The AMA's 100 Years of Robbing You Blind

I frequently ask people attending my lectures what the word doctor means in Latin. Many educated audiences will respond correctly with the word "teacher." But when they do, I tell them it actually means expensive. That usually gets a lot of laughs because they all know it is true. Have you ever wondered how it got to be that way in the United States? Because it sure isn't true in many other countries in the world.

The AMA was formed in 1847 and its unstated real goal was building a government-enforced monopoly for the purpose of dramatically increasing physician incomes. It eventually succeeded, becoming the most formidable labor union on the face of the earth. The AMA's initial drive to increase physician incomes was motivated by increasing competition from homeopaths that was doing serious damage to the incomes of AMA allopaths.

To accomplish the twin goals of artificially elevated incomes and worship by patients, AMA formulated a two-pronged strategy for the labor market for physicians.

  • First, use the coercive power of the state to limit the practices of physician competitors such as homeopaths, pharmacists, midwives, nurses, and later, chiropractors.
  • Second, significantly restrict entrance to the profession by restricting the number of approved medical schools in operation and thus the number of students admitted to those approved schools yearly.

To implement the second goal the AMA created its Council on Medical Education in 1904 with the goal of shutting down more than half of all medical schools in existence. (This is the Council having its 100th anniversary celebrated in Chicago this weekend.) They created an official report as a basis for closing 25 medical schools in three years and reducing the number of students by 50 percent at remaining schools. Since AMA's creation of the Council a century ago, the U.S. population (75 million in 1900, 288 million in 2002) has increased in size by 284 percent, yet the number of medical schools has declined by 26 percent to 123. Over two-thirds of the applicants applying to medical school are rejected.

The AMA's effects on restricting labor supply have been impressive. While decade in, decade out, recessions, depressions, consolidations, and (recently) outsourcing have dislocated millions of blue-collar, engineering, computer programming, and middle-management employees from jobs and forced permanent career changes, physicians as a class have been almost completely immune. Unlike workers in most other industries, a competent, licensed physician with a clean record who remains unemployed despite months and months of search for work is unheard of in the United States. The labor supply restriction has also been great for physician incomes as the median yearly salary for primary-care physicians is $153,000 and specialization raises that to $275,000.

Now that you know some of the low down on the AMA you will know why I, and many of my subscribers, were absolutely delighted when this site passed the AMA in total number of visitors in January 2004. While there is a long way to go to change the paradigm this is a small sign that we are making progress and will eventually be successful.

Ludwig von Mises Institute June 11, 2004

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