In the course of practicing medicine, a range of issues may arise that require consultation from either a lawyer, a risk manager, or an ethicist. The following discussion will outline key distinctions between these roles



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In the course of practicing medicine, a range of issues may arise that require consultation from either a lawyer, a risk manager, or an ethicist. The following discussion will outline key distinctions between these roles.

  • In the course of practicing medicine, a range of issues may arise that require consultation from either a lawyer, a risk manager, or an ethicist. The following discussion will outline key distinctions between these roles.
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  • The role of lawyers and risk managers are closely linked in many health care institutions. Indeed, in some hospitals the Risk Manager is an attorney with a clinical medicine background. There are, however, important distinctions between law itself and risk management.
  • Law is the established social rules for conduct; a violation of law may create criminal or civil liability.
  • Risk Management is a method of reducing risk of liability through institutional policies/practices.
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  • Risk Management is guided by legal parameters but has a broader institution specific mission. It is not uncommon for a hospital policy to go beyond the minimum requirements set by the legal standard.
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  • When legal and risk management issues arise in the delivery of health care, there may be ethical issues, too. Conversely, what is originally identified as an ethical problem may raise legal and risk management concerns.

In the course of practicing medicine, a range of issues may arise that require consultation from either a lawyer, a risk manager, or an ethicist. The following discussion will outline key distinctions between these roles.

  • In the course of practicing medicine, a range of issues may arise that require consultation from either a lawyer, a risk manager, or an ethicist. The following discussion will outline key distinctions between these roles.
  • The role of lawyers and risk managers are closely linked in many health care institutions. Indeed, in some hospitals the Risk Manager is an attorney with a clinical medicine background. There are, however, important distinctions between law itself and risk management.
  • Law is the established social rules for conduct; a violation of law may create criminal or civil liability.
  • Risk Management is guided by legal parameters but has a broader institution specific mission. It is not uncommon for a hospital policy to go beyond the minimum requirements set by the legal standard.
  • When legal and risk management issues arise in the delivery of health care, there may be ethical issues, too. Conversely, what is originally identified as an ethical problem may raise legal and risk management concerns.

Medical ethics may be defined as follows:

  • Medical ethics may be defined as follows:
  • Medical ethics is a discipline/methodology for considering the implications of medical technology/treatment and what ought to be.To better understand the significant overlap among these disciplines, consider the sources of authority and expression for each.
  • Law is derived/expressed through:
  • federal and state constitutions
  • federal and state statutes (ex. Revised Code of WA.)
  • federal and state regulations (ex. WA. Administrative Code)
  • federal and state case law (individual lawsuits-decisions at appellate level.)
  • Risk Management is derived from law and professional standards and is expressed through institutional policies/practices.

Within their distinctive roles, the disciplines of law and medical ethics nevertheless significantly overlap. Consider that both disciplines address:

  • Within their distinctive roles, the disciplines of law and medical ethics nevertheless significantly overlap. Consider that both disciplines address:
  • access to medical care (provision of care, emergency treatment, stabilization and transfer)
  • informed consent confidentiality of health care information and exceptions to confidentiality (mandatory reporting obligations such as: child and elder abuse, duty to warn) privileged communications with health care providers advance directives abortion physician-assisted suicide
  • There are, however, significant distinctions between law and medical ethics in philosophy, function and power. A court ruling is a binding decision that determines the outcome of a particular controversy. A statute or administrative code sets a general standard of conduct, which must be adhered to or civil/criminal consequences may follow a breach of the standard. Conversely, an ethics pronouncement which is not adopted into law may be a significant professional and moral guidepost but it is generally unenforceable. Lawmakers (courts and legislatures) frequently do turn to the policy statements (including any medical ethics statements) of professional organizations when crafting laws affecting that profession. Thus, health care providers may greatly influence legal standards by their work in creating professional ethics standards.

Law and medical ethics are both dynamic and are in a constant state of change, i.e., new legislation and court decisions occur and medical ethics responds to challenges created by new technology, law or other influences. To locate information about what the law on a particular topic is or to get copies of statutes, regulations or case law you may need to go to a law library. There are also legal search tools available on the Internet. Another potential resource are medical journals which frequently have articles on ethical issues which mention relevant legal authority.

  • Law and medical ethics are both dynamic and are in a constant state of change, i.e., new legislation and court decisions occur and medical ethics responds to challenges created by new technology, law or other influences. To locate information about what the law on a particular topic is or to get copies of statutes, regulations or case law you may need to go to a law library. There are also legal search tools available on the Internet. Another potential resource are medical journals which frequently have articles on ethical issues which mention relevant legal authority.

For decades the cost of medical care has risen relative to prices in general and relative to people's incomes. Today [1994] a semi-private hospital room typically costs $1,000 to $1,500 per day, exclusive of all medical procedures, such as X-rays, surgery, or even a visit by one's physician. Basic room charges of $500 per day or more are routinely tripled just by the inclusion of normal hospital pharmacy and supplies charges (the cost of a Tylenol tablet can be as much as $20). And typically the cost of the various medical procedures is commensurate. In such conditions, people who are not exceptionally wealthy, who lack extensive medical insurance, or who fear losing the insurance they do have if they become unemployed, must dread the financial consequences of any serious illness almost as much as the illness itself. At the same time, no end to the rise in medical costs is in sight. Thus it is no wonder that a great clamor has arisen in favor of reform – radical reform – that will put an end to a situation that bears the earmarks of financial lunacy.

  • For decades the cost of medical care has risen relative to prices in general and relative to people's incomes. Today [1994] a semi-private hospital room typically costs $1,000 to $1,500 per day, exclusive of all medical procedures, such as X-rays, surgery, or even a visit by one's physician. Basic room charges of $500 per day or more are routinely tripled just by the inclusion of normal hospital pharmacy and supplies charges (the cost of a Tylenol tablet can be as much as $20). And typically the cost of the various medical procedures is commensurate. In such conditions, people who are not exceptionally wealthy, who lack extensive medical insurance, or who fear losing the insurance they do have if they become unemployed, must dread the financial consequences of any serious illness almost as much as the illness itself. At the same time, no end to the rise in medical costs is in sight. Thus it is no wonder that a great clamor has arisen in favor of reform – radical reform – that will put an end to a situation that bears the earmarks of financial lunacy.

The causes of the present crisis in medical care, namely, its runaway cost, which the Clinton plan is intended to address, can all be subsumed under one essential heading: the government's violation and/or perversion of the individual's actual, rational right to medical care.

  • The causes of the present crisis in medical care, namely, its runaway cost, which the Clinton plan is intended to address, can all be subsumed under one essential heading: the government's violation and/or perversion of the individual's actual, rational right to medical care.
  • I use the concept of "rights" in the sense in which Ayn Rand uses it, and in which, at least implicitly, John Locke and the Founding Fathers of the United States used it. (See Ayn Rand's essay "Man's Rights," which appears in two of her books: The Virtue of Selfishness and Capitalism: The Unknown Ideal.) That is, not as an arbitrary, out-of-context assertion of claims to things or to obligations to be filled by others, but as pertaining to the actions an individual must take in order to live – as moral principles defining and sanctioning his freedom to take those actions. The only way that the individual's freedom, and thus his rights, can be violated is by means of the initiation of physical force against him – that is, by the use of guns and clubs against him, in the form of the government's threat to dispatch the police if he does not obey irrational laws.

To respect the right of others to be free from any initiation of physical force on his part. This is implicit in the right of each to be free from the initiation of physical force by the whole rest of the world. In exercising his own rights, therefore, the individual is not to violate the essential right of anyone else to be free from the initiation of physical force by him. This means that insofar as any individual's exercise of his rights entails the cooperation of other people, their cooperation must be obtained voluntarily. An individual has no right to exercise any alleged right that would entail the initiation of physical force against others and thus the violation of their rights. There is no right to violate anyone else's rights.

    • To respect the right of others to be free from any initiation of physical force on his part. This is implicit in the right of each to be free from the initiation of physical force by the whole rest of the world. In exercising his own rights, therefore, the individual is not to violate the essential right of anyone else to be free from the initiation of physical force by him. This means that insofar as any individual's exercise of his rights entails the cooperation of other people, their cooperation must be obtained voluntarily. An individual has no right to exercise any alleged right that would entail the initiation of physical force against others and thus the violation of their rights. There is no right to violate anyone else's rights.

Medical licensing has played into the hands of the advocates of socialized medicine precisely by making medical care scarcer and more expensive, thereby reducing the amount of medical care obtained, particularly by the poor. Because the effect of medical licensing was greatly to increase the difficulties of poor people in obtaining medical care, socialized medicine was perceived as all the more necessary. It was a classic case of what von Mises describes as prior government intervention serving as the cause of problems used to justify later government intervention, this time against the beneficiaries of the prior intervention.

  • Medical licensing has played into the hands of the advocates of socialized medicine precisely by making medical care scarcer and more expensive, thereby reducing the amount of medical care obtained, particularly by the poor. Because the effect of medical licensing was greatly to increase the difficulties of poor people in obtaining medical care, socialized medicine was perceived as all the more necessary. It was a classic case of what von Mises describes as prior government intervention serving as the cause of problems used to justify later government intervention, this time against the beneficiaries of the prior intervention.

The essential goal of socialized medicine is that the individual should be relieved of financial responsibility for his and his family's medical care. Medical care should be provided to him without charge by the government, paid for out of taxes. To this extent, allegedly, his life will be worry free, because the government will take care of him. Medical care will simply come to him according to his need, paid for by others, presumably according to their ability. It should be obvious that such an arrangement entails the utter perversion of the right to medical care. The right to medical care ceases to be the individual's right to take the actions required to secure his medical care – namely, to buy it from willing providers. Instead it becomes an alleged right to the fruits of others' labor and ability, with or without their consent, for that it is the only way it can be obtained if the individual himself is not to pay for it and yet is to have a right to it merely because he needs it. As I have shown, its existence is in direct contradiction of all actual rights, which center precisely on the individual's freedom from involuntary servitude.

      • The essential goal of socialized medicine is that the individual should be relieved of financial responsibility for his and his family's medical care. Medical care should be provided to him without charge by the government, paid for out of taxes. To this extent, allegedly, his life will be worry free, because the government will take care of him. Medical care will simply come to him according to his need, paid for by others, presumably according to their ability. It should be obvious that such an arrangement entails the utter perversion of the right to medical care. The right to medical care ceases to be the individual's right to take the actions required to secure his medical care – namely, to buy it from willing providers. Instead it becomes an alleged right to the fruits of others' labor and ability, with or without their consent, for that it is the only way it can be obtained if the individual himself is not to pay for it and yet is to have a right to it merely because he needs it. As I have shown, its existence is in direct contradiction of all actual rights, which center precisely on the individual's freedom from involuntary servitude.

After World War II, in the remainder of the 1940s and in the early 1950s, coercive labor unions made employer-financed medical insurance a standard part of their contract demands. Even most nonunion employers were compelled to provide it, in order to avoid giving their employees a reason to unionize. Thus, by the end of the 1950s, employer-financed medical insurance had become the prevailing method of meeting medical expenses throughout the American economy. This is how the system of medical insurance we know today came into being

  • After World War II, in the remainder of the 1940s and in the early 1950s, coercive labor unions made employer-financed medical insurance a standard part of their contract demands. Even most nonunion employers were compelled to provide it, in order to avoid giving their employees a reason to unionize. Thus, by the end of the 1950s, employer-financed medical insurance had become the prevailing method of meeting medical expenses throughout the American economy. This is how the system of medical insurance we know today came into being

Of course, not all medical insurance plans were or are exactly the same. Some require of the worker no out-of-pocket payment of any kind for medical expenses. Others have imposed some kind of relatively modest annual deductible, such as $100 or $200, which the worker has had to pay before payment by the insurance company begins. A common practice has also been that the employee pay some share of the medical expenses beyond the deductible, typically 20 percent of the amount of the expenses up to some rather modest maximum limit, such as, at present, $5,000 (which means a maximum limit of $1,000 as the employee's own additional contribution).

  • Of course, not all medical insurance plans were or are exactly the same. Some require of the worker no out-of-pocket payment of any kind for medical expenses. Others have imposed some kind of relatively modest annual deductible, such as $100 or $200, which the worker has had to pay before payment by the insurance company begins. A common practice has also been that the employee pay some share of the medical expenses beyond the deductible, typically 20 percent of the amount of the expenses up to some rather modest maximum limit, such as, at present, $5,000 (which means a maximum limit of $1,000 as the employee's own additional contribution).

A leading socialist feature of the system is that the typical wage earner has been led to regard medical care as essentially free, either completely free or virtually completely free, or, at most, 80 percent free after a modest deductible and then completely free after a relatively modest maximum limit on his own outlays. Thus, the psychology of the average American worker in relation to the cost of medical care has become the same as if he were living under communism. For all practical purposes, medical care comes to him simply according to his need for it. This situation is both based upon and reinforces the perverted notion of the right to medical care as a right divorced from considerations of what one has earned and can afford to pay and of the willingness of suppliers to satisfy one's need out of regard to their own financial self-interest. As I say, under the system of medical insurance of the last forty years or so, medical care appears to come to the average wage earner almost as though by magic, on virtually no other basis than that he needs it.

  • A leading socialist feature of the system is that the typical wage earner has been led to regard medical care as essentially free, either completely free or virtually completely free, or, at most, 80 percent free after a modest deductible and then completely free after a relatively modest maximum limit on his own outlays. Thus, the psychology of the average American worker in relation to the cost of medical care has become the same as if he were living under communism. For all practical purposes, medical care comes to him simply according to his need for it. This situation is both based upon and reinforces the perverted notion of the right to medical care as a right divorced from considerations of what one has earned and can afford to pay and of the willingness of suppliers to satisfy one's need out of regard to their own financial self-interest. As I say, under the system of medical insurance of the last forty years or so, medical care appears to come to the average wage earner almost as though by magic, on virtually no other basis than that he needs it.

The present system also shares with socialism – with communism – the further, corollary feature that for all practical purposes the individual's burden (the actual financial cost of his treatment) is borne by a large group – a more or less giant collective. Thus, when an individual with medical insurance undergoes procedures with a cost of $10,000, say, he personally may pay nothing at all or, at most, perhaps $1,100 or $1,200; the entire rest of the cost is spread over the group as a whole. And if the individual undergoes medical procedures with a cost that is twice as great or ten times as great, the cost to him, if anything at all, will still be no more than $1,100 or $1,200, and the much larger remaining total will be spread over the group as a whole.

  • The present system also shares with socialism – with communism – the further, corollary feature that for all practical purposes the individual's burden (the actual financial cost of his treatment) is borne by a large group – a more or less giant collective. Thus, when an individual with medical insurance undergoes procedures with a cost of $10,000, say, he personally may pay nothing at all or, at most, perhaps $1,100 or $1,200; the entire rest of the cost is spread over the group as a whole. And if the individual undergoes medical procedures with a cost that is twice as great or ten times as great, the cost to him, if anything at all, will still be no more than $1,100 or $1,200, and the much larger remaining total will be spread over the group as a whole.
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This is a system of collectivism. For all practical purposes, it is the same as exists under communism or socialism. Although called medical insurance, it is actually a hybrid of insurance and collectivized medical costs. It is insurance only insofar as it provides for the meeting of extraordinary, catastrophic medical expenses. For the rest, it is a system simply of collectivized medical costs.

  • This is a system of collectivism. For all practical purposes, it is the same as exists under communism or socialism. Although called medical insurance, it is actually a hybrid of insurance and collectivized medical costs. It is insurance only insofar as it provides for the meeting of extraordinary, catastrophic medical expenses. For the rest, it is a system simply of collectivized medical costs.

By the mid-1960s, the collectivization of medical costs imposed by the government had created severe new problems. The rising demand for medical services it had created was pricing medical care more and more beyond the reach of the poor and the elderly. At this point, the government added further intervention to its earlier intervention, namely, the Medicaid and Medicare programs.

  • By the mid-1960s, the collectivization of medical costs imposed by the government had created severe new problems. The rising demand for medical services it had created was pricing medical care more and more beyond the reach of the poor and the elderly. At this point, the government added further intervention to its earlier intervention, namely, the Medicaid and Medicare programs.

The collectivization of medical costs, both under government-imposed "private" medical insurance and under Medicaid and Medicare, raises medical costs in a variety of ways, each of which deserves consideration. In each instance, the perverted notion of the need-based right to medical care – that is, an alleged right to medical care that entails a claim on other people's wealth or labor, which must be met with or without their consent – is what underlies both the collectivization of medical costs and the concomitant loss of the individual's personal financial responsibility. In this way, it is a perverted notion of the right to medical care that is fundamentally responsible for the rising cost of medical care. The following are the specific ways in which this is the case.

  • The collectivization of medical costs, both under government-imposed "private" medical insurance and under Medicaid and Medicare, raises medical costs in a variety of ways, each of which deserves consideration. In each instance, the perverted notion of the need-based right to medical care – that is, an alleged right to medical care that entails a claim on other people's wealth or labor, which must be met with or without their consent – is what underlies both the collectivization of medical costs and the concomitant loss of the individual's personal financial responsibility. In this way, it is a perverted notion of the right to medical care that is fundamentally responsible for the rising cost of medical care. The following are the specific ways in which this is the case.

The notion of the need-based right to medical care and the collectivization of medical costs to finance it create the potential for a practically limitless increase in the quantity of medical care demanded. When visits to doctor's offices are made free or almost free, the frequency of such visits increases. More importantly, physicians quickly come to realize that there is little or no financial cost to the patient as the result of the course of treatment they prescribe. The result is an enormous increase in the volume of medical tests, hospitalizations and the length of hospital stays, and of surgeries and other medical procedures. Usually, there is some genuine value to be gained from these things. They represent additional precautions or are objectively desirable in some other way. It is just that there is no longer any consideration of the costs involved. The situation is comparable to individuals who need to buy some kind of automobile, say, being relieved of the responsibility of having to pay for it, and so being placed in a position in which the automobile they choose is a very expensive top-of-the-line model.

  • The notion of the need-based right to medical care and the collectivization of medical costs to finance it create the potential for a practically limitless increase in the quantity of medical care demanded. When visits to doctor's offices are made free or almost free, the frequency of such visits increases. More importantly, physicians quickly come to realize that there is little or no financial cost to the patient as the result of the course of treatment they prescribe. The result is an enormous increase in the volume of medical tests, hospitalizations and the length of hospital stays, and of surgeries and other medical procedures. Usually, there is some genuine value to be gained from these things. They represent additional precautions or are objectively desirable in some other way. It is just that there is no longer any consideration of the costs involved. The situation is comparable to individuals who need to buy some kind of automobile, say, being relieved of the responsibility of having to pay for it, and so being placed in a position in which the automobile they choose is a very expensive top-of-the-line model.

The notion of the need-based right to medical care and the collectivization of medical costs to finance it are largely responsible for the growing problem of irrational medical malpractice awards. They imply that what the patient is entitled to is nothing less than medical care that is state of the art. This follows because if a person's mere need for medical care is what entitles him to it, then if his need is better served by more expensive medical care than by less expensive medical care, he is entitled to the more expensive medical care. If his need is best served by the most expensive medical care, then that is what he is allegedly entitled to. In this way, medical care that is anything less than state of the art comes to constitute malpractice – because it represents giving the patient less than his medical need allegedly entitles him to. Indeed, courts have found physicians guilty of malpractice for so much as considering their patient's financial circumstances in determining their course of treatment.

  • The notion of the need-based right to medical care and the collectivization of medical costs to finance it are largely responsible for the growing problem of irrational medical malpractice awards. They imply that what the patient is entitled to is nothing less than medical care that is state of the art. This follows because if a person's mere need for medical care is what entitles him to it, then if his need is better served by more expensive medical care than by less expensive medical care, he is entitled to the more expensive medical care. If his need is best served by the most expensive medical care, then that is what he is allegedly entitled to. In this way, medical care that is anything less than state of the art comes to constitute malpractice – because it represents giving the patient less than his medical need allegedly entitles him to. Indeed, courts have found physicians guilty of malpractice for so much as considering their patient's financial circumstances in determining their course of treatment.

The fear of being the object of a malpractice suit leads physicians to practice what has come to be called "defensive medicine." This is the practice of prescribing tests and procedures not because they are objectively necessary in the circumstances, but merely in order to provide documentation that will serve to protect the physician in the event of a subsequent malpractice suit, and which thus can serve to prevent such a suit from being brought. Defensive medicine has been estimated to account for more than one-third of the total cost of health care. (See Leonard Peikoff, "Medicine: The Death of a Profession" in Ayn Rand, The Voice of Reason [New York: New American Library, 1988], p. 304.) 

  • The fear of being the object of a malpractice suit leads physicians to practice what has come to be called "defensive medicine." This is the practice of prescribing tests and procedures not because they are objectively necessary in the circumstances, but merely in order to provide documentation that will serve to protect the physician in the event of a subsequent malpractice suit, and which thus can serve to prevent such a suit from being brought. Defensive medicine has been estimated to account for more than one-third of the total cost of health care. (See Leonard Peikoff, "Medicine: The Death of a Profession" in Ayn Rand, The Voice of Reason [New York: New American Library, 1988], p. 304.) 

 

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  • The notion of the need-based right to medical care and the collectivization of medical costs to finance it are responsible for the perverse effects caused by new technology in the field of medicine. In virtually every other field – automobiles, computers, farming, whatever – improvements in technology represent a combination of higher quality and lower real cost. Thanks to improvements in technology, we now obtain far better goods than we used to and have to devote much less of our working time to being able to earn the money to buy any of them. Today, for example, thanks to improvements in technology, the average worker works perhaps forty hours a week and is able to buy with the wages he earns the array of goods that quantitatively and qualitatively constitutes today's average standard of living. A few generations ago, the average worker worked sixty hours a week and received much less in terms of the goods he could buy with the money he earned

The only reason it is the exception is the existence of the notion of the need-based right to medical care and the collectivization of medical costs to finance it. If there were a notion of a need-based right to computers, say, and the collectivization of the costs individuals incurred to buy computers, then improvements in computer technology would have the same perverse effect. Then the development of every improved computer chip, hard drive, monitor or whatever would immediately be accompanied by an immense demand. Everyone who could benefit from such things would want them, in the knowledge that he could have them at little or no cost to himself, because the collective would pay.

  • The only reason it is the exception is the existence of the notion of the need-based right to medical care and the collectivization of medical costs to finance it. If there were a notion of a need-based right to computers, say, and the collectivization of the costs individuals incurred to buy computers, then improvements in computer technology would have the same perverse effect. Then the development of every improved computer chip, hard drive, monitor or whatever would immediately be accompanied by an immense demand. Everyone who could benefit from such things would want them, in the knowledge that he could have them at little or no cost to himself, because the collective would pay.

Thus the problem of medical care today absorbing more and more of people's incomes in conjunction with improvements in technology, and at the same time becoming more and more expensive rather than less and less expensive, is in no sense the result of improvements in technology. It is the result of nothing but the perverted notion of the need-based right to medical care and the resulting collectivization of payment and loss of individual financial responsibility that it engenders. This is what makes new medical technologies into a source of higher costs rather than the cause of lower costs.

  • Thus the problem of medical care today absorbing more and more of people's incomes in conjunction with improvements in technology, and at the same time becoming more and more expensive rather than less and less expensive, is in no sense the result of improvements in technology. It is the result of nothing but the perverted notion of the need-based right to medical care and the resulting collectivization of payment and loss of individual financial responsibility that it engenders. This is what makes new medical technologies into a source of higher costs rather than the cause of lower costs.

The perverted notion of the need-based right to medical care and the collectivization of medical costs to finance it help to explain the very high prices of many patented prescription drugs. The prices of goods enjoying patent or copyright protection, or which are produced under a unique, secret technology – that is, the prices of goods whose sellers need not fear direct competition – are set with regard to what economists call the elasticity of demand. This is a measure of the extent to which charging a higher price results in a reduction in the quantity of the good that people are prepared to buy. Sellers of such goods do not want to set the price so high that the reduction in sales volume outweighs the rise in price. They set a price or prices that are low enough to enable them to retain the bulk of their volume.

  • The perverted notion of the need-based right to medical care and the collectivization of medical costs to finance it help to explain the very high prices of many patented prescription drugs. The prices of goods enjoying patent or copyright protection, or which are produced under a unique, secret technology – that is, the prices of goods whose sellers need not fear direct competition – are set with regard to what economists call the elasticity of demand. This is a measure of the extent to which charging a higher price results in a reduction in the quantity of the good that people are prepared to buy. Sellers of such goods do not want to set the price so high that the reduction in sales volume outweighs the rise in price. They set a price or prices that are low enough to enable them to retain the bulk of their volume.

The fact that I have stressed the role of the alleged need-based right to medical care in raising drug prices should not be understood as minimizing the role played by arbitrary FDA regulations that delay and inhibit the introduction of new drugs. These are responsible for the average new drug that is introduced having a development cost and thus price, far in excess of what market conditions require.

  • The fact that I have stressed the role of the alleged need-based right to medical care in raising drug prices should not be understood as minimizing the role played by arbitrary FDA regulations that delay and inhibit the introduction of new drugs. These are responsible for the average new drug that is introduced having a development cost and thus price, far in excess of what market conditions require.

It should be realized that the government can also be motivated to impose restrictions on hospitals' purchases of equipment even in conditions in which the purchases are entirely necessary and appropriate. To the extent that the hospitals' patients are served for free, at the government's expense, the restrictions on the purchases appear from the government's perspective simply as a saving of cost – that is, as a saving of cost unaccompanied by any reduction in revenue. The patients are worse off, but from the government's perspective all that happens is that its cost is less.

  • It should be realized that the government can also be motivated to impose restrictions on hospitals' purchases of equipment even in conditions in which the purchases are entirely necessary and appropriate. To the extent that the hospitals' patients are served for free, at the government's expense, the restrictions on the purchases appear from the government's perspective simply as a saving of cost – that is, as a saving of cost unaccompanied by any reduction in revenue. The patients are worse off, but from the government's perspective all that happens is that its cost is less.

Since the mid-1980s, when the Medicare program adopted the policy of payment according to "diagnostic related groups" (DRGs), cost shifting has intensified. Now Medicare payments also frequently turn out to be inadequate to cover the costs of treatment. This inadequacy is added to the insufficiency of Medicaid payments. The inadequacy is further compounded to the extent that private insurance companies have adopted the DRG standards of payment. The total, combined shortfall is then passed along to the remaining patients, above all, the uninsured.

  • Since the mid-1980s, when the Medicare program adopted the policy of payment according to "diagnostic related groups" (DRGs), cost shifting has intensified. Now Medicare payments also frequently turn out to be inadequate to cover the costs of treatment. This inadequacy is added to the insufficiency of Medicaid payments. The inadequacy is further compounded to the extent that private insurance companies have adopted the DRG standards of payment. The total, combined shortfall is then passed along to the remaining patients, above all, the uninsured.
  • 8. Bureaucratic interference with medicine and the rise in administrative costs

In addition to everything that can be traced specifically to the perversion of the right to medical care, there is the impact on the cost of medical care of government regulation in general. Alleged safety regulations, environmental regulations, labor regulations, and so on all add more or less substantially to the cost of medical care, just as to the cost of everything else. Probably, they have added more to the cost of medical care than to the cost of most other things, because of the lack of buyer resistance that the perverted notion of the need-based right to medical care engenders in the field. For example, the resistance to the employment of unnecessary workers in connection with union featherbedding practices is certain to be less in hospitals to the extent that the hospitals know they can pass the extra cost on to the insurance companies or to the government. 

  • In addition to everything that can be traced specifically to the perversion of the right to medical care, there is the impact on the cost of medical care of government regulation in general. Alleged safety regulations, environmental regulations, labor regulations, and so on all add more or less substantially to the cost of medical care, just as to the cost of everything else. Probably, they have added more to the cost of medical care than to the cost of most other things, because of the lack of buyer resistance that the perverted notion of the need-based right to medical care engenders in the field. For example, the resistance to the employment of unnecessary workers in connection with union featherbedding practices is certain to be less in hospitals to the extent that the hospitals know they can pass the extra cost on to the insurance companies or to the government. 

In as much as we have had essential features of socialized medicine for many years, the Clinton plan should not be thought of as representing the inauguration of socialized medicine in the United States. It should, however, be thought of as representing a more extreme, fuller-bodied, and uglier form of socialized medicine than we have had thus far. It should be thought of, in effect, as socialized medicine discarding the ballerina shoes it has been parading around in up to now, and replacing them with a pair of hobnailed boots – as taking off the velvet glove and revealing a mailed fist.

  • In as much as we have had essential features of socialized medicine for many years, the Clinton plan should not be thought of as representing the inauguration of socialized medicine in the United States. It should, however, be thought of as representing a more extreme, fuller-bodied, and uglier form of socialized medicine than we have had thus far. It should be thought of, in effect, as socialized medicine discarding the ballerina shoes it has been parading around in up to now, and replacing them with a pair of hobnailed boots – as taking off the velvet glove and revealing a mailed fist.

The essential purpose of the Clinton plan is to reduce spending for medical care in the United States at the same time that it brings 37 million presently uninsured individuals under the umbrella of the alleged need-based right to medical care. Thus 37 million additional individuals are to be placed in a position in which medical care will appear to be free. (I must digress to point out that a significant number of these individuals will also become unemployed, as their employers, who until now have not paid health-insurance premiums, are compelled to pay a major new and additional employment cost in the form of a medical payroll tax that the regional alliances will collect on these individuals' alleged behalf. The results must be the same as those produced by a rise in the minimum wage or in union scales, namely, a reduction in the quantity of labor demanded and thus unemployment.)

  • The essential purpose of the Clinton plan is to reduce spending for medical care in the United States at the same time that it brings 37 million presently uninsured individuals under the umbrella of the alleged need-based right to medical care. Thus 37 million additional individuals are to be placed in a position in which medical care will appear to be free. (I must digress to point out that a significant number of these individuals will also become unemployed, as their employers, who until now have not paid health-insurance premiums, are compelled to pay a major new and additional employment cost in the form of a medical payroll tax that the regional alliances will collect on these individuals' alleged behalf. The results must be the same as those produced by a rise in the minimum wage or in union scales, namely, a reduction in the quantity of labor demanded and thus unemployment.)

The quantity of medical care demanded will rise correspondingly, with this enlargement of the number of those eligible to receive it as an alleged need-based right. At the same time, financing to meet the demand for medical care is to be reduced. Indeed, the Clinton plan aims to reduce spending for medical care on behalf of those presently covered by employer-financed health insurance plans to such an extent that when the savings from the medical insurance premiums are paid over to the employees as additional wages, the federal government's tax collections on the wage earners will go up by $51 billion. (New York Times, Sept. 21, 1993, p. A13.) If you realize that the extra federal taxes the workers will pay are on the order of 25 percent of their additional incomes, the implication is that the Clinton plan contemplates slashing something on the order of $200 billion or more from medical spending on behalf of today's insured wage earners.

  • The quantity of medical care demanded will rise correspondingly, with this enlargement of the number of those eligible to receive it as an alleged need-based right. At the same time, financing to meet the demand for medical care is to be reduced. Indeed, the Clinton plan aims to reduce spending for medical care on behalf of those presently covered by employer-financed health insurance plans to such an extent that when the savings from the medical insurance premiums are paid over to the employees as additional wages, the federal government's tax collections on the wage earners will go up by $51 billion. (New York Times, Sept. 21, 1993, p. A13.) If you realize that the extra federal taxes the workers will pay are on the order of 25 percent of their additional incomes, the implication is that the Clinton plan contemplates slashing something on the order of $200 billion or more from medical spending on behalf of today's insured wage earners.

Another leading candidate for cutbacks in medical care are the aged. The cost of treating them is high, and their remaining years as taxpayers are few, if any. It is not accidental that in Great Britain, for example, it is extremely difficult, if not impossible, for people over the age of fifty-five to obtain coronary-artery-bypass operations, and that elderly people with a broken hip are likely to die before they reach the top of the waiting list for such operations.

  • Another leading candidate for cutbacks in medical care are the aged. The cost of treating them is high, and their remaining years as taxpayers are few, if any. It is not accidental that in Great Britain, for example, it is extremely difficult, if not impossible, for people over the age of fifty-five to obtain coronary-artery-bypass operations, and that elderly people with a broken hip are likely to die before they reach the top of the waiting list for such operations.

Thus the "competition" the Clinton plan envisages is competition among providers operating within its guidelines of medical treatment and to the satisfaction of its regional alliances. The medical insurance companies are to compete in delivering medical care at the lowest cost within these parameters. Individual citizens are then to choose among the medical insurance companies allowed to compete by the regional alliances.

  • Thus the "competition" the Clinton plan envisages is competition among providers operating within its guidelines of medical treatment and to the satisfaction of its regional alliances. The medical insurance companies are to compete in delivering medical care at the lowest cost within these parameters. Individual citizens are then to choose among the medical insurance companies allowed to compete by the regional alliances.

The realization of some of the worst nightmares collectivists and socialists have about the effects of the profit motive, for the Clinton plan makes the source of profit nothing other than the withholding of medical care from the sick. An insurance company will be the more profitable, the more consistently its treatment methods conform to the minimum standards allowed by the government's "Practice Guidelines." In fact, the arrangement is nothing less than a formula for near murder. This is because so long as an insurance company both complies with the practice guidelines and turns in an overall performance record that is judged to be statistically satisfactory, it has absolutely no reason to make the substantial additional expenditures that may be necessary in individual cases to save a human life. At the same time, of course, the individual whose life is at stake is prohibited from offering the insurance company or its practitioners additional money of his own to obtain the medical care he requires.

  • The realization of some of the worst nightmares collectivists and socialists have about the effects of the profit motive, for the Clinton plan makes the source of profit nothing other than the withholding of medical care from the sick. An insurance company will be the more profitable, the more consistently its treatment methods conform to the minimum standards allowed by the government's "Practice Guidelines." In fact, the arrangement is nothing less than a formula for near murder. This is because so long as an insurance company both complies with the practice guidelines and turns in an overall performance record that is judged to be statistically satisfactory, it has absolutely no reason to make the substantial additional expenditures that may be necessary in individual cases to save a human life. At the same time, of course, the individual whose life is at stake is prohibited from offering the insurance company or its practitioners additional money of his own to obtain the medical care he requires.

it is difficult to imagine a worse arrangement than one in which one's well-being and very life are made to depend on the largesse of necessarily indifferent government officials who will pay a given amount on one's behalf to some other set of strangers for one's total medical care and who then pretend that the problem of one's care is provided for, while the individual himself is prevented from going out and offering money for his care – more money for more care – and thereby enlisting the self-interest of others in his care.

  • it is difficult to imagine a worse arrangement than one in which one's well-being and very life are made to depend on the largesse of necessarily indifferent government officials who will pay a given amount on one's behalf to some other set of strangers for one's total medical care and who then pretend that the problem of one's care is provided for, while the individual himself is prevented from going out and offering money for his care – more money for more care – and thereby enlisting the self-interest of others in his care.

Finally, in a free market, medical care is purchased by each individual patient only when and to the extent that the apparent need for medical care outweighs its cost. At every step of the way, starting with the initial decision of whether or not to seek medical care in the first place, the course of treatment is determined in the light of the cost of the treatment and the patient's financial circumstances. The various treatments are ordered only when the patient's need for them is deemed clearly to exceed the impact on his life of having to meet their cost. Always, the standard is the individual patient's life: the extent of the likely impact on his life of his medical condition versus the extent of the impact on his life of his having to pay the cost of improving or safeguarding his medical condition.

  • Finally, in a free market, medical care is purchased by each individual patient only when and to the extent that the apparent need for medical care outweighs its cost. At every step of the way, starting with the initial decision of whether or not to seek medical care in the first place, the course of treatment is determined in the light of the cost of the treatment and the patient's financial circumstances. The various treatments are ordered only when the patient's need for them is deemed clearly to exceed the impact on his life of having to meet their cost. Always, the standard is the individual patient's life: the extent of the likely impact on his life of his medical condition versus the extent of the impact on his life of his having to pay the cost of improving or safeguarding his medical condition.

 The simplest, most obvious method of achieving a free market in medical care would be at one stroke to abolish all government intervention that violates a free market in medical care: namely, all medical-licensing legislation; all government interference that promotes the present, collectivist system of private medical insurance; the Medicare and Medicaid programs; and all other government intervention in the economic system that violates the freedom of contract between patient and physician or otherwise impairs the ability of patients to gain access to medical care, notably, all regulation that increases the cost of medical care. Such a sweeping, radical solution is what is in fact required to establish a fully free market in medical care, and is precisely what should be aimed at and ultimately accomplished.

  •  The simplest, most obvious method of achieving a free market in medical care would be at one stroke to abolish all government intervention that violates a free market in medical care: namely, all medical-licensing legislation; all government interference that promotes the present, collectivist system of private medical insurance; the Medicare and Medicaid programs; and all other government intervention in the economic system that violates the freedom of contract between patient and physician or otherwise impairs the ability of patients to gain access to medical care, notably, all regulation that increases the cost of medical care. Such a sweeping, radical solution is what is in fact required to establish a fully free market in medical care, and is precisely what should be aimed at and ultimately accomplished.


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