The Health Care System and the Guilds

There can be no question that the American health-care system has tremendous problems. We spend almost as much per capita in public funds as do the Europeans, but we do not have universal service. We spend a greater amount in private funds, yet we do not have free market in medical care. It is almost as if someone deliberately designed a system that combined the worst features of socialism and capitalism into one Rube Goldberg operation. We spend more than any other country in the world on medical services, yet the results are near third-world levels.

The debates on this issue usually take place within this framework of “free market” vs. “socialized” medicine, yet the system we have is neither and both. It cannot be a free market system because the supply of medicine and medical services are limited by licenses and patents. Milton Friedman advocated abolishing the licensing of doctors altogether. Friedman argued that medical licenses restrict the supply of doctors and thereby raise the cost. He believed that the free market would judge medical competence better than any license board, rewarding the competent doctors and punishing the incompetent.

The problem with Friedman's argument is that we have already tried that. Right into the early 20th century, doctors were unlicensed; they took perhaps one to two years at a local medical college, usually a for-profit institution run by local doctors who lectured at the college. After their course of lectures, and without ever having touched a microscope or a cadaver, they set up as doctors. The results were disastrous, as became evident in the great Spanish Influenza pandemic of 1918. After that, the move to improve education and require licenses gained public support to produce the system we have today, a system largely controlled by the American Medical Association (AMA).

Further, a free market solution depends on the availability of information and the ability to judge that information. In comparing doctors, information about them is hard come by, and even if I had such information, I would not be able to make an informed judgment. And if I am having a heart attack, I am in no position to do the comparison shopping that a free market requires.

Yet for all that, Friedman has a point. By limiting the number of doctors, we restrict the supply and raise the cost. Further, the education of a doctor is long, arduous, and expensive. New doctors are frequently burdened with huge education loans, and setting up a practice requires a huge capital investment. This forces doctors to act more like businessman than medical professionals; they have to turn a large profit just to break-even on both their costs and the amount of income forgone while they were getting their educations. And it has frequently been charged that the AMA restricts the number of “slots” in medical schools so as to further restrict supply.

I have previously dealt with the problem of licenses (see Sicko-phancy). Instead of a single license requiring many years, and hundreds of thousands of dollars, I propose a series of licenses: midwife, nurse practitioner, medical practitioner, medical doctor, medical specialist. This would vastly expand the supply of medical personnel and thereby lower the cost. However, this can only be a partial solution. Doctors, whatever their license level, still face tremendous problems with medical insurance. And likewise the public faces similar problems. The cost of medical care is so high that nearly everyone needs insurance, but the insurance companies do their best to limit the claims they will pay. And there is still the problem of who gets to grant the licenses, no matter how many levels there are. Would not the AMA exercise its influence on governmental agencies to keep the supply as low as it is today, and the price as high as possible? And how to address the problems of the high cost of medicine and medical equipment, like MRIs?

Can we take away the power from government and still have an effective medical system? Must we be mired in socialism, or should we return to the free-market chaos of the 19th century? I believe that there is a better way. I believe that the answer lies in a well-tested institution from out past, and that institution is the guild. The guilds were associations of professionals in a given field who took responsibility for the training of their members and the quality and price of their products and services. They were the sole judge of the qualifications of their members, and had the power to set both standards and prices. What I propose is that we allow medical professionals to form guilds with the power to grant various licenses. They would be the sole judge of the qualifications required, and they would set the practice standards and prices. But most importantly, the guild would stand surety for its members. That is to say, when a patient had a complaint, he would sue not the doctor but the guild. The guild would be responsible for the competence and good conduct of its members.

You might ask, “why would one doctor stand surety for another?” But in fact, this is what already happens in malpractice insurance. Insurance is merely cost averaging. If the losses go up for one doctor, the rates for every other doctor in that insurance pool goes up. But doctors have no control over who is in their insurance pool; the quack and the competent get thrown in the same insurance system, with the later required to pay for the former. In a guild system, the guild would have a strong incentive to ensure the competence of their members and monitor their practice standards; they would want to weed out the incompetent or downgrade their licenses. The guild would purchase insurance for all its members, or even provide the insurance itself, thereby removing the profit motive and lowering the cost.

Since the guild would be the sole judge of the qualifications and practices of its members, there would be a greater diversity of practical approaches. The Guild of St. Luke, for example, might favor one approach to medicine, the Galen Guild might favor another, and natural competition and practical experience would be sufficient to discover the superior approach. And while it might be difficult for the public to judge one doctor against another, it would be easier to judge the performance of one guild versus another. Further, this also provides space for “alternative medicine.” I have no way to judge whether such things as acupuncture or Chinese herbalism are medically valid. But when joined in a guild and required to stand surety for each of their members, practices which do have some value would likely thrive, even if traditional medicine does not, as yet, recognize their value. And if they have no value, it is likely that such practices would simply disappear because the insurance claims would bankrupt them. Likely the government would still have some minimal role to prevent outright quackery; they would not likely allow a Guild of Peach Pit cure-alls.

The guild would also provide a career path for its members. As it is now, student spends the better part of their youth and a great part of their future earnings in getting an MD. But with a guild with a multiple license structure, they could enter as nurse or medical practitioners, practice medicine at some level while continuing their training for higher levels. This would give them both an income stream and practical experience in their trade. It would be a kind of “apprentice” program.

In addition to insuring their doctors, the guild could offer insurance to the public. That is, they could offer to treat people for a fixed annual fee. This would give the guilds an income stream, but also a great incentive to insure that small problems do not go untreated to become big problems. In other words, such health insurance would actually be concerned with insuring health rather than denying claims. Further, the guilds could be required to devote a certain amount of their resources to free or low-cost care for the impoverished or indigent. The government might play a role here in qualifying people as eligible for such reduced-cost treatment.

The guild would be empowered to establish its own clinics, its own training and education programs, its own pharmacies, labs, administrative structures, and whatever else is necessary to medical practice. This would also make it easier for medical professionals to enter practice without worrying about setting up the business and administration that consumes so much of doctor's time today.

Of course, the complete solution to the problem cannot be found without breaking the monopoly power of prescription drugs and medical equipment. I have already outlined an approach to this in the aforementioned Sicko-phancy. But I believe that the guilds can also play an important role here, especially in the testing new drugs and negotiating prices. Drug companies would no longer have an incentive to “bribe” doctors to prescribe their patent medicines, since it would be the guild and not the individual doctor who establishes standards for medicines and judges their effectiveness. The collective judgment of the guild is likely to be superior to the individual judgment of any given doctor, especially when that individual judgment is influenced by “gifts” from the drug companies, as it is now.

Now, I will not pretend to my long-suffering readers that I am an expert in medical economics. I welcome any critiques or refinements that those more qualified than I am can offer on these matters. But I will assert that there are some principles which hold no matter what the system, one of these being that the incentives will dictate the outcomes. And the current incentives—for doctors, insurance companies, the AMA, and others—are all wrong and cannot be repaired in the current system. Every solution now on the table in the public debate will likely only make the problems worse.

What I will assert is that sometimes our best future is in our long past; that methods that have been tried and worked, but for some reason were abandoned, can be re-worked to answer current conditions. I believe that it is the essence of both the progressive and the traditional to find what has worked, and to adapt it to the present moment.

11 comments:

Anonymous,  Saturday, December 20, 2008 at 12:51:00 PM CST  

Excellent idea! I'm sending it to my Congressman and Senators ASAP! God bless you, Sir, for bringing your mind to bear upon these matters.

Anonymous,  Saturday, December 20, 2008 at 3:44:00 PM CST  

I agree, excellent idea. The government would have to have the power to prevent guilds from forming local monopolies, though.

So what are the actual legal impediments to making this happen? Doctors today typically form professional corporations or partnerships - could this not be considered some sort of guild?

Today's "concierge medicine" could be considered a mini-guild, I think.

cs Sunday, December 21, 2008 at 8:18:00 AM CST  

I support the passage of HR676, a national health care bill. However, I purchased a swordcane from the South African Knifemakers' Guild and man was it sweet, so the idea of some sort of guild for Doc's sounds great. It is hard to believe that such a thing hasn't emerged in our country as of yet. Guilds used to be quite popular. As an industrial worker, I have some beefs with them, but overall, there are some goodies that are just too good!

M.Z. Forrest,  Monday, December 22, 2008 at 10:50:00 AM CST  

In some respects your proposal is similar to the PPO structure. In other ways, it is similar to the HMO structure. This is somewhat to be expected.

I think the fundamental problem is whether the guild itself could raise the capital necessary to operate. Conservatively, I would imagine $100 milllion would be required to start up a guild as you have layed out. This would include a level 1 trauma center, etc. If that were divided between 250 doctors, that would be $400,000/doctor. (A pubic company, CYH, has 130 hospitals and assigning all the PP&E on the balance sheet brings it to $45MM/hospital.) I think at this point, you have to look at the public assuming some portion of the public infrastructure.

The most logical (in my mind) place to start would be the hospitals. Communities should own the plant, or at least control allocation. This would make a guild more viable. Perhaps servicing guilds would be assigned so many ER hours in exchange for a right to operate in a community.

The second area and one your mention is MRI machines, etc. Actual MRI machines aren't bad. This is one area where capitalism has proven itself. As we move up the technological ladder we need to recognize what has been true for every other industry: competition is ruinous for innovation in heavily capitalized industries. Capitalism is good for dissemination, not innovation. Be it Google or the bio-medical industry, all the innovations occured on public universities and then were applied to private industry. The laissez faire-ests refuse to acknowledge it. Many of them accept patents, which is based on the same principle, oddly enough. Anyhow, we have ruinous competition in many of our communities resulting in perfectly servicable hospitals in the inner city being replaced with glass behemoths in the suburbs. Again, this because of payment arbitrage and not innovation, similar to what Keynes observed with British industry out-sourcing.

My goodness. I've exceeded the indulgence you've offered allowing me to comment. Thank you for your thoughts.

Anonymous,  Thursday, December 25, 2008 at 9:01:00 PM CST  

Great post John! This is a bit off the mark, but I would like to know how distributist thought could be applied to nursing homes. I am a former autoworker, now working as a caregiver for a small hospice. I'm working on a degree in Long-Term Care Administration. I spend much of my time in nursing homes, and I am saddened by how much they remind me of the factory where I once worked. What lessons could be gleaned from the Catholic Worker and Distributist philosophy to improve this area of health care?

John Médaille Friday, December 26, 2008 at 10:35:00 AM CST  

Anon, I don't really know, and I hope someone with knowledge in this field will comment. I can observe that the great reliance on hospice and nursing home care partially results from a breakdown in the extended family structure. That being said, they are still necessary structures whatever the reasons.

John Médaille Friday, December 26, 2008 at 10:37:00 AM CST  

M.Z. I suspect the PPO is an adjunct of the insurance company, designed more to keep down cost rather than provide care. I don't think the doctors are in control, but I could be wrong. As far as the capital required, I suspect most doctors already have a tremendous amount of capital invested anyway. But than I cannot claim to be an expert in the precise economics of a practice. Perhaps a doctor will write in on this subject.

Anonymous,  Monday, December 29, 2008 at 1:16:00 PM CST  

I am amenable to this solution, as long as membership in the guild is voluntary, and multiple guilds are allowed to flourish. Government-mandated professional licensure is a protectionist racket. The trade groups are always begging to be regulated to keep competition out and prices high.

It may be the case that in an unregulated market for medical professionals, guild systems would naturally emerge primarily to mediate consumer information. It would be in a health professional's interest to align himself with a guild.

Also, we already have separate licensure for the various types of health professionals, so I am not quite sure what John is proposing.

Thanks.

John Médaille Monday, December 29, 2008 at 1:41:00 PM CST  

Anon, only the MD is licensed to practice medicine.

Licensure often works out to be a racket, I agree. It certainly is in my profession. Nevertheless, licensure serves a purpose; the trick is to get it to the point where it actually serves that purpose and not the purpose of mere protectionism; it should protect the public in areas where they normally would not have expertise; it normally protects the license holder, both from competition and even from complaint.

M. Z. I think a doctor may already have $400,000 in his practice, or close to it. But you are right that the value of capitalism in development is over-rated. In fact, it often misallocates funds. The Celebrex debacle, for example. The prescription NSAID market was well served before Celebrex, but the company wanted an entry in this lucrative field, so put great resources into duplicating work that had already been done. A lot of "research" is like that.

Race Mathews,  Friday, January 2, 2009 at 12:37:00 AM CST  

Here in Australia, we started out funding hospital and medical costs through friendly societies that were among our earliest mutuals - groups of people who banded together initially in order to access through a mutualist or co-operative structure the burial services that would otherwise have been able to unaffordable for them, and over time added to their offerings medical attendance, hospital care, unemployment benefits, pharmaceuticals and in some cases nursing home accommodation. Doctors initially were retained on a 'list basis' and and paid an agreed per service fee, but later shifted to direct billing of patents, whom the 'friendlies' then reimbursed through what was effectively an insurance system. Over time, numerous flaws in the system emerged, such as - to name only the more obvious - (a) lack of coverage for those who 'chanced their luck or never had any', including in particular the children of uninsured households who frequently bore the brunt of the consequences; (b) soaring administrative costs consequent on the 'friendlies' moving through what social movement theorists characterise as their 'generation to degeneration' cycle to a frequently self-indulgent bureaucratisation; (c) inability of the 'friendlies' to agree with doctors and other service providers on cost control and quality assurance measures. By 1972, majority opinion recognised that a change was needed, and the Labor government of the day enacted a simple medical and hospital cost social insurance pool - Medibank - to which all but low income earners contributed a percentage of their taxable incomes and all received in return free public hospital care and reimbursement of 85% of the cost of medical services as specified in an agreed schedule. While, like other mutuals, the 'friendlies' have mostly fallen prey either from without or within to predatory demutualisers, optional additional insurance for private hospital care also remains available from a variety of mostly corporate insurers.

It's in no sense a perfect scheme, but simple, universal and generally agreed to be a big improvement on its predecessor - the Conservatives abolished it when they were returned to office in 1975, only to see it reinstated by Labor in 1983 as 'Medicare' and become entrenched to the point where any further attempt to abolish it is now all but inconceivable. Where a model based on a diversity of guilds might have a role is as socially responsible service delivery partners for the Medicare 'single payer' insurance pool, as might also community hospitals and health centres organised on a mutualist basis and perhaps conventional group practices.

Arrangements along these lines would be totally consistent with Distributism as outlined by Chesterton when he wrote:

'Even my Utopia would contain different things of different types holding on different tenures. … There would be some things nationalised, some machines owned co-operatively, some guilds sharing common profits, and so on, as well as absolute individual owners, where such individual owners are most possible.

reading Tuesday, September 22, 2009 at 5:48:00 AM CDT  

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