Healthcare’s Vicious Cycle

Healthcare’s Vicious Cycle

Government interventions that restricted supply and distorted demand laid the groundwork for the vicious cycle of increasing healthcare costs Americans know today.

“Government does not solve problems; it subsidizes them.” – Ronald Reagan

Despite having a chronic shortage of healthcare, Montana is one of only four states that does not have a medical school. A recent article in Kaiser Health News reminded me of the strange history of healthcare in America and the longstanding controversy behind two current proposals for Montana’s first medical school – one for profit and one non-profit.

Prior to 1910, healthcare was largely unregulated. The U.S. had a relative abundance of medical providers with various medical schools and the highest number of physicians per capita in the world.

Following the recommendations of the Flexner Report published in 1910, most states began requiring licenses to practice medicine and imposed accreditation standards for medical schools. These new regulations included prohibiting for-profit schools, a ban that lasted for over 100 years – lifted only recently.

As a result of the new regulatory regimes imposed in the 1910s, nearly half of medical schools closed over the following decade. Unsurprisingly, this big contraction in supply led to a severe shortage of medical care and a cost crisis in the 1920s.

In the 1950s and ’60s, the government radically transformed how most Americans pay for healthcare, adding fuel to the fire by subsidizing and incentivizing demand for healthcare services with employer sponsored health insurance, Medicare and Medicaid.

These government interventions which restricted supply and distorted demand laid the groundwork for the vicious cycle of increasing healthcare costs Americans know today.

So how can we start to unwind this mess? One way is to increase the number of practicing medical professionals. Regardless of for-profit or non-profit status, I’m glad efforts to attract and train doctors are taking root here in Montana.

Policymakers can help by reducing barriers for medical professionals to get licensed and keep practicing in Montana. They could also look at ways to eliminate red tape and expand the ability of current practitioners to utilize the fullest extent of their training to care for patients.

For Liberty,

Kendall Cotton

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The Latest 


  1. An advocacy organization criticized Commissioner Troy Downing and the legislature for passing HB 379, a bill that repealed Montana’s longstanding “unisex” mandate prohibiting insurance companies from factoring gender or marital status into rates. The organization claimed that repealing the mandate is “discriminatory” and will lead to higher insurance rates for women. 

Our Take:

These claims directly contradict numerous other studies which demonstrate that government “unisex” mandates unfairly penalize women with higher insurance rates, especially younger novice drivers.

These studies are backed up by Montanans’ own experiences. Local insurance agents who testified in support of HB 379 said that some of their female customers were forced to pay 30% more for life insurance due to the unisex mandate, and in some situations auto rates would be double for young married couples in Montana compared to other states.

Commissioner Downing, Governor Gianforte and the legislature made the right move by repealing this government mandate.

Occupational Licensing

  1. A new policy breakdown from the Mercatus Center shows how some regulations are holding back pharmacists from bridging the healthcare gap in underserved communities.

“Relaxing restrictions will open an undertapped and, in some cases, untapped medical resource to address Americans’ growing healthcare needs.”

Our Take:  

Many of Montana’s small town, brick-and-mortar pharmacies struggle to get by – despite pharmacists being highly trained medical professionals with intimate knowledge of our communities. Loosening Montana’s regulations surrounding staffing ratios, telepharmacy and licensure could help expand healthcare access in areas of our state that need it the most.

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