The simple answer to the question, “how to make medical services more affordable?”, is to remove all government-imposed barriers to entry in the medical services area. This should be a no-brainer but unfortunately it isn’t. Not just in medical services, but in every kind of human enterprise, all government-imposed barriers to entry should be discarded.
Let’s invoke a general principle, or a law if you will, of economics. All price controls are pernicious. Mandating price ceiling is bad, as are price floors. Nothing good can ever come out of it. Why? Because they create barriers to entry and exit. They impede the functioning of a free market. Just to be sure what we mean by a “free market”, it’s one in which there are no barriers to entry or exit. In free markets, all voluntary trades are mutually beneficial. In technical terms, Pareto optimal outcomes obtain in free markets. What’s Pareto optimality? It’s a situation such that you cannot make anyone better off though any intervention without making at least one person worse off.
Consider price floors such as minimum wage laws. Suppose the minimum wage is set at $15 per hour. If Joe agrees to pay Jim $10 for an hour of work, and Jim agrees to that trade, clearly the minimum wage law will prevent that mutually beneficial trade, and thus not be Pareto optimal. Why? Because you could remove the minimum wage law, and both Joe and Jim would be made better off without making anyone worse off. A minimum wage law is an example of a barrier to entry: Joe wants to enter the market as a buyer (of one hour of work), and Jim wants to enter the market as a seller (of one hour of work). Both are frustrated in their attempt to become better off. Minimum wage laws are an example of a stupid law — it hurts people, without any commensurate gains to anyone.
There are too many stupid laws. We should really distinguish between natural laws (such as the law of demand or the law of gravity) and legislation (laws that are passed by some bunch of humans). The former kind cannot be disobeyed, while disobeying the latter kind can often be beneficial to society. Laws against arbitrage are an example of stupid legislation.
Alright, now to the issue at hand — medical services. Remove all licensing requirements for providers of medical services. There should be a free market for medical services. Anyone who wants to sell medical services should be free to do so, and everyone should be able to buy medical services from whomever they wish. There should be no degree requirements.
What’s so wrong with requiring degrees for practicing medicine? Wouldn’t people get better medical advice if doctors were duly trained and certified by recognized bodies? The answer would seem to be an unqualified yes. But that’s wrong. Some people would get better medical services but — and here’s the problem — many people will be worse off. Many people would get no services at all.
Here’s an analogy. Take food services. We would agree that chefs duly trained in good schools that are certified by the government, and employed in government licensed restaurants are likely to produce good food. But that food will also be expensive. Many poor will not be able to afford that food. Licenses and certifications, in that case, are bad for those who cannot afford high quality stuff. The range of restaurants in a free market will meet the demand for a range of quality of food — the restaurants at fancy five-star hotels can charge $100 a plate, and the street-food seller $1 a plate, and others prices in between. By prohibiting the selling of low priced foods (which may not meet the discriminating palates of the rich), no favor is being done to the poor.
So here’s my recommendation for India. Don’t require a MBBS degree for medical services. Establish various kinds of medical training institutions. These should be run by the private sector. The simplest and cheapest would churn out “Trained medical person–Grade 1” in less than a year. Every year of additional training, a person moves up one grade. One can stop at any grade, and ply one’s trade wherever.
But a person does not have to get any training at all. Even untrained people should be free to provide medical services, or electrical services, or hair dressing, or what have you.
Demanding that only those with MBBS and MD degrees from government-approved institutions is a racket that hurts the poor. It’s a racket that erects a barrier to entry, and only benefits the medical profession, at the cost of health care for the poor. It’s like demanding that only BMW-and-above quality cars should be sold and allowed to be used as passenger vehicles. No three-wheelers and cheaper cars allowed — for safety reasons. That would force the poor to walk. That would also be great for the owners of BMWs etc because the roads will be less crowded. In fact, I know people in Mumbai who own fancy cars and who believe that 3-wheelers should be banned since there are too many of them on the road.
OK, that’s my answer to a question asked in one of my “Ask me Anything” posts. Be well, agitate to get all licensing laws overturned, and keep in touch.
PS: What’s the relevance of that image at the top? Not relevant but if you click on the image, you will learn about Wolfgang Pauli, and it’s good for you to know that.