Every Industry Gets Worse When Government Gets Involved

This is easily provable with Public Choice Theory, and consistently proven in practice.

Contrary to the absurdly naive belief that monopolizing an industry will produce “efficiencies”, it has the opposite effect.  All the wrong things are incentivized and no one has any clear signal of what creates value. (See “Socialist Calculation Problem“)

Antony Davies shared this depressing graph with me last week.  If you’ve been to a health care provider in the last few years, you’ve felt the pain this causes in the realm of customer experience.

 

Non-Physicians in Health Care

First, Do No Harm

Last summer I had a trip to the emergency room that highlighted one of the perversities of the medical industry in the United States: Health practitioners are prevented from helping patients because of regulatory hurdles erected by the state at the behest of vested interests.

We were on vacation in a small town on the shore of Lake Michigan, and I experienced some intense stomach pains. When the pain persisted, I wondered if it might be my appendix and decided to hazard a trip to the ER to get it checked out. Fortunately, my appendix was fine and the pain subsided not long after I arrived at the hospital. Unfortunately, my experience in the ER was painful for other reasons.

I arrived late at night to a small but clean new building. There were only two other people in the ER waiting room and there were several nurses and hospital personnel on hand to take my information. I was in the system and seated in no time.

Then I waited for an hour and a half.

Given that effective pricing mechanisms are not available to the hospital, the long wait actually makes sense as a way to weed out the more frivolous ER visitors. Hospitals are required to see everyone who comes in, and virtually no one pays directly for their health services, so the incentive is to abuse the ER with visits of low importance. Making patients wait a long time is one of the only means available to the hospital for reducing low value visits. Indeed, one of the two patients there before me left during this time.

Finally I was admitted. A very energetic 30-something nurse took my vitals and inquired to the nature of my visit. I discussed my abdominal issues at length, and he looked very thoughtful and excited, like an engineer relishing the challenge of a puzzle he knows can be solved. He asked a slew of good questions, some of them unexpected to me. He looked pleased in a Sherlock Holmes kind of way.

Now I was excited. I could tell he had several ideas about my condition. He said, “Well, you have to wait for the doctor.” He paused and lowered his voice a bit, “but I can tell you that I don’t think you’re in serious trouble … I’ve got some really good ideas on what’s going on and what you can do about it. I’ve seen and experienced what I think you’re dealing with.”

This was great news! I’ve had on and off unexplained stomach issues for a number of years, so I was eager to hear his thoughts. I asked him to elaborate and he looked a little dismayed. “I’m not a doctor. It would be outside of my professional boundaries if I told you more. The doctor will be in soon.” Then he left.

I was irritated, but glad at least that he seemed so energized and full of ideas. I was hopeful he’d talk to the doctor—and the doc could share his thoughts. I waited.

I waited some more.

After 45 minutes, I wandered into the hall (revealing hospital gown and all) looking for signs of life. I rounded a corner and came to a room where six or seven nurses were hanging around chatting. I asked if the doctor had forgotten about me. They casually said he’d come soon and returned to their chit chat. I went back to the room. At this point the pain had subsided quite a bit, and after my vague conversation with the nurse, I was convinced I was not in danger. Still, I wanted his thoughts. The nurse poked his head in again, seeming to feel sorry for me and, showing signs of frustration said, “Sorry, the doctor will be here soon. Hang tight.”

I waited another 45 minutes. Nothing.

I was tired, feeling better and getting grumpy. I had no cell signal, and I knew my wife was worried. I wandered the hall one last time with no result, so I decided to leave.

As I drove back to the cottage, I couldn’t help thinking of the frustrated nurse who seemed to have some helpful information he was dying to share with me but couldn’t. Why couldn’t he? Because he’s not a state-licensed doctor, and state-licensed doctors have made sure they are the only ones allowed to provide certain information.

The public justification for medical licensing laws is that they protect patients from bad service. The idea that state bureaucracies are the best way to guarantee good service is laughable. Just visit the DMV. The laws do offer protection, but not to patients. They protect doctors’ economic interests from the competition of other health practitioners with less training who might offer services at lower cost. This is an ethical problem for the medical profession.

The famous medical creed, “First, do no harm,” means that doctors ought not intervene with a patient if the intervention might cause more harm than doing nothing. But what about legal intervention? Left alone, I would have happily paid the nurse for his insight into my discomfort. He would have happily offered it. The doctor’s cartel, far from doing nothing, intervened with the long, blunt arm of the law and prohibited this interaction from taking place. In doing so, they caused harm to me by denying me information that could prove valuable to my health. In this case, it was not an emergency, but it very well could have been. There are instances of medical services prohibited by regulations that cause severe illness or death.

In South Carolina, where I now live, a law was recently passed banning midwives from assisting in home births if the mother has previously had a C-section or is otherwise considered a “high-risk” birth. The nurses and doctors advocated this law. It reduces the growing competition from the more personal, convenient and far less expensive home birth practitioners. Of course you can’t reasonably make it illegal for so called high-risk mothers to have home births across the board, because sometimes it just happens. So the law only makes it illegal for a midwife to assist. The result has been an increase in unassisted high-risk home births and an increase in medical problems as a result.

In both cases, the doctors’ lobby violates the creed to do no harm. Rather than letting people follow their planned course of action, professional associations concerned with the economic interests of their members run to the state and demand intervention that prohibits voluntary exchanges and does harm to the patients.

Milton Friedman argued long ago against medical licensing because it raises the cost and reduces the accessibility of medical services. Not only is it a bad practice for these economic reasons, but it is unethical as well. If doctors have an ethical obligation not to interfere with a patient when it might do harm, they should start by opposing state licensing regimes that do just that.

Originally posted here.