Licensure

In The Social Transformation of American Medicine, author Paul Starr analyzes the development of modern American medicine. A large portion of the book looks at the roots of physician licensure. His analysis dates back to the colonial era. Some important turning points in the history of physician licensure before the twentieth century are:

• In the 17th century, “[colonial] legislatures would now and then bestow licenses on worthy doctors, but the acts themselves indicate that these men had already been in practice for years.”
• “An early Massachusetts law…states that no one ought to engage in healing ‘without the advice and consent of such as are skillful in the same Art, (if such may be had) or at least some of the wisest and gravest then present.’”
• In 1760, New York City passed the first law which called for the examining and licensing of prospective doctors and placed a fined on unlicensed physicians. Unlike present day medical societies, licensure authority rested with city officials.
• “In 1763 physicians in Norwich, Connecticut, requested their colonial legislature ‘to Distinguish between the Honest and Ingenious Physician and the Quack or Empirical Pretender’ by allowing doctors to found societies with licensing power. Both these bids for authority were rejected.”
• After independence, medical societies were organized in many states, and legislatures often extended them licensing powers. Since there was no set standard for education or achievement in order to obtain a license, the medical societies were largely ineffective in restricting physician supply. The societies faced a fundamental problem. If high standards for membership were implemented,the group size would be small and the society would not be able to outlaw ‘quacks’ or stop price competition; lowering standards and admitting more practitioners would weaken the society’s position that the organization’s goal was to maintain high quality standards.

Starr distinguishes between ‘hostile’ and ‘friendly’ licensing. The ‘hostile’ form occurs when government officials are placed in charge of physician licensure; the ‘friendly version manifests itself when licensing is self-regulated within a profession. While friendly licensing did appear in NYC in the late eighteenth century, it only manifested itself on a large scale in the late nineteenth century.

• In 1877, Illinois passed a law empowering a state board of medical examiners to reject diplomas from disreputable schools. “Under the law, all doctors had to register. Those with degrees from approved schools were licensed, while others had to be examined. Of 3,600 nongraduates practicing in Illinois in 1988, 1,400 were reported to have left the state within a year. Within a decade, three thousand practitioners were said to have been put of of business.”
• In 1888 in the Dent v. West Virginia case, the U.S. Supreme Court upheld a West Virginia law which required practitioners “…to hold a degree from a reputable medical college, pass an examination, or prove that he had been in practice in the state for the previous ten years.”
• In the 1898 the Hawker v. New York case extended the grounds for denying a medical licensing. The Supreme Court decision noted that “character is as important a qualification as knowledge.”
• In 1901, the Missouri board of health was empowered to act as a board of medical examiners.

Despite increased control of physician licensure, the American Medical Association still was not successful in restricting the supply of doctors, because as licensing requirements increased, the number of medical schools awarding physicians licenses increased just as rapidly. Thus, not until the Flexner report—when the AMA gained control over medical education standards in the United States—were physicians able to truly restrict medical practitioner entrance and create economic rents for existing providers.

• Starr, Paul (1982); The Social Transformation of American Medicine. Basic Books, Inc. New York.

One final example of licensure’s impact on quality is given by a 1978 study of the quality of contact lens fitting.  The study looked at 502 households who had been fitted for contacted lenses in the previous three years and were still wearing contacts.  The study was conducted with the cooperation of the American Academy of Ophthalmology, the American Optometric Association and the Opticians Association of America and representatives from these groups examined the survey participants to determine the quality of contact lens fitting without any knowledge of which type of provider had rendered the service. 

The study looks at five different groups: ophthalmologists, Noncommercial optometrists, commercial optometrists, unclassified optometrists, and opticians.  Ophthalmologists receive the most training and opticians receive the least.  Statistical tests showed that commercial optometrists tended to outperform noncommercial optometrists; optometrists as a whole preformed similarly to ophthalmologists.  Opticians also were found to have similar overall quality scores to ophthalmologists and optometrists. 

Despite quality similarities, there were significant cost differentials between the five groups:

Average price for contact lenses and fitting (1980)
	Hard	Soft
Ophthalmologists	183.85	234.54
Noncommercial optometrists	154.00	195.33
Commercial optometrists	119.21	150.07
Unclassified optometrists	136.41	212.48
Opticians	160.66	205.52

 

What can we conclude from this study?  First, if there were licensure requirements that mandated that only ophthalmologists could prescribe and fit contact lenses, this would likely create a welfare loss to society.  Opticians, optometrists, and ophthalmologists preformed similarly on quality measures, however, optometrists and opticians had significantly lower prices than ophthalmologists.  This study shows that licensing to too high a quality standard is not optimal.

This study, however, is limited by the fact that 1) quality is relatively easy to observe for patients in the case of contact lens fitting and 2) contact lens fitting is a less technically complicated procedure than say cataract surgery or the treatment of glaucoma.  Procedures in which patients can easily observe physician quality and providers do not need a high technical skill level are not good candidates for licensure requirements.  One would expect to encounter different findings if the study was based on a procedure with 1) more uncertainty in the quality measurement and 2) more technical skill needed to perform the procedure accurately.  For instance, one would likely find significant quality differences between the three groups in the case of cataract surgery (even though currently only ophthalmologists are certified to conduct surgery).

Study: Hailey; Bromberg; Mulholland; (1983) A comparative analysis of cosmetic contact lens fitting by ophthalmologists, optometrists, and opticians, Federal Trade Commission, Bureau of Consumer Protection.  Study summary found in: Frech, H.E. Regulating Doctors Fees, Chapter 4 “Licensure and Competition in Medical Markets” by Lee Bernham, pp. 87-90.

On February 4th, I wrote on the American Medical Association’s (AMA) role in modern medicine. Today I will give further commentary regarding the AMA by reviewing a seminal paper by Reuben Kessel (1958). The paper describing the AMA’s development in the first half of the twentieth century.

The AMA has two main goals: 1) a “suitable preliminary education” for all physicians and 2) “uniform elevated standard of requirements for degree of M.D. should be adopted by all medical schools in the United States” (Flexner Report). These goals amounted to the licensure of physicians and the accreditation of medical schools. The first goal of physician licensure was achieve gradually over time at the turn of the nineteenth century. The second goal took longest to achieve.

In 1904, the Council on Medical Education was founded. The group was dedicated to improving the quality of medical education. In 1906 the council inspected 160 medical schools in existence at the time and found that only 82 complied with their standards. Since this study was commissioned by physicians and preformed by physicians, it was not deemed to be unbiased. Thus the AMA looked to the Carnegie Foundation to repeat the study. In 1910, Abraham Flexner concluded his similar study and published what was later to be known as the Flexner report. This report “…convinced legislators that only the graduates of first class medical schools ought to be permitted to practice medicine and led to the delegation to the AMA of the task of determining what was and what was not a first class medical school.” Over the next 35 years, the United States saw a drastic decrease in the number of accredited medical schools.

Year	No. of Med Schools	U.S. Pop (m)
1906	162	85.5
1920	85	106.5
1930	76	123.1
1944	69	138.4

Creating a cartel

According to the Kessel paper, the aim of the two goals was to establish a cartel. Cartels usually function best when there are a small number of producers; the physician market is made up of many small producers. The question remains how one would enforce a cartel to maintain artificially high prices with so many individuals who could defect.

Kessel claims that a combination of 1) severe threats 2) restriction of consumer access to information and 3) informal associations led to the permanence of this cartel. Individuals who tried to cuts prices (e.g.: those who used a prepaid model of medicine) were often banned from using hospital facilities in the area.

The Farmers Union Hospital Association in Oklahoma, the Kaiser Foundation of San Francisco and Oakland, Group Health of Washington, Group Health Cooperative of Puget Sound, Civic Medical Center of Chicago, and the Complete Service Bureau of San Diego all attempted to charge fees independent of patient income to create a more competitive environment. Physicians participating in these organizations were often banned from practicing in local hospitals or attending professional conferences. The banning of hospital privileges severely crippled many of these organizations who did not have their own comprehensive hospital facilities.

The second means to enforce the cartel was to restrict the information given to consumer. Advertising promoting the medical profession as a whole was allowed, but advertising promoting a specific doctor was prohibited as this would likely increase competition.

The third manner in which the cartel was enforced was the creation of an in-group mentality. Few minorities (especially Jews and African Americans) were allowed into medical schools in the first half of the twentieth century. Finally, free medical care was provided to fellow physicians and their families, and criticism of one’s peers was not tolerated.

Remarks

Since the time of the Kessel paper was published, much has changed in medicine. Large organizations such as HMOs are able to negotiate price discounts from physicians and thus reduce the market power of physicians. Members from nearly all races and religions are represented in the ranks of medical professionals. Nevertheless, it is important to review the history of the development of modern medicine in order to better comprehend its roots and find new avenues through which health care can be improved.

• Kessel (1958) “Price Discrimination in Medicine” J Law Econ, vol 1, pp. 20-53.

During the past few days, I have written extensively on the reasoning behind why society would wish to create a licensing arrangement for some professions. Today, I will review Hayne Leland’s 1979 paper which develops a mathematical model which explicitly describes the welfare implications of licensure.

Model

Leland uses a Akerlof style set-up where the seller knows the quality of their product, but the buyer does not. Thus, low-quality physicians have no incentive to lower their prices since lowering their price will signal to the buyers that they are low quality. Sellers can disguise their quality level simply by pricing at the average quality price. High quality physicians will not be able to charge a higher price since buyers cannot differentiate between high and low quality doctors. Thus, all physicians in the market must charge the same fees in equilibrium and this price will reflect the average quality of all medical services provided [see Akerlof 1970)]. The ideal remedy to this problem is to eliminate the informational asymmetry either through repeated interaction, certification, labeling, or a caveat venditor device. Leland assumes that these solutions prove too expensive in the case of physicians market and thus we are left with a classic Akerlofian framework.

Let us assume that f(q) is a function representing the potential supply of physicians at quality level q. Leland normalizes physician quality (’q') to a uniform distribution between 0 and 1 and thus f(q)=1. F(q) is equal to ∫_{q to 1} f(q’)dq which is equal to q in the uniform distribution case presented here. Finally we have R(q) which is an increasing, convex function of the opportunity costs to supply a unit of service of quality level q. The opportunity cost of quality must equal the supply price ‘p_s‘.

Market supply (y) and average quality (q_bar) will thus be:

• [1] y = ∫_{0 to q’} f(q) dq = F(q’)=q’
• [2] q_bar = ∫_{0 to q’} qf(q)dq/F(q’) = q’/2

Consumers’ willingness to pay p_d is a function of average quality (since it is impossible to distinguish between low and high quality doctors) as well as the market supply. So p_d = p(q_bar,y). Substituting equations [1] and [2] into our demand equation we have p_d=p(q’/2,q’). In equilibrium p_d=p_s so we have an equilibrium condition of:

• [3] R(q*)=p(q*/2,q*)

Welfare implications

Now we must determine how social welfare would change if we would change the quality level. Net benefits are measured using the Dupuit model and are calculated as follows:

• [4] W= ∫_{0 to y} p(q_bar,y’) dy’ - ∫_{0 to q’} R(q)dq

Leland shows that

• [5] dW/dq|_q=q*= .5*∫_{0 to q} p_q(q_bar,y’)dy’ > 0

Thus, in the case of asymmetric information, welfare would be enhanced by increasing quality.

Adding Licensing to the model

If minimum quality standards ‘L‘ were imposed, than it is easy to show that y=(q’-L) and q_bar=.5(q’+L). Our new equilibrium condition becomes:

• [3]‘ p[.5(q*+L),(q*-L)]=R(q*)

What are the welfare effects? Are new social welfare equation becomes:

• [4]‘ W= ∫_{0 to (q’-L)} p(q_bar,y’) dy’ - ∫_{L to q’} R(q)dq

When we calculate dW/dL, the sign is uncertain. Licensure will create some benefits at first, but too much licensure will cause society to incur unnecessary costs from restricted physician supply. Leland shows that in the general case dW/dL|_L=0>0. That is some licensure is always welfare improving in the case of fully asymmetric information.

Conclusion

The major qualitative points derived from this math are that licensure is most beneficial when: 1) markets are more sensitive to quality variation, 2) there is a low demand elasticity, and 3) the market has a low marginal cost of providing quality. In the case of medicine, it is likely that demand is sensitive to quality and there is a demand elasticity below 1 in magnitude, but it is unlikely that the cost of providing quality is inexpensive. Leland also extends his model to include when the level of licensure ‘L’ is chosen endogenously by the a professional group who is attempting to maximize profits of the group. When the level of licensure is chosen by a professional group, the level of ‘L’ is most often set to high or too low.

This model is elegant and shows that licensure can be beneficial. Leland acknowledges, however, that even if licensure is welfare improving, other options such as certification would likely be Pareto superior. What this paper concludes is that licensure can be beneficial, but is not necessarily optimal in light of other policy options available to society.

• Leland (1979) “Quacks, lemons and licensing: A theory of minimum quality standards” JPE, vol 87(6), pp. 1328-1346.

Another example of how physician licensure affects earnings is a paper by Keith Leffler. In the paper, Leffler looks at the different states who accepted and refused to accept the Federal Licensing Exam (FLEX) in the late 1960s. Leffler proposes that if physicians acted as a cartel, only states with lenient state examinations would accept the federal exam. This is because people who pass the stricter federal test would have passed the state test anyway. On the other hand, states with more difficult exams are likely to refuse to accept the FLEX exam since by accepting the national exam the state medical association would be increasing the supply of physicians and thus decreasing the monopoly rents for each doctor already in practice. A simple empirical examination seems to prove Leffler’s point:

Physician salaries (thousands $)
Year	Accepting	Nonaccepting	Δ
1965	43.6	45.2	1.6
1966	45.8	48.4	2.6
1968	50.0	52.7	2.7
1970	46.2	52.3	6.1

One can easily observe that nonaccepting states (i.e.: those who were able to restrict the supply of physicians) saw large increases physician earnings over the 5 year period shown. Leffler does conclude, however, that “like Peltzman’s model of regulators, the regulators of physicians seem to reach an equilibria where consumers and the regulatee share the gain (and the pain).”

Leffler (1978) “Physician Licensure: Competition and Monopoly in American Medicine” J Law Econ, Vol 21(1), pp. 165-186.

What is the purpose for licensing physicians?  For the general public, the answer seems obvious: society must prevent individuals from consuming low-quality health care.  From the economist’s point of view, this reasoning is not very compelling.  If individuals are looking out for their own best interests, it would be illogical for them to consume low-quality medical care if this is this is not in their best interests.  A seminal paper by Thomas Moore (1961) claims that there are three major classes of justifications for licensing. 

I. Lack of information or misinformation.  

One possibility for why licensing is needed is that individuals do not have complete information of the quality of their doctor.  From my experience, this seems entirely reasonable.  Did my health improve because of my doctor’s adroitness or did my body heal itself?  Am I getting since because I am getting old or because my physician is not caring for my health adequately?  The question remains, however, whether licensure is the proper means through which to cure this informational problem. 

I agree with Moore who claims that licensure is sub-optimal.  Licensure only “establishes minimum qualifications for entrants” and does not “give any information concerning the difference between practitioners above the minimum entrance requirements.  Further, licensure restricts the supply of medical care, thus increasing the price.  Certification would allow the consumers to see which doctors are high and low quality, without restricting the individual’s choice of physician.  On the positive side, in modern medicine certification may be more of a de facto quality control than licensure.  A family practice doctor is not legally prohibited from performing cardiac surgery, but most consumers and insurance companies will only pay for cardiac surgery performed by a board-certified cardiologist. 

Moore claims that certification should be used in industries with the following characteristics: 1) greater variation in service quality, 2) greater possibility of harm from poor service, 3) more training needed to evaluate the quality of the service rendered, and 4) fewer frequency of contact between the consumer and the provider.

II. Paternalism

Moore divides the paternalistic argument into two groups.  The first claims that “the individual, if he had perfect knowledge…would know what is best for himself” but the individual does not have perfect foresight; the second claims that even if the individual had perfect information they “would still not be the best judge of his own welfare.”  One can make a compelling case for licensure based on the first scenario.  If I believe that alternative medicine gives me the best chance of improving my health, but in reality traditional medicine offers me the greatest likelihood of health gains, it may be welfare improving for the government to outlaw alternative medicine (i.e.: license medical providers only of the traditional variety).  This is of course predicated on the fact that the government actually know best and acts altruistically.  If alternative medicine provides a superior quality of care to traditional medicine, however, outlawing alternative medicine would be welfare destroying.  The argument Moore makes in his paper is similar to mine, but he claims that “individuals are overly optimistic in evaluating the expected results of their actions” and thus may not be acting optimally.  By licensing, the government may eliminate choices which short-sighted individuals may elect, but which are not welfare maximizing.  [For an example how to model myopic behavior, see the hyperbolic preferences model developed by Laibson]

I would reject the second class of paternalistic arguments (’big brother knows best always’) as coercive.  As Moore states, “If the individual is not the best judge of what is best for him, then what is best and who is to decide?”

III. Externalities

One common reasoning cited for the imposition of licensure is externalities.  In particular, many people claim that if an individual receives poor medical care and they become very sick, the state may begin to pay for this person’s medical treatment.  This is a fiscal externality which could have been avoided had the individual received higher quality care in the first place. 

Two issues would make a careful observer tentative to accept this reasoning.  First, if one assumes an individual wants to improve their health, than they would have an incentive to seek better quality care; it would be perverse to purposefully seek low-quality care in the effort to later receive government assistance.  More compelling is the author’s argument that “it is therefore necessary to argue as well that the harm done through purchasing from ‘incompetent’ practitioners is greater than the possible harm done through not purchasing the service at all.”  In a more contemporary setting, this is analogous to requiring a such a high level of care that insurance becomes unaffordable to many people. 

A true externality argument could be made in the case of contagious diseases, but in the West treating these diseases make up a relatively small portion of total healthcare spending. 

• Moore, Thomas (1961) “The Purpose of Licensing” Journal of Law and Economics, vol 4, pp. 93-117.

 

When traveling from San Diego to Milwaukee for Thanksgiving, my flight was delayed two hours.  While this was an inconvenience, it did provide me with the opportunity to finish the book Capitalism and Freedom by Milton Friedman.  The book espouses a libertarian point of view; this point of view is one which is currently held by many economists but one which at the time of publication (1962) was revolutionary in the face of the growing sympathy towards socialism and the Soviet Union. 

The book also examines the merits of the system of licensure which is practiced in the field of medicine.  Below are some excerpts:

“In practice, the major argument given for licensure by its proponents is…a strictly paternalistic argument that has little or no appeal.  Individuals, it is said, are incapable of choosing their own servants adequately, their own physician or plumber or barber.  In order for a man to choose a physician intelligently, he would have to be a physician himself.  Most of us, it is said are therefore incompetent and we must be protected against our own ignorance.  This amounts to saying that we in our capacity as voters must protect ourselves in our capacity as consumers against our own ignorance, by seeing to it that people are not served by incompetent physicians or plumbers or barbers.”

“If ‘medical practice’ is to be limited to licensed practitioners, it is necessary to define what medical practice is, and featherbedding is not something that is restricted to the railroads.  Under the interpretation of the statutes forbidding unauthorized practice of medicine, many things are restricted to licensed physicians that could perfectly well be done by technicians, and other skilled people who do not have a Cadillac medical training.”

“If you are a member of the profession and want to stay in good standing in the profession, you are seriously limited in the kind of experimentation you can do.  A ‘faith healer’ may be just a quack who is imposing himself on credulous patients, but maybe one in a thousand or in many thousands will produce an important improvement in medicine.  There are many different routes to knowledge and learning and the effect of restricting the practice of what is called medicine and defining it as we tend to do to a particular group who in the main have to conform to the prevailing orthodoxy, is certain to reduce the amount of experimentation that goes on and hence to reduce the rate of growth of knowledge in the area.”

In most markets, quality regulation is not used.  If you buy a pair of pants that is lower quality than you had anticipated, you simply will not frequent the store again.  If the firm continues to offer low quality pants (at insufficiently low prices), few consumers will patronize the store and the firm will go out of business. The creation of a “fashion police” which would insure an adequate level of quality is unnecessary in a capitalistic society.  The market will act as the quality arbitrator.  Having a pants quality oversight board would be costly and would bestow political powers to those who where placed in charge of this fashion police. 

In the medical field, however, conventional wisdom holds that believe that quality assurance is needed.  Physicians must be licensed (graduate from medical school) in order to provide services.  One rationale for this regulation is that a poor outcome from a medical provider can so adversely affect the lives of the consumer that regulation is imperative in order to prohibit physicians on the lower end of the quality distribution from practicing.  A second rationale for the regulation is that consumers are not experts in the medical field and can not properly evaluate the quality of care they are receiving. An outside board is needed to evaluate quality for them.

Lee Benham describes the way physicians control quality in “Licensure and competition in medical markets” a chapter in the book Regulating Doctors’ Fees.  There are three main mechanisms of quality control and Benham analyzes each in tern.

1. Ethical Standards: Physicians are inculcated throughout medical school with a rigorous education in medical ethics.  Yet even if all physicians abided by the ideal ethical standards, the quality of medical care may not improve greatly.  The physicians are not trained in management, auditing, or decision analysis and thus directing the appropriate amount of resources to each patient may not occur even in the presence of a completely ethical physician.
2. Medical Training - Medical School provides a rigorous education to all physicians.  It is very difficult to gain entry into medical school–in 1988 only 10% of applicants with a GPA below 3.0 were admitted.  Thus doctors are the cream of the undergraduate crop.  Once the physicians arrive in medical school, however, the total attrition rate is less than 3%.  Further, physicians have a disincentive from taking any difficult classes not required for medical school (such as mathematics or statistics) since these classes are generally difficult and receiving a poor grade in a class not required for medical school can lessen the chance one will gain entry into medical school.  Yet statistics training is often needed to evaluate the efficacy of a medical procedure.
3. State Licensing Boards: These are the weakest link of the quality control scheme.  Benham reports that Florida spent only $41.70 per doctor in monitoring costs in 1983.  Further, since these boards are made up of physicians, state licensing boards are self-policed.  Of 270 allegations of physician misconduct brought to the attention of the Wisconsin Medical Board in 1982, only 1 was raised by the state medical society and the defendant in the case was a chiropractor. 

Is licensing succeeding?  I am not sure.  It is likely that physician quality has improved as a result of licensing, but licensing likely has also increased the cost of medical care.  Also, even if average physician quality has improved, there are still many incompetent doctors practicing.  California’s Board of Medical Quality Assurance director Robert Rowland stated that “10 percent of the physicians who are practicing now should not be practicing without some kind of restraints–either a rehabilitation program, limits on surgery, or some other oversight practice.”  The New York state commissioner of health, David Axelrod, said “As many as ten percent of the state’s 45,000 practicing physicians are either mentally or physically impaired or incompetent at some point in their careers.

• Frech, H. E. (1991) Regulating Doctors’ Fees: Competition, benefits and controls under Medicare, American Enterprise Institute, Washington, D.C., pp.  75-96.

The American Medical Association (AMA) is a national physicians organization founded in 1847 by Nathan Smith Davis.  While, the AMA exists explicitly to serve the interests of physicians, politicians often seek advice from the AMA when setting health care policy.  Conventional wisdom is that the AMA is dedicated to providing the best care for patients.  The mission statement on the AMA website states:

The American Medical Association helps doctors help patients by uniting physicians nationwide to work on the most important professional and public health issues.

But is the AMA interested in quality of care or simply increasing physician profit-mostly through erecting barriers to entry into the profession?

There are a few examples which make clear that the AMA is dedication mostly to the interests of its members-doctors.

• The AMA claims that the difficultly of entering the medical profession is to ensure that incompetent doctors do not practice.  If this was the motivation of the AMA, one would expect to see the AMA favor re-examination and re-licensure of physicians.  Some physicians have been trained 30 to 40 years ago.  The AMA has never proposed physician re-examination.
• In the 1970s, Congress enacted the professional standards review organization (PSROs) legislation in an attempt to develop physician peer review to maintain quality.  If the AMA is most interested in patient quality, this seems like a sensible bill to support.  The AMA opposed the legislation. 
• For years the AMA had banned advertising under their “Principles of Medical Ethics.  The major reason for this restriction was to prevent physicians from competing on price or informing the public regarding quality measures.  In 1982, the FTC ruled against the AMA and stated that:
• “prices of physician services have been stabilized, fixed, or otherwise interfered with; competition between medical doctors in the provision of such services has been hindered, restrained, foreclosed and frustrated; and consumers have been deprived of information pertinent to the selection of a physician and of the benefits of competition.”
• On the their website, the AMA states that their advocacy efforts are directed a variety of objectives.  Let us list their advocacy agenda and see how each one will benefit physician directly:
1. Medical liability reform - This will lower the cost of practicing medicine for physicians.
2. Medicare Physician Payment Reform - In essence, the AMA is asking Congress to give more generous payments to doctors who serve Medicare patients.
3. Expanding Coverage for the uninsured and increasing access to care - While at first this objective seems noble, it will also increase the demand for physician services as consumers become price insenitive with third parties paying doctors’ bills.
4. Improving the health of the Public - Commendable.
5. Patient safety and quality improvement in health care - Commendable
6. Managed Care Reform - The physicians wish to advise patients which procedures are necessary regardless of the cost.  Managed Care takes into the cost of each procedure and thus may limit a physician’s choice to advise expensive medical options.
7. Regulatory Relief - Similar to point one, this will lower physician costs.

Further, there are three major barriers to entry in the medical profession which the AMA in essence controls.  The first is licensure.  The AMA sets the requirements for a license to practice medicine and can suspend or revoke a license once it has been granted.  Secondly, the AMA’s Council on Medical Education approves the number of medical schools in the US.  By not approving additional medical schools, the AMA can reduce the supply of physician care.  If fact, between 1905 and 1944, the number of medical schools in the US decreased from 162 to 69.  Finally, the AMA has increased the length of medical training, thus making it more financially difficult for prospective students to enter the medical field.  With fewer doctors, there is less competition and thus prices (and physician profits) will increase.

While, this post has not been kind to the AMA, I do not wish to state that the AMA sole goal is maximize profits of its members at the expense of patient health.  I simply hope that the public realize that the AMA is not simply a benevolent, consumer driven organization, but one who vigorously defends the interests of its members.  One should think twice as to whether AMA policy truly helps patients or simply helps member physicians.

 

Much of the background for my analysis was found in Health Care Economics by Paul J. Feldstein, 6th edition; Thompson Delmar Learning, 2005.