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How Medical Licensing Laws Harm Patients and Trap Doctors

Much of this could be alleviated by relaxing medical licensing laws to allow more “mid-level providers” such as nurse practitioners and physician assistants to care for patients. The ones I’ve worked with are perfectly capable of administering flu shots, treating sprained ankles, and providing other basic medical services. They are also capable of knowing when a problem is sufficiently serious that it warrants the attention of a full-fledged MD.

Retail health clinics” staffed by such health professionals are especially good at providing affordable high-quality health care, which can be an enormous boon to those on a tight budget. Yet organized medical groups such as the AMA have consistently fought against allowing such mid-level providers greater responsibility, using licensure and “scope of practice” laws to protect their state-sanctioned monopoly on the practice of medicine.

Medical licensure laws will also harm physicians as well as patients. As ObamaCare pushes more patients into government-controlled insurance (e.g., Medicaid, Medicare, and nominally private government-approved plans purchased through the ObamaCare “exchanges”), many doctors will balk at the low payment rates. Government officials will be increasingly tempted to compel physicians to accept these patients as a condition of retaining their license to practice medicine.

This idea has already been proposed in Massachusetts. In 2010, the Massachusetts legislature considered (but ultimately rejected) a bill that would require doctors “to accept 110% of Medicare rates for health insurance for small businesses. For physicians, acceptance of set rates would be as a condition of licensure.”

More recently in 2012, Massachusetts did pass into law new cost controls, which includes overt controls on how doctors can practice medicine linked to licensure. The Wall Street Journal reported:

[A]ll Massachusetts doctors, hospitals and other providers must register with a new state bureaucracy as a condition of licensure — that is, permission to practice. They’ll be required to track and report their financial performance, price and cost trends, state-sanctioned quality measures, market share and other metrics.

This new “Health Policy Commission” will have the power “to ensure that total Massachusetts health spending, public and private, grows no more than projected gross state product through 2017” (emphasis WSJ). In other words, if a doctor or hospital spends too much on a patient’s care, they could be punished.

How hard will a Massachusetts doctor fight for his patients’ medical interests, if his medical license is endangered whenever he spends more money than the government considers appropriate? If a doctor using his best professional judgment decides that an extra MRI scan or a stronger (but more expensive) antibiotic is medically necessary, but the government thinks otherwise, how many doctors will choose their patient over the bureaucrat who can yank his license and destroy his livelihood?

Because health care developments in Massachusetts are often a bellwether for the rest of the country, it may not be long before we see similar practice restrictions imposed on doctors nationally as a condition of retaining their licenses.

Government licensure has thus become a trap for physicians. In the mid-1800s, doctors sought medical licensure as a special “favor” from the government to exclude competition and ensure a state-sanctioned monopoly. But this was akin to accepting a favor from “The Godfather” — there are always strings attached. Now the government will use those licensure laws to keep doctors under its thumb.

Although ObamaCare has many problems independent of medical licensing, licensure laws makes them worse. Conversely, patients could benefit enormously by eliminating licensure laws. Although full repeal of licensure laws is not yet politically feasible, we can seek partial measures that would move us in the right direction, with an eventual goal of a fully free market in medical services.

For example, economist Shirley Svorny has proposed loosening “scope of practice” laws to allow mid-level providers to perform more medical services currently restricted to physicians. Dr. Milton Wolf has proposed allowing medical licenses to be valid across state lines (like our driver’s licenses). This would open the medical market and increase the freedom of physicians to practice where their services are most needed.

Free-market advocacy groups such as the Institute for Justice have scored major victories against unjust occupational licensure laws, such as striking down a Utah law requiring state licensure of hair braiders. Americans should extend this battle to include medical licensing laws. Repealing medical licensing laws would be a win-win for both patients and doctors.

(Note: This piece is adapted from a short talk I recently gave on Milton Friedman and medical licensing. I don’t agree with Friedman on some important issues, but he was excellent on the issue of occupational licensure.)