December 31, 2016
Breaking the taxi industry cartel’s and promoting Uber has been somewhat of a cause célèbre among economists in recent years. Any card carrying economist can give you the two minute tirade on the evils of the taxi cartel and the benefits of Uber. (I can too, but the argument should be for modernized regulation, not Uber gets to do whatever it wants because it’s Uber, see pieces here, here, and here.)
What is striking is that the enthusiasm for the virtues of competition seems to disappear when we switch the topic from the taxi cartel to the doctors’ cartel. Doctors actually have been far more effective than taxi companies in limiting competition. Doctors largely get to set standards of care, which not surprisingly requires twice as high a percentage of highly paid specialists as in other wealthy countries. They also restrict the number of doctors with a wonderfully protectionist rule that prohibits doctors from practicing in the United States unless they have completed a U.S. residency program. This means that even well-established doctors in places like Germany, France, and Canada would face arrest if they attempted to practice medicine in the United States.
As a result of this cartel, doctors in the U.S. earn on average more than $250,000 a year, putting the average doctor not far below the one percent threshold, even assuming no other family income. This is roughly twice the pay as the average doctor earns in other wealthy countries.
It is striking that the doctors’ cartel gets so much less attention from economists than the taxi cartel. After all, we spend close to $250 billion a year on doctors compared to $6 billion a year on taxis. I could suggest that the lack of interest is due to the fact that many economists have parents, siblings and/or children who are doctors, but I wouldn’t be that rude.
Anyhow, there are measures that can be taken at both the national and state level to break the cartel if economists ever take an interest in free trade. At the national level the obvious step would be to establish an international certification system so that doctors trained in other countries could establish their competency and then practice in the United States just like a doctor born and trained here. (Save the whine. We can establish a system whereby we repatriate money to developing countries for the doctors they train who then practice in the United States. As it stands, they get zero money for the doctors that leave the country, so this system would almost certainly be a net improvement for them. Yes, this is discussed in Rigged.)
Since protectionists dominate trade policy (I mean up until now, not just since the election of Donald Trump), we can also look to measures at the state level. It seems that several states are considering policies that would allow doctors who do not complete a residency program to practice under the supervision of another doctor. This is a great first step as is expanding the scope of practice for nurse practitioners and other less highly paid health care professionals.
Developments in technology should allow health care professionals with much less training than doctors to make diagnoses as accurately or more accurately than the best doctors. The same is true with robotics, which is likely to eventually outperform even the best surgeons. These technologies will offer both huge savings and better care, if we don’t allow the doctors’ cartel to maintain its lock on the practice of medicine.
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