Professional Documents
Culture Documents
United States of America: Before Federal Trade Commission
United States of America: Before Federal Trade Commission
United States of America: Before Federal Trade Commission
IN THE MATTER OF
PIEDMONT HEALTH ALLIANCE, INC., ET AL.
1 The Thornton Institute for Health Care and Economics Research, a division of Citizens
for Voluntary Trade, examines the impact of antitrust and competition laws on the health
care industry. The Institute's members apply the principles of Austrian economics and
rational ethics to contemporary public policy issues in health care. The Institute is named
in honor of Dr. Matthew Thornton (1714-1803), a New Hampshire physician and judge,
and a signer of the Declaration of Independence.
IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
2
The Unifour area consists of Alexander, Burke, Caldwell, and Catawba counties.
3
Ludwig von Mises, Human Action, at 257.
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IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
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IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
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IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
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IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
less than $140, the FTC would condemn this as price-fixing, using
the government’s arbitrary $120 price as “proof” that the
manufacturers were asking for “above market” prices.
Paragraph 32 of the FTC’s complaint claimed this is what PHA
did: “prices for physician services in the Unifour area have
increased or been maintained at artificially high levels.” (Italics
added.) Artificial compared to what? To the RBRVS, the
government’s arbitrary, non-market price scheme.
The FTC’s concern is understandable, if not sympathetic. If
MCOs paid physician prices that deviated too much upward from
the RBRVS, many physicians would be in a position to reject
Medicare patients altogether. After all, if the furniture maker can
get $160 a couch from Wal-Mart, why would he sell any couches to
the government at $120?
It’s also worth noting that the government could constrain
“artificially high” price levels through fiat. Congress could pass a
law requiring all physicians to charge RBRVS rates to private
MCOs. And taking this argument to a logical endpoint, the
government could set the price for physician services at zero.
Obviously such a price would not attract many physicians, if any.
Such is the consequence, however, of ignoring market principles in
favor of political intervention.
***
But what of the FTC’s view that price-fixing agreements of any
sort are illegal because they restrain “competition”? The complaint
said PHA deprived consumers of “the benefits of competition
among physicians.” This assumes two things: First, that physicians
have a legal duty to compete, and second, that competition would
exist but for PHA’s actions.
The notion that sellers in a market have a legal duty to compete
is coterminous with the FTC’s position that all buyers have a
“right” to competition among sellers. It’s unclear, however, where
this right comes from. The American constitutional system
presupposes the existence of certain individual rightsûlife, liberty,
property, and the “pursuit of happiness.” These rights are a
function man’s existence, and do not depend on any positive act of
the state. Rights, in fact, represent a negative on the state and
society at-large. Rights protect against the initiation of force.
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IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
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IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
Since the early 20th century it has been illegal to sell medical
services in the United States without a license from a state board
composed of existing sellers. Licenses are generally restricted to
graduates of medical schools that are also approved by existing
sellers (i.e. the American Medical Association.) These regulatory
schemes allow the government to artificially control the supply of
medical services throughout the market.
In a free market, sellers could offer medical services without
restriction, subject only to the judgment of one’s customers. This is
not a Utopian scenario; it was how American medicine operated for
most of the 19th century:
The [medical] profession was, throughout the
country, unlicensed and anyone who had the
inclination to set himself up as a physician could do
so, the exigencies of the market alone determining
who would prove successful in the field and who
would not. Medical schools abounded, the great bulk
of which were privately owned and operated, and the
prospective student could gain admission to even the
best of them without great difficulty. With free entry
into the profession possible and education in
medicine cheap and readily available, large numbers
of men entered practice.4
Modern medical licensing has little to do with protecting the
public from unqualified physicians, and everything to do with
restricting competition and raising consumer prices. The FTC itself
has attacked licensing schemes that benefit incumbent practitioners
in the funeral services and contact lens industries, yet the
Commission refuses to recognize the negative impact of licensing
in medical services. Yet abolishing medical licensing
requirementsûsomething that is admittedly far beyond the FTC’s
powersûwould do far more to reduce medical costs across-the-
board than would selective prosecutions of alleged “price-fixing”
among relatively small groups of physicians.
***
4
Ronald Hamowy. “The Early Development of Medical Licensing Laws in the United States,
1875-1900.” Journal of Libertarian Studies. Vol. 3, No. 1, at 73 (1979).
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IN THE MATTER OF PIEDMONT HEALTH ALLIANCE, INC., ET AL.
Respectfully Submitted,
S.M. Oliva
President, Citizens for Voluntary Trade
Co-Chair, Thornton Institute for Health
Care and Economics Research
Post Office Box 66
Arlington, VA 22210
(703) 740-8309