Remember, It's Not Socialism

by S.M. Oliva
Mises Economics Blog
Jun. 20, 2010

A few days after telling the American Medical Association that he was not a socialist, Federal Trade Commission Chairman Jon Leibowitz went right back to implementing health care socialism. On Friday, the FTC announced its 36th “consent order” since 2001 against a physician group for the crime of negotiating a contract without FTC consent. The only wrinkle in this case is the physician group is located in Minnesota, where the state legislature recently enacted a law giving the state power to review and approve “jointly negotiated” contracts; the FTC, however, decided that law didn’t apply here -- the second instance this week of the unelected FTC claiming the right to make binding interpretations of laws enacted by elected state legislatures.

I won’t re-travel old ground here on the physician issue. But two things to keep in mind. First, if physician price-fixing is indeed as rampant as the FTC has claimed over the past decade, then the antitrust system has not done its job. There is no other industry I am aware of where there were 36 cases of price-fixing -- 38 counting two Justice Department civil cases -- without any criminal prosecution. The FTC has said time and again doctors who jointly negotiate contracts -- or refuse to accept federal or state price controls -- are guilty of price-fixing. Price-fixing is a felony.

The DOJ generally prosecutes price-fixing as a criminal matter. Why are the doctors getting a break? By my count, over 19,000 individual physicians were members of the 38 groups charged with civil antitrust violations. If the FTC and DOJ really believe their own antitrust rhetoric, then they have a legal obligation to indict, prosecute, and imprison physicians who fix prices. The DOJ prosecutes small businessmen and individual employees all the time, so that can’t be the reason physicians are held to a different antitrust standard.

The real reason, of course, is that imprisoning physicians would set off a political firestorm that would focus public and political attention on the DOJ, and by extension the FTC. News footage of FBI agents “raiding” physician offices -- remember, antitrust “raids” are common in Europe -- with trusted family doctors led away in handcuffs while a federal prosecutor tells the public how multi-billion dollar insurance companies are “victims” of a price-fixing conspiracy wouldn’t sit well with most people. It would look like the government is using the threat of prosecution to coerce economic outcomes. Which of course is what’s going on now.

The second thing to keep in mind is that while you might cheer the FTC and DOJ’s tough stance against doctors -- thinking it might somehow magically lower your own medical costs -- the agencies may turn against you next. As Chairman Leibowitz told the AMA, he’s a strong supporter of the Obamacare bill -- which includes that pesky health insurance mandate. Some would call that a grant of monopoly privilege, forcing customers to buy your product. Jon Leibowitz calls it market competition. And once the mandate takes effect, suppose a group of activists publicly gather and say they won’t comply and refuse to buy health insurance.

Well, gee, the FTC might just call that price-fixing. After all, if doctors refuse to sign a contract with state-backed insurers, that’s illegal; so why would it be legal for people to collectively refuse to purchase a mandatory service? Certainly if there were any organized groups that advocated defiance of the mandate, it would be acceptable for the FTC to investigate, prosecute, and compel such groups to never oppose the government’s healthcare mandates again. Because that’s the rule already applied to doctors.

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