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History shows it's possible for the market to provide affordable health care

History proves it’s possible for the market to provide affordable health care

May 15, 2023 by AFP

Today we are told that there are only two options for health care policy in the U.S.: heavy regulations or complete government control. We are told that without these guard-rails put in place by our betters in Washington, medical care would be too expensive for the poor and we’d all be sicker.

Not only is this premise wrong, it’s a complete inversion of the truth.

A community-based solution for affordable health care

Over 100 years ago, the working class in America, Britain, and Australia had devised a free market, community-based solution: fraternal societies.

As Roderick Long explains in his essay “How Government Solved the Health Care Crisis

The principle behind the fraternal societies was simple. A group of working-class people would form an association (or join a local branch, or “lodge,” of an existing association) and pay monthly fees into the association’s treasury; individual members would then be able to draw on the pooled resources in time of need. The fraternal societies thus operated as a form of self-help insurance company.

Turn-of-the-century America offered a dizzying array of fraternal societies to choose from. Some catered to a particular ethnic or religious group; others did not. Many offered entertainment and social life to their members, or engaged in community service. Some “fraternal” societies were run entirely by and for women. The kinds of services from which members could choose often varied as well, though the most commonly offered were life insurance, disability insurance, and “lodge practice.”

“Lodge Practice” refers to an agreement between a doctor/hospital and an individual fraternal society for medical services for its members. The members would pre-pay a low fee for services and the doctors would enjoy a consistent revenue stream.

By today’s standards, that fee is shockingly low:

Most remarkable was the low cost at which these medical services were provided. At the turn of the century, the average cost of “lodge practice” to an individual member was between one and two dollars a year. A day’s wage would pay for a year’s worth of medical care.

In 1884, the New Hampshire Bureau of Labor stated in a report,

The tendency to join fraternal organizations for the purpose of obtaining care and relief in the event of sickness, and insurance for the family in case of death, is well-nigh universal. To the laboring classes and those of moderate means they offer many advantages not to be had elsewhere.

In David Beito’s book, “From Mutual Aid to the Welfare State,” he outlines how black-owned fraternal societies provided critical services to their members in the south:

In 1942 more than 7,000 black people gathered in the small town of Mound Bayou, Mississippi, to celebrate the opening of the Taborian Hospital. The project had been undertaken by the Mississippi Jurisdiction of the International Order of Twelve Knights and Daughters of Tabor. To many celebrants it seemed a miracle. Through their combined efforts they had raised enough money to build a hospital in one of the poorest counties in the nation. For the first time, men and women could visit a doctor by walking through the front door rather than the side entrance for the “colored section.”

The hospital of the Knights and Daughters of Tabor was neither the first nor the last such institution among blacks. Black fraternal organizations had established various hospitals during the first three decades of the twentieth century. In Indianapolis, for example, the Sisters of Charity, an independent women’s lodge, founded a small hospital in the 1910s. . . By 1931 black fraternal societies had founded nine fraternal hospitals in the South.

You may be asking, if this arrangement was so beneficial and successful, why doesn’t it exist anymore?

Why don’t these historical health care arrangements exist anymore?

Organizations like the American Medical Association that represented doctors argued that the falling cost of health care was having a negative effect on their members’ wages. They argued it was too successful, that health care was too affordable! Why should a Harvard-educated doctor have to interview with and be selected by the working poor?

These concerns over the falling cost of health care were presented to our government, which rushed to step in to “fix it,” as Long explains:

Medical societies like the AMA imposed sanctions on doctors who dared to sign lodge practice contracts. This might have been less effective if such medical societies had not had access to government power; but in fact, thanks to governmental grants of privilege, they controlled the medical licensure procedure, thus ensuring that those in their disfavor would be denied the right to practice medicine.

Such licensure laws also offered the medical establishment a less overt way of combating lodge practice. It was during this period that the AMA made the requirements for medical licensure far more strict than they had previously been. Their reason, they claimed, was to raise the quality of medical care. But the result was that the number of physicians fell, competition dwindled, and medical fees rose; the vast pool of physicians bidding for lodge practice contracts had been abolished. As with any market good, artificial restrictions on supply created higher prices — a particular hardship for the working-class members of fraternal societies.

Would free-market health care in today’s day and age look like the fraternal societies of old? Perhaps not, but they’re evidence that without government intervention we can have very effective, low-cost solutions.

After decades of government interventions that have smothered market forces, we have a long way to go in the battle for more affordable health care. Fortunately, AFP has been working on solutions that would significantly improve health care, or what we call the Personal Option:

  1. Give all Americans access to a tax-free health savings account that would allow people to spend pre-tax dollars on medical care.
  2. Promote patient and doctor relationships through direct patient care, which would allow patients to pay a membership fee directly to their doctor in exchange for primary care services, preventive services, and drug discounts.
  3. Reduce drug prices without government price-fixing by allowing more generic drugs on the market, allowing for the sale of drugs already approved by advanced countries we trust, and reducing seniors’ prescription costs by capping out-of-pocket drug prices and closing coverage gaps.
  4. Streamline federal drug approvals for drugs and devices already approved by advanced countries such as Germany, England, and Japan.
  5. Increase access to telehealth services by eliminating government red tape that restricts them.

Visit to learn more about the Personal Option.