Chapter 2: The Expansion of the Market

One of the main problems for physicians in the beginning of the 19th century was that they could not make enough money. As stated by Starr, at this time, there were limiting "economic conditions that encouraged most families to care for themselves." Without many people to treat, medical professionals did not have the opportunity to make any financial gains.

Unregulated Medical Expansion
Interestingly, circumstances soon changed as more and more people began to pay for medical services and hospital care. As patients pursued more health care, the medical market expanded to provide more and more services. Yet, "the public, as well as physicians, resisted treating medicine purely as a commodity and giving free rein to commercial impulses." Americans did not know whether the medical profession should be allowed to grow without restriction or not. Two sides formed: Some believed that the market should be freed of constraint so that the medical profession can grow. In contrast, some thought it best to protect the economy and also traditional medical institutions by restricting the growth of the medical profession.

At this time, the government was not as involved in treatment of the sick. Thus, with little government intervention, the medical market was allowed to grow without impediment. One consequence of little regulation was the formation of several different payment systems for medical care. For example, in the 1830's and '40's, a fee for service system popularized. So, many physicians would simply collect money for individual services provided. Other physicians provided medical care by credit and collected payments either quarterly or annually. Another consequence was that the number of physicians increased dramatically. Many recognized the lucrative advantages of entering medicine. There were no standards for medical education, thus many medical school and "easy" degree programs were created allowing a flood of people to quickly become "doctors" and begin working.

Economic Problems
A major economic problem was the difference between direct price of medicine (physician's fee and hospital stay fee) and indirect price (transportation, etc.). The indirect price for medicine was very expensive no matter where physicians worked. The major contributing factor to indirect prices was transportation. There was no way to control where and when doctors would have to see patients. Thus, they were oftentimes forced to pay large prices simply to commute to where their patients were. There was no way in generalizing indirect costs in medicine, which led to discrepancies in what a physician should charge.

Some of the pressures of the indirect costs of medicine were alleviated by the construction of railroads, steamboats, and roads. This construction led to larger cities and urban areas in which patients and doctors were much closer together. This allowed the physician to travel shorter distances to see patients, thus reducing costs of transportation. Furthermore, the creation of the telephone and automobiles allowed physicians to talk to patients, which sometimes eliminated the costs of transportation altogether.