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How Medical Licensing Laws Harm Patients and Trap Doctors

I am committing professional heresy: government medical licensing is morally and economically wrong.

by
Paul Hsieh

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October 1, 2012 - 12:03 am
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I am about to commit a professional heresy.

Here it goes: Government licensing of doctors is both morally and economically wrong.

Most organized medical societies including the AMA (American Medical Association) and my own state medical society support government licensing of physicians, on the grounds that it protects the public from incompetent practitioners. But as with all other forms of occupational licensing, medical licensing actually serves primarily to protect the practitioners at the expense of the public. Furthermore, the interaction between current licensing laws and upcoming ObamaCare laws will harm both patients and doctors in unanticipated ways.

Government licensing of physicians is a relatively new phenomenon. Prior to the mid-1800s, there was relatively little regulation over who could or could not practice medicine. But in 1847, the AMA was formed to promote the interests of MD physicians relative to other health practitioners (such as naturopaths and chiropractors). Over the next several decades, the AMA persuaded Congress and state legislators to shut down “substandard” medical schools and impose the current system of state-based medical licensing under licensing boards controlled by physicians. (Some of these other health practitioners eventually survived by forming their own government-sanctioned licensing organizations.)

Nobel Prize winning economist Milton Friedman identified the basic problem with medical licensing in his classic 1962 book Capitalism and Freedom. Friedman observed, “[L]icensure… almost inevitably becomes a tool in the hands of a special producer group to obtain a monopoly position at the expense of the rest of the public.” Licensing laws restrict the supply of practitioners, thus raising prices for patients. Thus, “The public [is] deprived of the medical care it wants to buy and is prevented from buying.”

Nor does licensing ensure professional competence. As a practicing physician, I know first-hand that it’s possible for someone to be a bad doctor yet still hold a state medical license.

I work with many excellent doctors. I also know a few atrocious doctors that I would never let touch me with a 10-foot pole. Yet all of them are licensed by the state of Colorado. In reality, state licensure does not and cannot protect patients from incompetent doctors.

Other private certification agencies provide much better protection for patients than government licensure. For instance, most major medical specialties have private certification boards that set a higher bar than mere state licensure. That’s why doctors typically advise you to seek someone who is “board certified” if you need a specialist such as a pediatrician, neurologist, or orthopedic surgeon.

Similarly, all reputable hospitals have a credentialing committee to oversee which physicians are allowed to practice in their facility. Some of my colleagues are members of these committees at their local hospitals and they work hard to weed out bad doctors. They are motivated by a simple, self-interested reason: the hospital’s reputation can suffer if incompetent doctors practice there. These private entities are much better guarantors of physician competence than mere state licensure.

Government licensure cannot guarantee physician competence. But government licensure can lull patients into a false sense of security. Just as we would never assume that someone possessing a state driver’s license is necessarily a safe driver, patients should never assume that someone possessing a state medical license is necessarily a competent physician. Ultimately, patients should assume primary responsibility for finding a good doctor, using some of the guidelines above, as well as through referrals from friends, family, and trusted physicians. (One good way is to ask your own family doctor, “Who would you send your mother to if she needed to see a specialist in X?”)

More fundamentally, government occupational licensure is morally and economically wrong because it violates individual rights. As Judge Andrew Napolitano recently said, “The state has no moral or lawful authority to restrain A and B from agreeing to exchange a service for a payment, providing that the agreement is voluntary.” Unless there is an issue of force or fraud, the government should leave patients free to seek medical care from willing providers on mutually agreeable terms.

Current medical licensing laws will have an increasingly harmful effect on patients and doctors as ObamaCare is phased in. This will be driven largely by the current shortage of physicians, expected to worsen under ObamaCare. The national shortfall of doctors is projected to reach 60,000 doctors in 2015 and 90,000 doctors by 2020, which amounts to roughly 10-15% of all practicing physicians. This number could climb much higher if a significant fraction of the 34% of doctors who have considering quitting due to ObamaCare actually do so.

ObamaCare also worsens the physician shortage by expanding the number of patients in government medical programs like Medicaid (which is notorious for underpaying physicians). One doctor noted that every time she sees a Medicaid patient, it’s like handing them a $20 bill. Hence, many doctors are choosing to not accept new Medicaid or Medicare patients (although they will likely continue seeing the ones they currently have).

As the New York Times notes, this causes an “invisible shortage” where patients are theoretically covered but have a hard time receiving actual medical care. The NYT notes that in some parts of the country, patients are already “driving long distances to doctors, languishing on waiting lists, overusing emergency rooms and even forgoing care.”

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