 Last weekend we discussed the lousy U.S. healthcare system from a more theoretical viewpoint in terms of its lack of market pricing. But this weekend we'd like to talk to an actual practitioner who's in the trenches and on the front lines of providing medical care every day. Dr. Michael Akkad is a cardiologist in San Francisco who somehow finds the time to write and blog on medical issues from an Austrian and a libertarian perspective, including articles he writes for us here at Mises.org. And he's here to talk to us about what it's really like to practice in this brave new world of Obamacare. And if you think you're just a number when you go to visit your doctor, you're going to find out that that's actually true. Your doctor has a small iPad with him and he finds a coding number that determines whether and if and how much that doctor is going to get paid for your visit or your particular symptoms. So Dr. Akkad is here to explain not only that, but what he and some other libertarian-minded doctors are doing to try to change the system from within. So stay tuned for a great interview with Dr. Michael Akkad. Doctor, tell us a little bit about your journey. How did you become, I guess, first and foremost a libertarian and so well-versed in Austrian economics, which you've written about both for Mises.org and on your own site? It's a work in progress. There's no question about it, but when I finished my training, I was pretty much of a progressive mindset and I joined a large HMO here and I worked there and sort of did well and moved through the ranks. But then it gave me a glimpse into the whole aspect of central planning to really understand how these large organizations work. And so I was dissatisfied with that and then that was in 2007, I discovered Ron Paul and that completely changed my outlook on everything. And then shortly thereafter, I discovered the Mises Institute and so it's been a complete shift in understanding of how things work. And then I decided to realign my career with what I thought was the right thing to do and the prudent thing to do also. As a doctor, not being at the mercy of these very large bureaucracies. But let me ask this, a hypothetical situation. You mentioned discovering Ron Paul in 2007. In the late 1960s, Ron gets out of the Air Force into which he was drafted during the Korean conflict. He's in South Texas. He's done with medical school. He's an OBGYN. He partners up with an older retiring OBGYN and on day one of Ron Paul's medical career, he has a waiting room full of patients. He has zero student loan debt and each and every one of these patients is paying cash, mind you. If they can't pay cash, they work out a payment system or many of the patients they simply do for free. And every employee down to even his receptionist is directly involved in patient care in some way, you know, taking their temperature, blood pressure, etc. There's not a single member of his paid staff whose job is billing. Right, right. Contrast this situation to the average doctor's experience today. First of all, it's almost impossible for a doctor to have a solo practice and still work within the system of insurance payments. The overhead cost is just prohibitive. So most doctors have abandoned their solo practices and have joined larger and larger, you know, increasingly large groups of doctors, medical groups. And for a while there was a trend for doctors within a specialty like, you know, cardiology or OBGYN or whatever to sort of join together and share the overhead. But now even these groups are too small to overcome the regulatory burdens. So they frequently, you know, you have groups of doctors that sell their practices to join very large entities of multi specialty groups frequently associated with the hospital. And you have an army of administrators that oversee the work of doctors to make sure that it complies with regulations for the purposes of billing and coding and all that nonsense. The doctors have to go through in order to get some reimbursement from the third parties, you know, primarily the government. But, you know, the insurance companies are no different. They essentially copy whatever rules, Medicare and acts. I call it bureaucratic mimicry because you have the huge bureaucracy of the government that imposes rules. And then on the receiving end, you have to mimic that. So you need to create very large bureaucratic entities to sort of respond and speak the same language as the governmental bureaucracy. Well, Doctor, you mentioned coding. When you're sitting in the examination room, it seems like today your doctor comes in and he or she has a sort of an iPad, a tablet. And they're trying to fit you into some sort of numerical coding. In other words, your symptoms or your treatment to satisfy insurance billing so that they get paid. Am I understanding that correctly? That's exactly right. It completely distorts the thinking of doctors, forces them to simplify or to make a caricature of what their clinical impression is in order to fit into the template of the coding system. And the coding system is the language that payers understand. So clinical care now is not what you think about what you think the patient has, but it's about what you think the insurer can understand. But it's more than just bureaucratic, right? It's more than just dollars. Isn't there an ethical component here? The insurance company now stands as an intermediary between the doctor and the patient. And for me, from a patient privilege standpoint, what if someone had symptoms that were embarrassing to them? What if someone had a substance abuse problem? What if someone had a sexually transmitted disease? I certainly would think that most patients would now be very reluctant potentially to reveal as their doctor because it's being recorded. It's going into a database and their insurance company is going to know about it and it might well affect them financially down the road. You're absolutely right. And so the privacy is completely lost even though you have a law that's called HIPAA, which, you know, laws are always named. The name of the law is exactly the opposite of what the law actually does. So instead of protecting privacy, which is the PP in HIPAA, it actually destroys privacy. But I would rephrase what you said. You said that the insurance company is the intermediary between the doctor and the patient. That's not quite right. How I view it is that the physician has become a subcontractor to the insurance company because by and large, most physicians and hospitals, you know, over the last 30 years, sign either implicit or explicit contracts with third-party payers. With private payers, it's an explicit contract. And with the government, it's an implicit contract. If you practice medicine and you don't actually opt out of the Medicare system, you're implicitly in a contract with the government. And your role is to quote-on-quote provide care and that provision of care is dictated by the third party. And it's the hand that feeds you as a physician. And so in a way, I think to me, it's ethically problematic for a doctor who, on the one hand, promises to do what's right for the patient. And on the other hand, has signed a contract to fulfill the promises of the third-party payer. And so the doctor has two masters, if you will. And they will tend to respond to the demands of the payer because the payer exercised influence on their income. So that's problematic. Now, many doctors try to do the right thing and go to great expense to do the right thing and fight the system and so forth. But it's a little bit accidental to their contract. They do this above and beyond what the contract calls for. The contracts that they sign with the insurance company just provide care under our terms, the terms of the third-party payer. So that's their primary obligation. And as these demands become more and more onerous and there's less and less privacy, then doctors have filled more and more corners into doing things to the interest of the payer rather than to the interest of the patient. So if the insurance model distorts the doctor's incentive, surely it distorts the patient's incentive. Right, too. I mean, if you have a patient sitting in front of you, do you have a sense that your patients, since they don't know what things cost, that they don't take as much responsibility for their own health and that they sort of just expect you to give them pills that make things better? There's no question about that. That's what's called moral hazard, which Austrian economists know very well when they talk about the Federal Reserve and the bailing out of banks and so forth. But the same principle happened in healthcare. So when the cost of your care is paid for by a third-party, it's very easy to lose sight of what's reasonable as a patient and to demand more. There's no end to what you could demand and think that is going to be to your benefit. And both doctors and patients are confused and lose track of the value of things when it's paid for by a third-party, you know, when there's a promise to pay for care. You can't gauge, you know, there's no price with which you can gauge the relative value of different services. And so it's a problem for both patients and doctors. In my mind, it's the main factor that's responsible for the escalation of costs over the last 50 years. For the average doctor, if a patient did come in, let's say to a cardiologist like yourself and said, I want to pay cash. The doctor doesn't even really have a coherent starting point, right? I mean, the doctor doesn't have a price to offer. That's correct. It's very hard to come up with a price because there's no market price for things. So, you know, there is a list price that's completely fictitious. The starting price that doctors and hospital put out before they start negotiating with the third-party payers. And then there's the price that they negotiate with the third-party payers, which is a fraction of the list price. And typically, when a patient who does not have insurance needs to get care and gets care, you know, on an emergency basis in a hospital or with a doctor, then they get charged the list price, which is an absurd price that's, you know, extremely inflated. And sometimes the doctor or the hospital have to, by law, have to charge that list price because there's some regulatory reason why they could not give them a discount. Or if they did, you know, the government may say, well, why did you give that patient a discount, which is less than our contractor price? That sort of thing. I mean, it gets to be very complicated. But you're right. I mean, there's no price. If somebody wants to open a cash practice, you have to construct your own price schedule. But at that point becomes more of an entrepreneurial decision of what do you think people or, you know, patients are going to be willing to pay if they come and see you and pay cash. And there is a burgeoning industry of doctors who have, you know, like me, who are just stepping outside the system and are offering our services directly to the patients. And you're starting to see sort of a trend towards, if you will, an equilibrium of what these prices might look like. It's interesting that you bring that up because we see the market seeping through the cracks, despite the government's, the state's best efforts. A doctor doing exactly what you've described as Keith Smith, he runs the Oklahoma Surgery Center. And there's an amazing landing page on that Surgery Center's website that's got prices listed, cash prices for a variety of things like knee replacements, hip replacements, you know, surgical procedures. And he's told me that this, the fact that this price list exists and that they get it, oftentimes from, for example, Canadian patients coming here and paying cash, that this not only bewilders, but it absolutely infuriates other doctors that this list of prices even exists. It's very important for us, you know, to be transparent with our pricing. I mean, that's our strategy is that there are no hidden costs, that this is what you pay for, that, you know, we're honest, you know, we work directly for the patients and for the best interests of the patient and so forth. And in a sense, it makes the other side look bad. It makes the other side look bad because they're enmeshed in this game of out of control or hidden costs and outrageous pricing that takes place when you play the game of the insurance. Business and the third party payment business. This model, this insurance policy has been bad not only for patients, but it's been horrible for doctors too. I mean, hasn't the AMA completely failed, even if you view the AMA as a cartel, hasn't it completely failed to protect the interests of doctors? Historically, there was a period of time where the doctors greatly benefited from the third party payments because when insurance came about in the 50s and then in the 60s when Medicare, you know, entered the scene, they were paying under the rule of what's called the usual and customary fee. So essentially, they're paying whatever doctors wanted to charge. And that's when you really started to see doctors get very, you know, quite wealthy as a professional segment. And that lasted for about, you know, 20, 30, 40 years up until, you know, the late 1980s when managed care era began. And then doctors had to sign contracts, you know, formal contracts, you know, both for the government and with insurance companies and price controls started to get in. And at that point, the AMA collaborated with the government to institute these coding schemes, you know, to allow the price controls and whatnot. So yes, in a sense, they have failed the doctor, you know, protecting the interests of the doctor. But you know that these cartels, like the AMA, they're primarily after their own interests first, you know, not so much after the interests of those who they, you know, allegedly are trying to serve. There's an elite of people at the AMA that, you know, look after their own interests and they make their own money out of the coding industry. But speaking generally, do you think doctors are less happy? Doctors in the U.S. are less happy today? Oh, it's clear. I mean, there's plenty of evidence. I mean, it's study after study that rates, you know, physician satisfaction, it's been going down the drain for the last 30 years. And there's no sign of that changing. And you have many doctors who are trying to get out of that system. But in a way, they're kind of trapped. They've gotten used to getting paid by a third party, which, you know, provides some income security and it's, you know, very hard for many of them to try to get out of that system. Especially if you have, if you practice a specialty that relies a lot on hospital care and procedures and whatnot, it's difficult, but it can be done. And it's, you know, you mentioned the Keith Smith's operation in Oklahoma, which is great. I think it's a wonderful sign and it's a healthy sign of people trying to do the right thing. There has to be an entrepreneurial risk when you do that. But, you know, and many doctors are risk averse. And so they prefer to stay in the system and hope that things will change, but things generally change for the worse. Talk about Rod Paul in 1968. Not only did he not have debt from medical school, he didn't even have malpractice insurance as an OBGYN at that point. Now contrast, as a young person today, thinking about going to medical school or getting out of medical school, are kids going to do this if they only make $150,000 or $200,000 a year as an employee of a managed care operation? No, they're not. And in fact, they're groomed right now. The educational system grooms them to become employees and to not think too much independently, to follow, you know, practice guidelines, and just go in and adopt a shift mentality where they work in a large group and they see a patient, you know, when they're on and then when they're off, they turn off their pager and cell phone and turn, you know, turn over the care of the patient to somebody else and collect a salary at the end of the month. That's pretty much the model for the majority of incoming students. Do you think the best and brightest are steering away from medical school? Do you think that word has gotten down to young people? I think that that's also, it has been documented. Recently, there was an article showing that many of the students as soon as they finish medical school, they actually go work for, you know, at least in the Bay Area, many of them go work for startups and try to do things, you know, outside of clinical care. We're almost out of time, but I wanted to talk to you real quickly about your blog. Anybody who's interested in medicine from a libertarian perspective, I recommend, alertandoriented.com. So what's the goal of the blog? Who are you hoping to reach and what's the purpose of having the blog? The blog is to try to educate my colleagues, really. It's primarily directed at other doctors and healthcare professionals who find themselves in this very difficult situation. You know, they're not responsible for designing the system, you know, the way it is, but they're working within the system and they realize that it has a lot of problems. But if they read the medical literature and the trade journals and whatnot, they really don't get the right perspective on on what the source of the problem really is. And so I'm trying to educate colleagues about economics, healthcare economics from an Austrian school perspective and ethics from a libertarian perspective and so forth. I think when doctors get exposed to these ideas, I think they'll have the same experience as I did, which, you know, recognize their their truth and then be able to navigate the system and perhaps find solutions, you know, on their own for their predicament and be able to to improve things, you know, the way the trend is going, this hopeful trend that I mentioned of doctors trying to provide solutions outside the system because the system has become so bogged down and so problematic for everyone that it's an opportunity for people to step outside of it and provide very good care for patients. So that's really the purpose of the blog. We're so grateful for libertarian doctors like yourself, like Dr. Keith Smith, like obviously Dr. Jane Orient, and we appreciate what you do. We hope you keep it up and we thank you for your time and a really fascinating interview on what it's like to be a doctor, a libertarian doctor from the inside. Ladies and gentlemen, have a great weekend. Thank you.