State Medical Licensing Hinders Affordable Quality Health Care

It fails to meet expectations in the area of discipline and consumer protection

September 17, 2008

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Medical licensing makes health care more expensive and less accessible while failing to protect patients from incompetent physicians, finds a paper by the Cato Institute.

“Consumers would benefit were states to eliminate professional licensing in medicine and leave education, credentialing, and scope-of-practice decisions to the private sector and other courts,” writes Cato adjunct scholar Shirley Svorny in “Medical Licensing: An Obstacle to Affordable, Quality Care”. Svorny is also a professor and chair of the Department of Economics at California State University-Northridge.

State medical licensing was first implemented in the early part of the 20th century when states handed the administration of physician-licensing laws to state boards composed of physicians. Since then, many-including Nobel Laureate Milton Friedman and University of Chicago professor Reuben Kessel-have argued that licensing laws give physicians too much power. This power, manifested through licensing and scope-of-practice laws, has been used to curb competition which ultimately slows the spread of affordable healthcare.

Mid-level clinicians such as advanced practice nurses and physician assistants are a good example of this medical-licensing effect. Not all states allow them to practice independently despite the fact that dozens of peer-reviewed studies have shown they provide the same quality of healthcare for a reduced price.

State medical boards are also ineffective at protecting patients. Researchers have found that state medical boards are inefficient at dealing with offenders because of the complications in reporting, verifying and prosecuting complaints. In fact, “among physicians who made 10 or more malpractice payments between 1990 and 2005, only one-third were disciplined by the state medical board.” 

Further, while they often get credit for establishing education and training criteria and running a background check of the applicant, the fact is they rely heavily on private organizations that accredit education and training programs for this work.

The author concludes: “If eliminating licensing is politically infeasible, some preliminary steps might be generally acceptable. At the very least, state legislators should be alert to the self-interest of medical professional organizations that may lie behind the licensing proposals brought to the legislature for approval.”

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