The medical profession is one in which practice of the profession has for a long time been restricted to people with licenses. Offhand, the question, “Ought we to let incompetent physicians practice?” seems to admit of only a negative answer. But I want to urge that second thought may give pause.

In the first place, licensure is the key to the control that the medical profession can exercise over the number of physicians. To understand why this is so requires some discussion of the structure of the medical profession. The American Medical Association is perhaps the strongest trade union in the United States. The essence of the power of a trade union is its power to restrict the number who may engage in a particular occupation. This restriction may be exercised indirectly by being able to enforce a wage rate higher than would otherwise prevail. If such a wage rate can be enforced, it will reduce the number of people who can get jobs and thus indirectly the number of people pursuing the occupation. This technique of restriction has disadvantages. There is always a dissatisfied fringe of people who are trying to get into the occupation. A trade union is much better off it can limit directly the number of people who enter the occupation-who ever try to get jobs in it. The disgruntled and dissatisfied are excluded at the outset, and the union does not have to worry about them.

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. In order for a medical school to get and stay on its list of approved schools it has to meet the standards of the Council. The power of the Council has been demonstrated at various times when there has been pressure to reduce numbers. For example, in the 1930′s during the depression, the Council on Medical Education and Hospitals wrote a letter to the various medical schools saying the medical schools were admitting more students than could be given the proper kind of training. In the next year or two, every school reduced the number it was admitting, giving very strong presumptive evidence that the recommendation had some effect. . . .

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. . . .

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More generally, if the number of physicians is less than it otherwise would be, and if they are fully occupied, as they generally are, this means that there is a smaller total of medical practice by trained physicians-fewer medical man-hours of practice, as it were. The alternative is untrained practice by somebody; it may and in part must be by people who have no professional qualifications at all. Moreover, the situation is much more extreme. 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. I am not enough of a technician to list the examples at all fully. I only know that those who have looked into the question say that the tendency is to include in “medical practice” a wider and wider range of activities that might well be done by others. The result is to reduce drastically the amount of medical care. The relevant average quality of medical care, if one can at all conceive of the concept, cannot be obtained by simply averaging the quality of care that is given; that would be like judging the effectiveness of a medical treatment by considering only the survivors; one must also allow for the fact that the restrictions reduce the amount of care. The result may well be that the average level of competence in a meaningful sense has been reduced by the restrictions.

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There is still another way in which licensure, and the associated monopoly in the practice of medicine, tend to render standards of practice low. I have already suggested that it renders the average quality of practice low by reducing the number of physicians, by reducing the aggregate number of hours available from trained physicians for more rather than less important tasks, and by reducing the incentive for research and development. It renders it low also by making it much more difficult for private individuals to collect from physicians for malpractice. One of the protections of the individual citizen against incompetence is protection against fraud and the ability to bring suit in the court against malpractice. Some suits are brought, and physicians complain a great deal about how much they have to pay for malpractice insurance. Yet suits for malpractice are fewer and less successful than they would be were it not for the watchful eye of the medical association. It is not easy to get a physician to testify against a fellow physician when he faces the sanction of being denied the right to practice in an “approved” hospital. The testimony generally has to come from members of panels set up by medical associations themselves, always, of course, in the alleged interest of the patients.

When these effects are taken into account, I am myself persuaded that licensure has reduced both the quantity and quality of medical practice; that is has reduced the opportunities available to people who would like to be physicians, forcing them to pursue occupations they regard as less attractive; that it has forced the public to pay more for less satisfactory medical service, and that it has retarded technological development both in medicine itself and in the organization of medical practice. I conclude that licensure should be eliminated as a requirement for the practice of medicine.

http://www.fff.org/freedom/0194e.asp

“A lot of problems were created in 20th century as a consequence the Flexner Report (1910), which was financed by the Carnegie Foundation and strongly supported by the AMA. Many medical schools were closed and the number of doctors was drastically reduced.” — Ron Paul; September 24, 2009

The seeds of the Flexner Report were planted in 1908 when the Carnegie Foundation for the Advancement of Teaching commissioned Abraham Flexner, a high school principle, to research and report on medical schools in the U.S. Flexner himself was not involved in the medical industry, but after being asked to take on the report he researched and grew fond of the medical systems in England, France, and Germany.

In the report, which was officially published in 1910, Flexner called homeopathic schools “a striking demonstration of the incompatibility of science and dogma.” What’s curious is that Flexner points out between 1900 and 1909 homeopathic schools decreased from 22 to 15 and students within the schools decreased from 1,909 to 1,009. Flexner uses these figures to conclude that “the rise of legal standard must inevitably affect homeopathic practitioners.” In short, even with the marketplace whittling out the unproductive and unsustainable homeopathic colleges (or any colleges, for that matter) that Flexner clearly did not appreciate, he still advocated increased government intervention to further clear out homeopathic schools.

Flexner believed the problems in medicine were primarily because there were too many doctors and medical colleges. “The country needs fewer and better doctors; and…the way to get them better is to produce fewer.” The flaws of Flexner’s arguments and his general report is that he may indeed have made some noticable observations, but he did not consider the economic consequences of increased government intervention, a centralized medical system in the hands of the American Medical Assossiation (AMA), and the impact of fewer doctors and medical schools.

Basic economic common sense tells us that when you forcibly remove one product without subsequently lowering demand, you will increase the price of that product. Less supply without less demand means higher prices. The homeopathic schools that Flexner so strongly criticized may have lacked in some areas of educational standards compared to more traditional health schools, but they provided a key element of competition for allopathic medicine and an essential choice for individuals who needed health care.

Basic economics also tells us that weak products and services are bound to fail to the competition due to inefficiency and poor judgment. As I previously mentioned, Flexner’s own research displayed that homeopathic schools were struggling to stay open and maintain steady attendance. Their services had difficulty competing in some cases, and those schools (or services) disappeared or were in the process of failing.

The publishing of the Flexner Report in 1910 led to many educational reforms. Among Flexner’s final proposals included extending years spent in health education (two years in undergraduate collegiate studies and four years in medical school), increasing the caliber of medical schools to universities, expanding government involvement in medicine, decreasing total graduates to 3,500 from 4,500, and bringing the total amount of medical schools in the U.S. from 150 to roughly 31. In short, Flexner proposed a medical system driven not by the free market and individuals, but a manipulated system molded by some of the wealthiest men and foundations in the world. In fact, the Rockefeller Foundation donated large sums of money to schools who followed the model recommended by the Flexner Report.

One of the unfortunate impacts the Flexner Report had on medical education was the shut-down of many schools geared toward disadvantaged rural areas, African-Americans, and women. Because of mandated school time regulated by the AMA and state governments, only those wealthy enough to afford at least six years of college had a chance at becoming a licensed doctor. This essentially limited the market for prospective doctors to wealthy white males. (All but two African-American medical colleges were closed.)

The flaw with the Flexner Report is the same flaw that has brought us to today’s broken medical system. When a product is forcefully limited to be provided by a certain central group (in this case the AMA), it will reduce choice and competition. Choice and competition in a free marketplace are what drive businesses to become more efficient and productive, which provides the greatest possible benefits to individuals who are able to freely buy and sell in the market. A strong, sustainable system built for individuals cannot come from a manipulative central source, it must come from the demands and choices of the people whom it is intended to help.

Government regulatory standards do not necessarily serve the individual as many people believe. In the case of medical care, the Flexner Report recognized many flaws with education that the free market was already weeding out on its own. Rather than allow people and communities to make their own choices with doctors, medicine, and education, it was all placed in the hands of the AMA and state governments, thus limiting the supply. This resulted in less doctors, more expensive education, and decreased access to medical care.

A central system concentrates power into the hands of a select few individuals, groups, and organizations who have the means to control that respective market. A free market divides that power among individuals who have the ability to make their own decisions themselves and through their communities.

Concentrated control, as proposed and implemented in the Flexner Report, is the direct cause of the majority of problems with health care today. The solution does not lie with more government intervention and centralized power, but rather with increased individual freedom. The answer is not centralized power in government, but centralized power within ourselves.