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The Health Care Revolution: From Medical Monopoly to Market Competition

Copyright Date: 2008
Edition: 1
Pages: 272
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  • Book Info
    The Health Care Revolution
    Book Description:

    America's market-based health care system, unique among the nations of the world, is in large part the product of an obscure, yet profound, revolution that overthrew the medical monopoly in the late 1970s. In this lucid, balanced account, Carl F. Ameringer tells how this revolution came into being when the U.S. Supreme Court and Congress prompted the antitrust agencies of the federal government—the Federal Trade Commission and the Justice Department—to change the rules of the health care system. Ameringer lays out the key events that led up to this regime change; explores its broader social, political, and economic contexts; examines the views of both its proponents and opponents; and considers its current trajectory.

    eISBN: 978-0-520-93468-9
    Subjects: Health Sciences

Table of Contents

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  1. Front Matter
    (pp. i-viii)
  2. Table of Contents
    (pp. ix-x)
  3. Foreword
    (pp. xi-xii)
    Carmen Hooker Odom, Daniel M. Fox and Samuel L. Milbank

    The Milbank Memorial Fund is an endowed operating foundation that works to improve health by helping decision makers in the public and private sectors acquire and use the best available evidence to inform policy for health care and population health. The Fund has engaged in nonpartisan analysis, study, research, and communication about significant issues in health policy since its inception in 1905.

    The Health Care Revolution: From Medical Monopoly to Market Competitionis the nineteenth of the California/Milbank Books on Health and the Public. The publishing partnership between the Fund and the University of California Press encourages the synthesis and...

  4. Preface
    (pp. xiii-xvi)
  5. Introduction
    (pp. 1-20)

    This book is about the health care revolution of the 1970s, which ended the medical monopoly in the United States and made a market-based health policy politically thinkable for the first time. It relates the events leading up to the revolution and the use of federal antitrust laws to help bring it about. It examines the revolution’s trajectory and discerns its consequences and aftershocks. Finally, it brings to light the efforts of the medical profession in the 1990s to alter the revolution’s course.

    As is true of most revolutions, a conflict transpired between those who sought to maintain the status...

  6. 1 The Professional Regime
    (pp. 21-41)

    This chapter traces the evolution of the medical profession from the late 1800s to the mid-twentieth century. Three questions frame the discussion: What factors gave rise to medicine’s professional regime? How did the regime exercise its authority? What role did the antitrust laws play in the acquisition and retention of economic and political power?

    In discerning the answers to these questions, this chapter stresses the importance of ideas to the development of a profession’s identity, its institutions, its internal culture, and its legal authority. Scientific progress in the late 1800s augured progressive reforms; progressive ideology, in turn, advanced the economic...

  7. 2 Precursors of Change
    (pp. 42-58)

    The social climate of the post–World War II years reveals a steady erosion of support, not for the professional ideal, but for professional associations and their interest-group tactics. Critics emphasized excessive fees, indifference to the personal concerns of patients, attacks on chiropractors, osteopaths, and other providers, and the failure of medicine to police its own ranks (Burnham 1982; Wylie 1952). Supporters stressed professionalism, physicians’ sense of mission and higher calling, patient trust, the dangers of commercialism, and the importance of competence and caring (Kass 1983; Mechanic 1998). The truth, of course, lay somewhere in between. According to historian Rosemary...

  8. 3 The Triumph of Market Theory
    (pp. 59-77)

    The transition from regulatory policy to competition policy in the late 1970s, though seemingly abrupt, followed years of preparation and accumulated knowledge in academic and policy circles. As political scientist John Kingdon observed, “Agenda change appears quite discontinuous and nonincremental. But incrementalism might still characterize the generation of alternatives” (Kingdon 1995:82). Universities and think tanks, such as the American Enterprise Institute, were the sources of the theories and ideas that fueled deregulatory and antitrust policy (Derthick and Quirk 1985; Eisner 1991). The economic study of antitrust law, for instance, originated at Chicago, Harvard, and Yale in the 1950s, yet federal...

  9. 4 The Federal Trade Commission Takes the Lead
    (pp. 78-99)

    The lead agency in the fight against the anticompetitive practices of the medical profession was the Federal Trade Commission. This chapter sets the stage for the agency’s initial confrontation with the AMA, addressed in the next chapter, and the series of investigations, probes, and administrative actions that struck at the heart of the medical monopoly. It explains why the FTC took the lead in these matters and how the agency organized for action. Finally, it examines the state of affairs at the AMA in the 1970s.

    The timing of these initiatives was no fluke—they reflected the intellectual consensus that...

  10. 5 The AMA Case
    (pp. 100-118)

    The crowning achievement of the FTC’s early campaign for a more competitive environment in the health care industry was its case against the AMA (In the Matter of the American Medical Ass’n,94 F.T.C. 701 [1979]). Begun in 1975, theAMAcase targeted ethical restrictions on physician advertising, solicitation, and contract practice. Advertising and solicitation lay at the heart of the distinction between professional and commercial behavior. Medical societies strenuously objected to such practices, asserting that they undermined professional integrity. Contract practice, on the other hand, had little if anything to do with personal appearance and character. On the advice...

  11. 6 A Question of Jurisdiction
    (pp. 119-134)

    Because a ruling of an administrative law judge is subject to internal review, it does not represent the final decision of an administrative agency. Though Michael Pertschuk and his fellow commissioners could reverse Judge Barnes’s proposed order, they were not likely to do so, despite threatened action in Congress. In the end, the commissioners modified the order to allow medical societies greater leeway to regulate physicians (a possible response to political pressures) but upheld the ruling on the merits, as well as the assertion of jurisdictional authority.

    The ink was barely dry on the FTC’s decision when the AMA announced...

  12. 7 Drawing the Line between Clinical and Business Practices
    (pp. 135-154)

    Viewed in historical context, the early health care agenda of the FTC was bold, even radical, in design. It reflected the preferences of its chief architects, Clark Havighurst and Jim Liebeler, and the prominent position of the FTC in the policy-making community in the mid-1970s. The main focus of the commission’s early investigations and prosecutions was on removing barriers to competition in the commercial sphere. These barriers included professional control of insurers and health plans, professional review of reimbursement standards, and ethical restraints on advertising, solicitation, and contract practice.

    But there were limits to what the FTC could or should...

  13. 8 The Quest for Antitrust Relief
    (pp. 155-172)

    The application of the antitrust laws to the medical profession spurred a structural transformation of the health care industry. New forms of finance and delivery emerged that medical societies previously had prohibited. Equally important, moreover, was the effect on physicians’ practices. By preventing independent practitioners from joining together through their professional associations or ad hoc to enhance their bargaining power, the antitrust laws encouraged doctors to form group practices or become salaried employees of large corporate entities. This did not bode well for organized medicine. Physicians who chose corporate practice had less need for professional associations that perpetuated the old...

  14. 9 The Demonization of Managed Care
    (pp. 173-195)

    Rolling back the antitrust laws as they applied to physicians proved to be a difficult undertaking. A special exemption for collective bargaining or the relaxation of enforcement standards for physician joint ventures required the acquiescence of Congress or the federal antitrust agencies. The health care revolution had altered an important dynamic: Before the revolution, insurers and health plans were allies of physicians. After the revolution, insurers and health plans were allies of government and employers in the quest for cost containment (see Fox 2006; Krause 1996). Protecting physicians from the full force of the antitrust laws threatened this shift in...

  15. Conclusion
    (pp. 196-210)

    The 1890 Sherman Act became America’s gospel of free enterprise, its “second constitution.” On initial inspection, the act appeared to embody the principles of laissez faire, the policy of relying on competitive markets to guide economic development and to protect consumer interests. But, like the equal protection clause or the due process clause of the U.S. Constitution, the Sherman Act’s prohibition on “every contract, combination . . . or conspiracy, in restraint of trade” called for interpretation.

    In the first half of the twentieth century, progressive ideas set the tone for the development of the medical profession. Progressives, such as...

  16. References
    (pp. 211-230)
  17. Index
    (pp. 231-253)
  18. Back Matter
    (pp. 254-254)