August 23, 2018 by Dr. Kyle Varner in Healthcare without Insurance

Last night, I was in an Uber with one of my friends and she mentioned that she was thirsty.

Without hesitation, the driver handed her a bottle of water.

Tell me, when has that ever happened to you in a taxi?

With Uber, if you need to charge your phone, they’ll have a charger. If you need refreshing before a date, they’ll have a mint for you.

You’re taken care of. Drivers want to make sure you’re happy, because you are the customer.

Why don’t taxi cabs care if you’re happy? Why don’t they have mints or water waiting for you?

The answer is very simple. Taxi cabs are a cartel industry.

Not just anyone can become a taxi driver. You have to be one of the lucky few that earns the government granted right to drive a cab.

The numbers of taxi cabs are not determined by demand, nor are they determined by how many people want to drive them. The number is limited to a fixed number to protect the existing drivers from competition and to raise prices.

For decades they faced no real competition, and thus they had no incentive at all to care if you as the customer is happy. If you wanted to get somewhere, you were going to have to use their services.

Once new companies like Uber and Lyft entered the market, everything changed.

The moment that consumers had a choice, they took their business away from the taxi cab cartel to the companies that provided them with better, cheaper, and safer service.

Unfortunately, cartels like this aren’t limited to the transportation industry. In fact, if you look at what the physicians’ cartel has done, it makes the taxi cabs look like a bunch of freewheeling capitalists in comparison.

The physician’s cartel, which I call the “White Coat Cartel” has been at work for the better part of the last 150 years, restricting the supply of doctors in an effort to raise the wages and social standing of doctors.

Political Dealing to Limit the Supply of Doctors

One of the first main drivers of this came in 1910 with the publication of the Flexner report, funded by the Carnegie Foundation. This report claimed that there were too many medical schools in the United States and that too many doctors were being trained.

It insisted that only schools that strictly adhered to mainstream medical theory and complied with much higher levels of admission and graduation standards should be allowed to educate doctors.

As a result, nearly half of all the medical schools in the United States were closed. Including any medical schools with divergences in their thinking.

In 1997, the chairman of the American Medical Association went to Congress and testified before the US Senate claiming that we were going to have an oversupply of doctors.

Since Congress was in the middle of a budget crisis, they recommended that they address this dangerous oversupply by capping government funding for residency training.

Now, that might not sound so bad… except, that the first thing they did was to make residency training so onerous and expensive that nobody could undertake it without government support. Then they capped the number of residency slots.

As a result, thousands of medical school graduates who’d passed all the licensing exams, were now unable to obtain residency and thus couldn’t practice medicine.

Ever wondered why going to the doctor is so expensive? Well, there’s your answer. It’s a cartel.

Regulations are creating scarcity in the healthcare market and that scarcity is then being used to punish consumers.

What Can We Do About the Shortage of Doctors in the US?

First, we need to look towards policies that create competitive markets and encourage a plentiful supply of services.

We need to free the physician market, the pharmaceutical market, and the insurance market. Even some very modest policy reforms can have a dramatic impact.

Then, the second thing to do is to enable disruptions in the healthcare industry in the same way that Uber disrupted the transportation industry.

A great example is direct primary care, a movement happening in the United States where people go to their primary care doctors and offer to directly pay them in cash on a monthly basis rather than through an insurance plan.

As direct primary care doctors are being paid directly by their patients, they know they have to respect them as customers. They build relationships with their customers, they don’t order unnecessary tests, and they are invested in their long-term health.

Turning to direct primary care may not fix the entire system, just as Ubers have not yet wiped out the taxi cartels, but it will get you one step closer to getting better quality, cheaper, and safer healthcare in your life.


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