• A system at war with itself

    From pages 227 and 232 of Paul Starr’s The Social Transformation of American Medicine and pertaining to U.S. health care circa 1920:

    The structural features Arrow[*] discusses have a history. He writes that when the market fails, “society” will make adjustments. […] One has to ask: For whom did the market fail, and how did “society” make these adjustments? The competitive market was failing no one more than the medical profession, and it was the profession that organized to change it. […]

    By the 1920s, the medical profession had successfully resolved the most difficult problems confronting it as late as 1900. It had […] won stronger licensing laws; turned hospitals, drug manufacturers, and public health from threats to its position into bulwarks of support; and checked the entry into health services of corporations and mutual societies. It has succeeded in controlling the development of technology, organizational forms, and the division of labor. In short, it had helped shape the medical system so that its structure supported professional sovereignty instead of undermining it.

    Over the next few decades, the advent of antibiotics and other advances gave physicians increased mastery of disease and confirmed confidence in their judgment and skill. The chief threat to the sovereignty of the profession was the result of this success. So valuable did medical care appear that to withhold it seemed deeply unjust. Yet as the felt need for medical care rose, so did its cost, beyond what many families could afford. Some agency to spread the cost was unavoidable. It would have to be a third party, and yet this was exactly what physicians feared. The struggle of the profession to maintain its autonomy then became a campaign of resistance not only to programs of reform but also to the very expectations and hopes that the progress of medicine was constantly arousing. To continue to escape the corporation and the state meant preserving a system that was at war with itself.

    * Arrow, Kenneth J. “Uncertainty and the Welfare Economics of Medical Care.” American Economic Review 53 (December 1963), pp. 941–73.

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    • Lost in the doc fix discussion (I cannot afford to take Medicare patients because it pays less than private insurance) is the fact (my belief?) that nothing has served to increase physician incomes more than the passage of Medicare. They are much higher than what they would have been without the creation of Medicare. Half of the elderly were uninsured and then they all were insured…. But we don’t observe the counterfactual. You know if anyone has tested empirically my assertion….

      • @Don Taylor – I do not know if anyone has tested your assertion or how it could be done so convincingly. But a theoretical argument is convincing.

        It’s clear Medicare benefited providers until PPS. Even since then, the lack of volume control suggests providers have done very well. Moreover, since participation is voluntary, the only way Medicare could harm providers financially is if it acted to push private payments and volume downward. That’s not totally implausible, but I think other forces (like managed care) are larger.

        So, I cannot think of a convincing argument that physicians have been harmed by Medicare.