Gingrich v. Evil Physicians
Former House speaker Newt Gingrich wants the federal government to restrict the right of physicians to form and operate their own “specialty hospitals.� Gingrich claims that only government intervention can protect “competition� from insidious, profit-seeking physicians:
Congress should insist on hospital ownership rules that allow doctors to invest in specialty hospitals in which they do not practice but that forbid doctors from having ownership in a hospital in which they do practice.Gingrich objects to specialty hospitals that take “easy and inexpensive� cases away from community (and taxpayer-subsidized) hospitals, leaving the welfare state to subsidize the unprofitable an expensive patients. Gingrich choses not to address the problem of relying on taxpayer subsidies or third-party payers to finance health care. Instead, he scapegoats the physicians for not supporting his vision of centrally-planned health care.Alternatively Congress should consider establishing a law requiring that specialty hospitals take all the cases in their area of specialization, the difficult and complex (and expensive) as well as the simple and profitable. What Congress should not do is allow the current market-distorting and community hospital-destroying system to continue unchecked.
As a free-market conservative I strongly favor competition. In fact, I think Adam Smith's description of markets creating more choices of higher quality at lower cost was one of the great breakthroughs in human productivity. His publication of "The Wealth of Nations" in 1776 was as liberating as our own Declaration of Independence the same year.
Yet Smith recognized that sellers often try to create phony markets. He warned that when businesses get together they are often conspiring against the consumer. Businesses can see a financial interest in rigging the market so that it minimizes competition or sets prices. This same temptation to conspire against the consumer can be found in the emerging specialty hospital movement.
Gingrich's misrepresentation of Adam Smith's views on competition further undermine his call for state intervention. Smith said that laws that interfered with private and voluntary contracts were not “consistent with liberty and justice.� Gingrich's proposed ban on physician ownership of specialty hospitals is not something that Smith would have supported. Forcing private hospitals to take “all of the cases in their area of specialization� is not “consistent with liberty and justice.�
Gingrich's “free market conservative� views are more consistent with the current Federal Trade Commission than Adam Smith. The FTC has imposed de facto price controls on physicians in the name of “protecting competition.� Any physician contract with a third-party insurer is now subject to a federal veto if FTC staff lawyers determine that physician compensation is “supra-competitive.� I wonder if Gingrich believes that unelected government lawyers are in the best position to decide “market� prices. If he doesn't, then he's contradicting his attack on specialty hospital ownership.
Comments (12)
Charles D. Quarles
Indeed. Physicians are slaves (in the eyes of politicians named Clinton and Gingrich). If you want to destroy excellent medical care, there's no better way to do it than remove incentives for improvement coupled with subsidies for demand.
Published: November 12, 2005 9:54 PM
Ike Hall
The allopathic monopoly on physician services does not help, either. The AMA has cartelized physician services, education, fees and licensing for decades now. Granted, the services one receives are unquestionably excellent. But for folks who have minimal healthcare needs, the monopoly thwarts them at every turn. Need a prescription refill for something that you know you need? Gotta see an allopath first.
Managed health care was the bastard child of spiraling monopoly healthcare costs plus employer insurance coverage (which was the result of government wage controls). It, like these small specialty hospitals, was a way to control costs.
Let's follow the bleating. Looks like Gingrich's "Center for Health Transformation" is funded by major hospital groups. Well, there ya go. Just another shill. Nothing to see here, unless they restrict something that might actually lower costs.
BTW, their tagline? "Better health, lower costs." Bwwwaaahahahaha!
I swear, sometimes I wonder if all I really need most days is just a good veterinarian!
Published: November 12, 2005 11:16 PM
DS
For the one-billionth time Adam Smith's famous quote has been taken out of context and distorted to to state the exact opposite of what he actually meant by leaving out the second part of the sentence.
The FULL TEXT:
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings by any law which either could be executed, or would be consistent with liberty and justice."
While Adam Smith laments the tendency for businesses to collude he also sees that as a lesser evil than the government passing laws that try to couter-act that (i.e., Anti-trust).
As a former "conservative" I am very disappointed that conservatives like Gingrich, who I partially credit with opening my eyes to the wonders of free market capitalism, are really just apologists for big government. Very disappointing.
Published: November 13, 2005 8:35 AM
Yancey Ward
I hate to say it, but the physicians' fate is to be slaves of the state. Complete government control of health care is coming, like it or not. The thing that is surprising is how willingly they don their shackles, thinking them made of gold.
Published: November 14, 2005 10:31 AM
Paul Edwards
"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings by any law which either could be executed, or would be consistent with liberty and justice."
Smith did well not to advocate coercion to avoid such meetings and conversations. Too bad he didn't understand that free market cartels are not conspiracies against the public nor are they in any way bad for the consumer overall. To the extent that they are sustainable, they represent just one more way the free market allocates resources in such a way as to maximize consumer satisfaction. The adverse results of that particular misunderstanding of the market will be with us for a long time. Not that it's all Smith's fault.
Published: November 14, 2005 1:06 PM
William
This is another example of the difference between a "Conserative" and a "Liberterian". Gingrich is the latter. He distrusts government not on principal buy when it goes against his preferences. He does not believe that these doctors have a right of association because his personal preferences are being hurt.
Liberterians are not against any voluntary associations where the actors do not use force or fraud against others. Clearly the doctors building these private hospitals are not using force or fraud but good old business sense that a potiential market is either under served or mor likely that the "Holyer than thou" Community Hospitals are in fact COLLUDING AND RIPPING OFF THEIR CUSTOMERS!!!!!
The funny part is that even if these private hospitals could collude to raise prices, the most they could raise them is that of the existing hospital.
Published: November 14, 2005 1:37 PM
Jim Bradley
Next we'll have "Homeschoolers are 'creating a phony market' by taking all the good students making the government schools work harder". What the heck is a "phony market" and who does Gingrich think he is able to define a "phony market"? Essentially with this logic, if the government does a lousy job, any avoidance of the government's depredation can result in the "phony market" charge. What about courts? "Sorry abitrators: you're taking all the 'easy' cases and leaving us with the hard ones". Besides, I bet that private medicine does 10x the complexity what public medicine does. Anybody got his email?
Published: November 15, 2005 7:21 AM
raul
*Granted, the services one receives are unquestionably excellent.*
How do you know Ike there is no possible comparison?
Published: November 15, 2005 8:32 AM
Randy
Before Newt Gingrich alleges that doctors who own hospitals have conflicts of interest, he should state his own. His Center for Health Transformation is funded by HCA, Sutter Health and the American Hospital Association. They are all opposed to physicians' owning specialized hospitals. Are his conclusions any surprise?
Published: November 15, 2005 9:13 AM
Ike Hall
Good one, Raul. I'm mostly considering outcomes over the long term, such as increasing life expectancy and decreasing mortality. The issue of value, however, which you raise, cannot be determined outside of market competition in health care. One can find competitively priced, quality health care, but one often has to go outside the US to find it. Think prescriptions from Canada and Mexico, dental holidays in Costa Rica, plastic surgery in Bangkok!
Published: November 15, 2005 11:33 AM
Michael F. Cannon
Actually, the FTC is MORE free-market than Newt. The FTC at least acknowledges that the problem is in Medicare's payment system, which indirectly subsidizes certain costs imposed on community hospitals. Their prescription: fix the payment system and use direct subsidies (if any).
Published: November 18, 2005 11:46 AM
Aakash
This was Professor Rothbard's last newspaper column, published in the Washington Post, on December 30, 1994.
He had them pegged right after the election.
Published: November 24, 2005 4:43 AM