Tag: shirley svorny

How The Supreme Court Can Stop Consumers From Getting Ripped Off

Today, the Supreme Court hears a case about whether dentists and other professions should be allowed to use state licensing boards to engage in anti-competitive behavior that would be illegal if not done under the auspices of state governments. The case is North Carolina State Board of Dental Examiners v. FTC, and involves actions taken by that state’s dental board to prevent non-dentists from providing teeth-whitening services.

In the University of Pennsylvania Law Review, Cato Institute adjunct scholars David Hyman and Shirley Svorny explain:

A majority of the courts of appeals gives state licensing boards and similar entities considerable latitude to engage in anticompetitive conduct, even when that conduct would be clearly unlawful were it undertaken individually by the licensed providers that typically dominate these licensing boards…

[T]he North Carolina Board of Dental Examiners (N.C. Board) became concerned that non-dentists were providing teeth whitening services. In North Carolina, teeth-whitening was available from dentists, either in-office or in take-home form; as an over-the-counter product; and from non-dentists in salons, malls, and other locations. The version provided by dentists was more powerful and required fewer treatments, but was significantly more expensive and less convenient. In response to complaints by dentists that non-dentists were providing lower-cost teeth-whitening services, the N.C. Board sent dozens of stern letters to non-dentists, asserting that the recipients were engaged in the unlicensed practice of dentistry, ordering them to cease and desist, and, in some of the letters, raising the prospect of criminal sanctions if they did not do so. The N.C. Board also sent letters to mall owners and operators, urging them not to lease space to non-dentist providers of teeth whitening services.

The Supreme Court will decide whether the North Carolina dental board should be able to claim a “state action” exemption to federal laws against anti-competitive conduct. Hyman and Svorny argue they should not, noting that doctors, lawyers, and other professions have used government licensing to stamp out competition, to the detriment of consumers:

Other occupations provide no shortage of similar examples, whether it is states requiring hair braiders to obtain cosmetology licenses (even though the requisite training has absolutely nothing to do with hair braiding), laws prohibiting anyone other than licensed funeral directors from selling coffins, states prohibiting anyone other than veterinarians from “floating” horse teeth, or ethics rules prohibiting client poaching by music teachers. 

“Antitrust has historically focused on private restraints on competition, but publicly imposed limitations can pose greater peril,” they write, “since they are likely to be both more effective and more durable.”

Hyman and Svorny make three further recommendations for the courts:

First, in reviewing the decisions of licensing boards, courts should presume that states were not actively supervising the boards, absent compelling evidence to the contrary. Second, defendant–licensing boards should be required to present persuasive evidence of actual harm that their proposed licensing restrictions or restraints will prevent and should be required to show that private market and non-regulatory forces (including brand names, private certification, credentialing, and liability) are insufficient to ensure that occupations maintain a requisite level of quality. Finally, we argue that legislators should take steps to roll back existing licensing regimes.

Hyman signed onto an amicus brief filed by antitrust scholars. (Here are two more amicus briefs filed by public-choice economists and the Cato Institute.) Svorny argues for the complete repeal of government licensing of medical professionals, and illustrates how the market for medical-malpractice liability insurance does more to promote health care quality than licensing

(Cross-posted at Darwin’s Fool.)

Better than Medicaid Expansion: Missouri Senate Approves ‘Good Samaritan’ Law

Never mind Medicaid expansion. The Missouri Senate has approved a bill that would allow doctors to give free medical care to the poor. 

You wouldn’t think the government would have to pass a law to let doctors give free health care to the poor. Yet nearly every state prohibits out-of-state physicians and other clinicians from providing free charitable care to the poor unless those clinicians obtain a new medical license from that state.

In a forthcoming paper for the Cato Institute, I explain how medical licensing laws deny care to the poor, and how reforming those laws is a better alternative than Medicaid expansion:

Remote Area Medical has had to turn away patients or scrap clinics in places California, Florida, and Georgia. “Before Georgia told us to stop,” says founder Stan Brock, “we used to go down to southern Georgia and work with the Lions Club there treating patients.” After a tornado devastated Joplin, Missouri, Remote Area Medical arrived with a mobile eyeglass lab, yet state officials prohibited the visiting optometrists from giving away free glasses.

These stories belie the claim that government licensing of medical practitioners protects patients. Instead, they block access to care for the most vulnerable patients.

States should adopt “Good Samaritan” laws, like those enacted in Tennessee, Illinois, and Connecticut. Those states allow out-of-state-licensed clinicians to deliver free charitable care in their states without obtaining a new license. To protect patients, visiting clinicians are and should be subject to the licensing malpractice laws of the state in which they are practicing.

This week, Missouri’s Senate passed such a Good Samaritan law. (It even lets licensed veterinarians come to the state to provide free charitable care to animals.) The bill also provides an inducement to out-of-state clinicians by reducing their liability exposure for malpractice. It would be better if the state were to let doctors and patients choose their own malpractice liability rules via contract. Unlike ObamaCare’s massive Medicaid expansion, this bill would expand access to care for the poor without costing states or taxpayers a dime.

Here’s a video on Remote Area Medical, the good that it does–and the good that licensing laws prevent it from doing.

Even if you’re not ready to concede that medical licensing laws are harmful and should be repealed, you would have to admit it makes no sense for the government to block licensed doctors from treating the poor for free.

The GOP’s Legislative Malpractice

If you read Virginia Attorney General Ken Cuccinelli’s op-ed in Sunday’s Washington Post, you witnessed the too-rare spectacle of a Republican denouncing his own party’s hypocrisy on medical malpractice reform:

With Senate Bill 197 — legislation that would have the federal government dictate how state judges are to try medical malpractice cases and cap what state courts may award — several Republican senators have…take[n] an approach that implies “Washington knows best” while trampling states’ authority and the 10th Amendment. The legislation is breathtakingly broad in its assumptions about federal power, particularly the same power to regulate commerce that lies at the heart of all the lawsuits (including Virginia’s) against the individual mandate of the 2010 federal health-care law. I have little doubt that the senators who brought us S. 197 oppose the use of the commerce clause to compel individuals to buy health insurance. Yet they have no qualms about dictating to state court judges how they are to conduct trials in state lawsuits…

This legislation expands federal power, tramples the states and violates the Constitution. And if it were ever signed into law — by a Republican or Democratic president — I would file suit against it just as fast as I filed suit when the federal health-care bill was signed into law in March 2010 (15 minutes later).

For more on why ObamaCare is unconstitutional see this white paper by Cato chairman Bob Levy.  For a discussion of why nearly all federal med mal reforms are unconstitutional, see this Policy Analysis by Bob Levy and Michael Krauss.  For a discussion of why mandatory caps on damages may harm patients, see this recent Policy Analysis by Cato adjunct scholar Shirley Svorny.  For an individual-rights-based approach to med mal reform, see this paper by yours truly.

Praise (Sort of) for Latest Cato Health Care Study

Physician assistant and health policy wonk Michael Halasy blogs about Shirley Svorny’s new study on medical malpractice liability reform:

Cato has truly shocked me….stupefied really…

Well, just the other day, I received an update from Cato. Now, Michael Cannon is a good guy, and while he and I simply don’t agree on … well much of anything from a health policy perspective, his colleague, Shirley Svorny, wrote this: “…Reducing physician liability for negligent care by capping court awards, all else equal, will reduce the resources allocated to medical professional liability underwriting and oversight and make many patients worse off. Legislators who see mandatory liability caps as a cost-containment tool should look elsewhere.”

I believe that I have been consistent with this…over and over…caps on noneconomic damages DO NOT WORK.

So, I have to (gulp) swallow some pride, and tip my hat to Cato…Now I need to go take a shower. I feel a little dirty.

It’s a good reminder that libertarians do not fit neatly into the usual political categories. We oppose direct government regulation of health care quality, such as through clinician licensing. But we support indirect regulation, such as through the medical malpractice system, and defend that system from critics who want to impose top-down rules on that system like mandatory caps on noneconomic damages. We prefer bottom-up approaches, like letting free individuals choose their own med mal reforms.

Cato Study: Malpractice Insurance Markets Promote Quality Care, Mandatory Damage Caps Could Undermine Same

Today, the Cato Institute releases a new study:

Could Mandatory Caps on Medical Malpractice Damages Harm Consumers?

by Shirley Svorny

Shirley Svorny is an adjunct scholar at the Cato Institute and professor of economics at California State University, Northridge.

Supporters of capping court awards for medical malpractice argue that caps will make health care more affordable. It may not be that simple. First, caps on awards may result in some patients not receiving adequate compensation for injuries they suffer as a result of physician negligence. Second, because caps limit physician liability, they can also mute incentives for physicians to reduce the risk of negligent injuries. Supporters of caps counter that this deterrent function of medical malpractice liability is not working anyway—that awards do not track actual damages, and medical malpractice insurance carriers do not translate the threat of liability into incentives that reward high-quality care or penalize errant physicians.

This paper reviews an existing body of work that shows that medical malpractice awards do track actual damages. Furthermore, this paper provides evidence that medical malpractice insurance carriers use various tools to reduce the risk of patient injury, including experience rating of physicians’ malpractice premiums. High-risk physicians face higher malpractice insurance premiums than their less-risky peers. In addition, carriers offer other incentives for physicians to reduce the risk of negligent care: they disseminate information to guide riskmanagement efforts, oversee high-risk practitioners, and monitor providers who offer new procedures where experience is not sufficient to assess risk. On rare occasions, carriers will even deny coverage, which cuts the physician off from an affiliation with most hospitals and health maintenance organizations, and precludes practice entirely in some states.

If the medical malpractice liability insurance industry does indeed protect consumers, then policies that reduce liability or shield physicians from oversight by carriers may harm consumers. In particular, caps on damages would reduce physicians’ and carriers’ incentives to keep track of and reduce practice risk. Laws that shield government- employed physicians from malpractice liability eliminate insurance company oversight of physicians working for government agencies. State-run insurance pools that insure risky practitioners at subsidized prices protect substandard physicians from the discipline that medical malpractice insurers otherwise would impose.

This study’s findings suggest that supporters of market-based health care reform should ditch their support of mandatory damage caps, and embrace better med mal reforms. It also suggests that government should abandon direct regulation of health care quality, such as through medical licensing.