In 2008, Dr. John Muney came up with an idea to make medical care more accessible to the uninsured: For a fee of $79 per month and a $10 co-pay per visit, patients could make unlimited office visits for medical services at any of the clinics he owns in New York City. However, under New York state law, only a licensed insurance company can charge a fixed rate for unplanned procedures, such as treatment for an unexpected injury. So, the Insurance Department of the State of New York ordered Dr. Muney to stop offering his plan.

Muney protested, but the Insurance Department was firm. Eventually, however, the State of New York gave Muney an option: raises his rates! In order to comply with state law, Muney now charges more than three times as much for an office visit as he did under the old plan.

This may seem like a perverse outcome, especially since government regulation of medicine is always sold as a way to protect the public.  A promising initiative to make medical treatment more accessible to people with low incomes has been snuffed out. However, this is actually a case of the system working exactly how it is supposed to work. If Dr. Muney’s program had taken off- and perhaps spawned imitators- it would have created competition for the major insurance companies, who have  a vested interest in keeping the Insurance Department friendly and more political muscle than the lowly health care consumer.

By requiring a special license to sell insurance or plans that might compete with conventional insurance, the government of New York has created an ideal way for existing insurance companies to reduce competition and protect their profits. Dr. Muney intends to challenge the law through the legislative process so that he can return to his lower rate, but I wouldn’t rate the chances of one man against the entire insurance industry very highly.

Furthermore, if you’re a politician who desires greater government control of medicine, the last thing you want to see is the development of private sector solutions to the problem of health care for the uninsured. That might make people question whether they need the government to save them, and we can’t have that.

I originally became aware of this story through Coyote Blog, which is a great source on economic freedom issues. Have a look at the Intel section entry Stop Rentseeking for more on the way statism works to the advantage of politically connected economic interests, and Politics Hurt and Stop Statism for more on how the state disrupts the workings of voluntary society.