History of Healthcare: medical cartels an early response to natural medicine

This is a series on the history of health care, exploring how and why health care costs in the US have risen beyond the levels a free market would normally bear.

If you were pregnant in Charlottesville, Virginia in 1848, according to the “Fee Bill” above, it looks like you would only pay $20 for a doctor to deliver your baby! And if your husband broke his arm, it would only cost $10 for a doctor to set his fracture. Even accounting for inflation, 1848 healthcare costs seem insanely cheap!

But to give some context... let's imagine that John is a bricklayer who earns the 1848 bricklayer average of $36 a month. He and his young wife, Sally, live on the east coast of the United States. They pay 8 cents for a loaf of bread, 25 cents for a pound of butter, and another 25 cents for a bag of potatoes. In 1848, a train ticket from New York City to Philadelphia costs $4 and a year of college, about $100. (1)

In light of these average wages and costs from the mid 1800s, a $20 fee to deliver a baby is still somewhat expensive; it equates to about three weeks' work for John. It's likely a young family like this would have just hired a midwife at a much lower cost. But it's worth asking: were medical expenses more fair in the 1800s than they are today?

Not necessarily, and the newspaper clipping above is a great example of an attempt to keep medical costs high. That Fee Bill isn't a price list; it's a form of price fixing that's also intended to call the reputation of natural healers into question.

Fee Bills were often published in newspapers in the 19th century. The general public may have assumed a bill like the one above was a simple price list, but if you read the fine print more closely it's clear that this is the work of a medical cartel:

"We, physicians, practising in Charlottesville, mutually agree to charge and require fees not less than the following, in the cases hereinafter specified."

A “cartel” is defined by Oxford as “an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.” And that's exactly what these doctors were up to: they were printing a list of minimum prices that the undersigned doctors promised not to undercut. Ultimately, they were agreeing not to compete with each other and this agreement kept the medical costs in Charlottesville higher than the market would normally bear.

Customers in any market rely on healthy competition between "sellers" because that competition is what keeps prices down. In the case of the 1848 Charlottesville healthcare market, one doctor might to decide to charge less to get more patients. This would force other doctors in that market to charge less, too, in order to keep their current patients. That's how competition works, and the Charlottesville physicians of 1848 were having none of it.

They didn't want to compete with one another. They wanted to collude with one another to keep prices artificially high.

To add insult to injury, the published Fee Bill above didn't prohibit any of the doctors from charging more. And it's likely that when Sally went into labor, she and John would have paid more than $20 if they chose a doctor instead of a midwife.

So why did people like John and Sally put up with these shenanigans? Because doctors had convinced them that these shenanigans actually protected consumers.

Allopathic doctors (called "regulars" back then) were facing competition from natural healers like herbalists and homeopaths. Trying to reduce that competition, they sought to denigrate natural medicine, much like we see today. And according to journalist Todd Savitt, “Naming the physicians who signed the fee bill served to advertise to the population who among local healers were the trained, respectable physicians and who were the low-cost (and, according to the regulars, presumably less competent) healers – the irregulars and quacks. Patients were thus 'protected' from unscrupulous practitioners.”

The implication here was that "regular" doctors were the only respectable providers -- because they charged more -- and that anybody charging less for medical services was surely a quack!

Just like today, people in the 1848 healthcare industry were looking for ways to kill their competition. They were putting out forms of propaganda denigrating their competition in newspapers and forming cartels with the competition (fellow doctors) they couldn't bring down: if ya can't beat 'em, join 'em.

Eventually this problem was "solved" with government regulation, but as usual, government interference didn't really solve anything. Regulations merely defined who was allowed to collude and price fix... and who wasn't.

Above all, the doctors' attempts to rig the healthcare industry were explained away as patient protection... much like today. Future posts in this series will show that healthcare providers have found many ways, over the last century, to rig the industry, eliminate competition, and keep healthcare costs high.

(1) 1848 prices and wages sourced from: https://libraryguides.missouri.edu/pricesandwages/1840-1849