Cronyism: How the AMA Cartelized the Medical Profession - PowerPoint Presentation

1. Cronyism: How the AMA Cartelized the Medical ProfessionDr. Patrick Newman2023 Mises University

2. What’s this Presentation About, and why should I care? I will concentrate on the efforts of the American Medical Association (AMA) in the Progressive Era (1897 to 1929) to restrict the supply of doctors by lobbying states forstricter licensing requirementstougher accreditation standardsThe AMA’s efforts were examples of cronyism: when the government passes policies to benefit special interests at the expense of the overall publichigher prices of medical services and restricted choices of consumers

3. Cronyism: Rise of the Corporatist State, 1849-1953Traces the development of corporatism in America (circa 1897 to 1953)Corporatism: a system where the economy is organized into various governmentally privileged cartels that are monitored by regulatory agenciesRailroads  Interstate Commerce Commission (1887)Banks  Federal Reserve System (1913)Industry  Federal Trade Commission (1914)Financial Services  Securities Act; Securities and Exchange Act (1933 and 1934)Airlines  Civil Aeronautics Act (1938)

4. Cronyism: Rise of the Corporatist State, 1849-1953Corporatism to benefit whom?The special interests of course!Special interests lobby the government to influence legislation/personnel and make sure it benefits them and not rival interestsE.g., railroads versus shippers and unions; Wall Street versus Chicago banks; large corporations versus small businesses and unions

5. Cartelizing High-skilled laborSame thing happened with professions’ trade associationsAmerican Pharmaceutical Association  licenses to control pharmacists American Bar Association  requirements for lawyers in arbitration proceedingsNational Education Association  professional training requirements for K-12And of course, the American Medical Association

6. Medical competition in the late nineteenth centuryAMA doctors: traditional “allopathic” care (use painkilling drugs) (usually cocaine, opium, whiskey, other alcohols, and morphine; aspirin only discovered in 1899)Homeopathic doctors: “like cures like” care (use diluted symptoms of sickness to strengthen immune system) Eclectics: herbal remediesDifferent consumers subjectively decided which treatment worked for them (much like today!)

7. The AMA tries to deal with “unrestricted competition”In 1880s AMA lobbies for state licensing boards to restrict supply of doctors Pass an exam and/or earn a diploma from a medical schoolBut homeopaths and eclectics were influential, and AMA only gets either single board systems (with heterodox representation) or systems of separate boardsStill intense competition # of physicians per 100,000 in population increased from 171 in 1880 to 173 in 1900Degree granting medical schools (unregulated) increase from 100 in 1880 to 160 in 1901New medicines: osteopaths/chiropractors and optometrists

8. What Does the AMA do? Greater Efficiency? No. More restrictions? Yes! Circa 1900, AMA creates a new lobbying front, the Council on Medical EducationAdvocates single boards with only AMA doctors, more rigorous medical schools (tougher entrance exams, longer academic years, more training, higher tuition fees, etc.), and tougher licensing examsWanted to force consumers to only purchase higher quality and higher priced doctor services

9. AMA elitismAMA looked down upon lower quality doctors, especially black, female, and Catholic immigrant doctorsAMA President Dr. Frank Billings sneered at those colleges that enabled “the clerk, the street-car conductor, the janitor, and others employed during the day to earn a degree.”

10. AMA ElitismOne medical school in Tennessee protested against the AMA:True, our entrance requirements are not the same as those of the University of Pennsylvania or Harvard; nor do we pretend to turn out the same sort of finished product. Yet we do prepare worthy, ambitious men who have striven hard with small opportunities and risen above their surroundings to become family doctors to the farmers of the south, and to the smaller towns of the mining districts. . . . Can the wealthy who are in a minority say to the poor majority, you shall not have a doctor?

11. Results of AMA lobbying1900 to 1907: thirty states and territories replace multiple boards with single boards (allopath dominated), require doctors to graduate from AMA approved schools# of physicians per 100k decreased 5%, medical colleges decrease 20%

12. AMA wants stronger restrictionsIn 1906, the Council visited every remaining medical school in the nation, issued a report that said only half satisfactoryReport was too controversial, would look too self-servingNeeds a public-interest garb. Council goes to Carnegie Foundation for the Advancement of Teaching to issue its own report

13. Carnegie FoundationCarnegie Foundation agrees, chooses Abraham Flexner to conduct a studyFlexner was not knowledgeable about medicine. But he was the brother of Dr. Simon Flexner, an advisor to John D. Rockefeller Junior and a director at the Rockefeller Institute for Medical ResearchSimon Flexner was also a protégé of Dr. William Welch, an advisor to Rockefeller Jr. and dean of the Johns Hopkins Medical School

14. More ElitismRockefeller, the Flexners, and Welch: pro-elite schools, pro research led science. Every medical school needed to be patterned on Johns HopkinsContrasted with patient led science of Dr. William OslerAbraham Flexner praised government subsidized educational system in GermanyWhere many AMA doctors earned graduate degreesThe “poor boy,” Flexner opined, had no right to enter medicine “unless it is best for society that he should”

15. Flexner visits the SchoolsIn 1909 and 1910 Flexner visits every medical school, very brief visits E.g., within three months he inspected 69 schools in 22 statesFlexner duplicating the Council on Medical Education’s secret reportCarnegie Foundation president at CME meeting: “the foundation would be guided very largely by the Council’s investigations” but would not mention the Council so it would “have the weight of an independent report of a disinterested body.”“we have been hand in glove with you and your committee. . . . When our report comes out, it will be ammunition in your hands.” But “maintain in the meantime a position which does not intimate an immediate connection between our two efforts.”

16. Flexner Report (1910)Promoted as a disinterested muckraking pieceFlexner: only 31 of the nation’s 131 medical schools should remain open This would leave no schools in 22 states!Very successful coverup, AMA connection hiddenResults were striking: by mid 1910s, single boards in 43 states, allopath dominatedAMA becomes de facto accreditation agency, medical schools decline from 131 in 1910 to 76 in 1929

17. Elite Institutions BenefitWhile lower ranked medical schools are forced out, Rockefeller Foundation and state governments funnel money to top universitiesE.g., in 1920, Rockefeller Jr. gives A. Flexner $50 million to gift Johns Hopkins, University of Chicago, and other schools. States match Rockefeller donations to state universitiesNew money leads to research heavy professorships at public’s expensePublic loses academic’s part-time medical services, graduate students deprived of hands-on technical experienceOsler: this incentivized “clinical prigs . . . whose only human interest was research.”

18. Leads to a Doctor Shortage# of physicians per 100k in population decrease from 164 in 1910 to 125 in 1929 (24% decrease, 28% decrease since 1900)Hit rural communities disproportionately1906-1923, # of people per doctors in large cities increased 9%, smaller towns 54%! CME: we “had anticipated this [decline] and felt that it was a desirable thing” because “we had an oversupply of poor mediocre practitioners” The real reason: average doctor salary: $1000 in 1900, $6354 in 1929 (535% increase!)

19. ConclusionDuring the so-called Progressive Era, the AMA lobbied for cartelizing restrictions that reduced competition and raised the prices of their servicesThe AMA behaved like other special-interest groups during this time. They were very successful because of the public-interest argument