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89

THE LIBERTARIAN ENTERPRISE
Number 89, September 11, 2000
HBTM!

Is There a Doctor in the House?

by O. Seong Kweon and
Casey J. Lartigue Jr.
cjl@cato.org

Special to TLE

"Please don't get sick and don't speed while driving," said a sign posted in March at a medical center in Asan, South Korea. This isn't typical medical advice in South Korea -- it was a warning to South Koreans that a major strike by medical professionals was set to commence.

For the last five months, the 70,000-member Korea Medical Association has paralyzed health care in the country with a series of labor strikes. As a result, an estimated 90% of the nation's 19,000 hospitals and clinics have closed at one time or another, reportedly leading to the deaths of several people seeking medical help, the arrests of doctors leading the strikes, and a major rift between doctors and patients.

Medical professionals in South Korea are mostly angry about one thing: The government-created monopoly that has allowed doctors and pharmacists to line their own pockets at the expense of consumers may be coming to an end.

The seeds of the crisis were planted in 1977, when the medical insurance system was first introduced. In exchange for price controls on medical care, doctors were allowed to supplement their incomes by selling medicine. Doctors have complained to the succeeding South Korean administrations that their fees are "unreasonably low." A government spokesman recently acknowledged that medical fees fail to cover about 20% of actual medical costs.

In addition to having a system that fails to cover medical fees, the sale of over-the-counter medicine is also prohibited in South Korea. If you have a headache or a stomachache in South Korea, you can't buy medicine at the local supermarket or 7-11. Your only "choice" is to visit a pharmacist or doctor. This government-created monopoly has been good for both pharmacists and doctors, who were allowed to write prescriptions and sell medicine to customers.

The result is that doctors and pharmacists have been over-prescribing medicine. Expenditures on pharmaceutical products reportedly account for about 30% of total medical costs in South Korea, much higher than the 8.4% spent in the United States and 15% in the United Kingdom.

To make matters even worse, the South Korean government drives up the cost of medical care by restricting the supply of doctors. Based on 1997 figures, there were 12 doctors for every 10,000 Koreans (compared with 58 doctors in Italy, 34 in Germany, 30 in France, and 27 in the U.S., for every 10,000 people, respectively). In a concession to angry doctors already practicing, the South Korean government has proposed restricting even further the supply of doctors.

The South Korean government has sought to tackle some of its problems. It recently announced it would curtail over-prescribing by dividing the duties of medical professionals. Since Aug. 1, doctors have been prohibited from selling most medicines and pharmacists have been prohibited from selling medicine without a doctor's prescription.

This restriction, which re-ignited the strikes, makes sense within the confines of the current system. As long as the sale of over-the-counter drugs is prohibited, doctors and pharmacists should be keeping tabs on one another instead of hanging on to prescription regulations and price controls concocted by the government during the 1970s. And yet, while reducing some of the over-prescribing, monitoring alone isn't the answer.

When it couldn't get the doctors and pharmacists to agree to its reforms, the government started arresting doctors leading the strike, as well as pharmacists selling medicine without prescriptions written by doctors. Positions have only hardened. The Korean Medical Association has made it clear that it will reserve the right to strike as long as doctors are not allowed to sell medicine and possess the exclusive right to write prescriptions. The nation's 50,000 pharmacists warn that they will go on strike if the government gives in to demands by doctors. And President Kim Dae Jung has drawn a line in the sand, insisting his administration "can never tolerate selfishness on the part of interest groups through illegal and violent means."

Few South Koreans are happy or satisfied with their health care system. Why should the government be deciding what the roles of doctors and pharmacists should be? Who should decide this, and who will decide who makes that decision? For far too long the Korean government has been doing the deciding, acting as judge, jury and negotiator.

There are three things the South Korean government needs to do to help end what appears to be a stalemate and head off a major medical crisis. First, it should stop meddling in the health care industry. The government has had a stranglehold on the market, acting as the sole regulator of prices and services. But that would mean recognizing that its previous policies are what led to the current disaster in the first place. Its latest recommendations and concessions (such as prohibiting pharmacists from selling certain medicines unless they sell them in bulks of 30) hurt consumers. The government needs to change its role as a micromanager of the system to one limited to providing information. Doctors take the Hippocratic Oath, "First Do No Harm." Mr. Kim's government needs to take a similar pledge.

Two, the government should allow the sale of over-the-counter medicine. This will help to break the monopoly doctors and pharmacists have over medicine, giving their captive customers a third option. What consumers need are more information and choices, not knowledge monopolies and anti-consumer regulations.

Finally, the government needs to reform the entire medical insurance industry. Holding down prices seemed to be a good bargain for consumers, but price controls are now hurting them even more. Prices are out of control and are what sparked the antipathy between doctors and pharmacists. There is a Korean saying, "Every net has a hole." Doctors and pharmacists have shown that they'll find a way around price controls, or go on strike when the hole in the net is temporarily covered.

There is no perfect solution to the impasse. But by busting the monopolies and allowing medical fees to find their natural pricing in a free market, it is much less likely that South Korea's doctors will be posting signs in medical centers telling patients to go away.


From The Asian Wall Street Journal. Mr. Kweon, director of public policy at the South Korea-based Center for Free Enterprise, is a visiting scholar at the Cato Institute, in Washington, D.C. Mr. Lartigue, a staff writer at the Cato Institute, worked as an educator in South Korea for more than five years.


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