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The debate around remedies for excessive healthcare costs in the United States usually aligns along one of two arguments: expansion of fiscal support for patients, up to and including introduction of single-payer insurance, or else eliminating or reducing third-party payments altogether. Both of these solutions attack only the demand side of the equation, however, and so both are powerless to resolve the issue.

Theory in this instance is borne out by fact, inasmuch as United States already has two large and a number of smaller single-payer systems, in the person of the Medicare, Medicaid and the Veterans Administration, none of which, with the qualified exception of the VA, have been effective in impacting costs. Neither has the increasing trend toward increased co-pay impacted pricing — its effect in cost reduction consists of reducing the quantity of care consumed by those affected, with some predictable deterioration in health outcomes.

Knowing as we do from both theory and vast experience that inelastic demand coupled with restricted supply can have only one effect on price, and the fact that the supply of medical professionals in the US has been tightly managed by the most effective guild organization in post-medieval history, the American Medical Association, it is no surprise that cost of care has been rising parabolocally. The AMA controls the schooling of doctors, thus ensuring a long, difficult and expensive education process; it controls the licensing of doctors, and so restricting the supply through importation; and AMA controls work rules, thus keeping qualified sub-doctoral practitioners from creating competition. In fact, VA’s cost-management success is rooted in the fact that it controls its own supply of labor.

The other hand of the medical-cost monster is none other than the trade barriers in importation of medicaments and devices whose ever-rising prices in domestic markets are supported by lobby-driven import bans and erosion of generic labels.

Now, eliminating supply constraints comes at a cost as well — an influx of foreign doctors and likely increasing use of medically dubious procedures would likely cause some issues, as would an inevitable lowering of quality controls on drugs and the equipment — but the quality of American healthcare is already fairly poor relative to other rich nations, and there would be more resources available to its management if less were captured by the supply professions.

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