Licensure Supply of Medical Services Textbook Review

Is the AMA interested in quality of care or physician profits?

The American Medical Association (AMA) is a national physicians organization founded in 1847 by Nathan Smith Davis.  While, the AMA exists explicitly to serve the interests of physicians, politicians often seek advice from the AMA when setting health care policy.  Conventional wisdom is that the AMA is dedicated to providing the best care for patients.  The mission statement on the AMA website states:

The American Medical Association helps doctors help patients by uniting physicians nationwide to work on the most important professional and public health issues.

But is the AMA interested in quality of care or simply increasing physician profit-mostly through erecting barriers to entry into the profession?

There are a few examples which make clear that the AMA is dedication mostly to the interests of its members-doctors.

  • The AMA claims that the difficultly of entering the medical profession is to ensure that incompetent doctors do not practice.  If this was the motivation of the AMA, one would expect to see the AMA favor re-examination and re-licensure of physicians.  Some physicians have been trained 30 to 40 years ago.  The AMA has never proposed physician re-examination.
  • In the 1970s, Congress enacted the professional standards review organization (PSROs) legislation in an attempt to develop physician peer review to maintain quality.  If the AMA is most interested in patient quality, this seems like a sensible bill to support.  The AMA opposed the legislation. 
  • For years the AMA had banned advertising under their “Principles of Medical Ethics.  The major reason for this restriction was to prevent physicians from competing on price or informing the public regarding quality measures.  In 1982, the FTC ruled against the AMA and stated that:
    • “prices of physician services have been stabilized, fixed, or otherwise interfered with; competition between medical doctors in the provision of such services has been hindered, restrained, foreclosed and frustrated; and consumers have been deprived of information pertinent to the selection of a physician and of the benefits of competition.”
  • On the their website, the AMA states that their advocacy efforts are directed a variety of objectives.  Let us list their advocacy agenda and see how each one will benefit physician directly:
    1. Medical liability reform – This will lower the cost of practicing medicine for physicians.
    2. Medicare Physician Payment Reform – In essence, the AMA is asking Congress to give more generous payments to doctors who serve Medicare patients.
    3. Expanding Coverage for the uninsured and increasing access to care – While at first this objective seems noble, it will also increase the demand for physician services as consumers become price insenitive with third parties paying doctors’ bills.
    4. Improving the health of the Public – Commendable.
    5. Patient safety and quality improvement in health care – Commendable
    6. Managed Care Reform – The physicians wish to advise patients which procedures are necessary regardless of the cost.  Managed Care takes into the cost of each procedure and thus may limit a physician’s choice to advise expensive medical options.
    7. Regulatory Relief – Similar to point one, this will lower physician costs.

Further, there are three major barriers to entry in the medical profession which the AMA in essence controls.  The first is licensure.  The AMA sets the requirements for a license to practice medicine and can suspend or revoke a license once it has been granted.  Secondly, the AMA’s Council on Medical Education approves the number of medical schools in the US.  By not approving additional medical schools, the AMA can reduce the supply of physician care.  If fact, between 1905 and 1944, the number of medical schools in the US decreased from 162 to 69.  Finally, the AMA has increased the length of medical training, thus making it more financially difficult for prospective students to enter the medical field.  With fewer doctors, there is less competition and thus prices (and physician profits) will increase.

While, this post has not been kind to the AMA, I do not wish to state that the AMA sole goal is maximize profits of its members at the expense of patient health.  I simply hope that the public realize that the AMA is not simply a benevolent, consumer driven organization, but one who vigorously defends the interests of its members.  One should think twice as to whether AMA policy truly helps patients or simply helps member physicians.


Much of the background for my analysis was found in Health Care Economics by Paul J. Feldstein, 6th edition; Thompson Delmar Learning, 2005.

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