The Underappreciated Role of the AMA in Driving Up Health Care Costs

Economist Milton Friedman, in his book “Capitalism and Freedom” argued passionately about the economic harms associated with professional licensing. Friedman’s basic point was that “The biggest advocates for licenses in an industry are, usually, the people in the industry, wishing to keep out potential competitors.” Unfortunately, with all the focus on the “public option,” mandates, and insurance companies, not much is being said about licensing issues.

That is why this article by Shikha Dalmia or Reason Foundation about the harms inflicted on the modern medical system by the American Medical Association (AMA) is very important. Specifically, writes Dalmia:

Doctors–and many Republicans–constantly carp about the costs of “defensive medicine” because it forces providers to perform unnecessary procedures and tests to insulate them from potential lawsuits. But excessive physician salaries contribute nearly three times more to wasteful health care spending than the $20 billion or so that defensive medicine does. “While the U.S. malpractice system is extraordinary,” the study notes, “it is only a small contributor to the higher cost of health care in the United States.” Meanwhile, other studies have found that doctors’ salaries contribute more to soaring medical costs than the $40 billion or so that the uninsured cost in uncompensated care–the president’s bete noir.

Add another issue to the list of problems with American health care for which a free market solution is demanded, but unlikely due to pressure from special interests.