Why Is American Health Care So Bad?

Editor’s note: This is a lightly edited transcript of the accompanying video from professor Peter St. Onge.

How did American health care get so bad? Why do we tolerate a system where you go bankrupt for a hip replacement?

Compared to socialized medicine, on almost any metric the U.S. has one of the best medical systems in the world—doctors per capita, hospital bed capacity, waiting times, surgical outcomes, access to specialists.

I’m not saying it’s great, I’m saying almost everybody else is worse. The problem is, this comes with nosebleed prices and a funding system that is corrupt, mind-bogglingly complicated, and often outright predatory.

U.S. health care costs two and a half times the average in the Organization for Economic Cooperation and Development. And it can feel like a reverse lottery where every so often it wipes you out and you go back to “start.”

So, what went wrong? In short, American health care is expensive because it’s lovingly written by lobbyists—insurers, hospitals, trial lawyers, and especially the doctors union—the American Medical Association.

Like all regulation, every word is designed to benefit the industry and the doctors’ union. Never the patient.

These rules ban competition and drive up prices. They push overtreatment and overprescription.

And above all, the system hides the costs to patients, leaving insurers to police hospitals in ways that destroy patients.

So, how to fix it?

Happily, it wasn’t always this bad. Our crony medical system is a creature of a World War I-era effort by the American Medical Association—the doctors’ union—to outlaw competition and drive up prices. The AMA destroyed the system of voluntary co-ops that provided care for nearly all Americans and that, by holding prices down, meant that any poor person in America was treated for free.

Members would pay a fee—less than $100 a month in modern terms—for health care, disability, and life insurance. That included a so-called lodge doctor who was on-call for members and would do house calls.

The AMA, of course, hated this system because it was too cheap. So, they broke it. First, they took over licensing to radically cull the number of new doctors, driving up the price, ending house calls, and giving us 11-plus years of medical school.

Then AMA lobbied to deny hospital privileges to lodge doctors, even to deny emergency care to lodge members. This wiped out the lodge system, replaced by heavily regulated—and very well paid—AMA members.

Finally, the AMA made it illegal to practice medicine without its license.

After this union takeover, every ongoing reform made it worse, driving up prices and shutting out competition because every reform is written by the AMA and incumbents.

The 1973 HMO Act, the 1985 COBRA Act, 1997 CHIP, 2003 Part D, and, of course, Obamacare—all written by union and industry for union and industry.

So, what’s next?

It’s tempting to try to fiddle around the edges—promote price transparency, high-deductible plans, co-payments that control costs.

But these are doomed so long as government effectively runs health care in America. Because government rules will always be written by lobbyists.

That leaves the radical solution: Go back to the co-ops. They do still exist—the Amish use co-op, and three states still have small functioning co-ops: Maine, Wisconsin, and Montana.

But it would take a root-and-branch disgorgement of the tens of thousands of mandates and regulations that make up our crony medical system. They would be replaced with the original intent of afforded pooled risk that actually serves the patient.

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