8 years after she arrived in the United States and 16 years after she first entered medical school.

Why shouldn’t Americans be free to choose whatever healthcare provider they want? For those people who live in fear that they might choose a quack to do their brain surgery, the fact is that even today people don’t select physicians by blindly picking out a doctor from a list of licensed physicians in the telephone book. They rely on recommendations from their doctor, their friends, Internet ratings, and private certifying agencies.

So, Medicare and Medicaid have caused healthcare prices to rise owing to increased demand for healthcare services. At the same time, medical licensure has caused prices to rise owing to an artificial constriction of the supply of physicians. On top of all that are the untold number of government regulations governing both the healthcare and insurance arenas.

Why wouldn’t there be a healthcare crisis given all this statism? The fact that the United States is mired in never-ending healthcare crises is perfectly understandable once one realizes that America abandoned the finest healthcare system in the world — one based on free enterprise, free markets, and voluntary charity — in favor of a system based on socialism, interventionism, and control.

The good news is that there is a solution: Forget about coming up with healthcare  reforms. Whatever reform is adopted will only make the situation worse. Instead liberate the entire healthcare arena from the tentacles of government. Repeal Medicare and Medicaid, repeal medical licensure, and repeal regulation. Separate healthcare and the state, the way our ancestors separated church and state. Then, we’d have, once again, the greatest healthcare system in the world.


This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.