Study suggests giving doctors freedom improves patient choice.
FEE has published several articles over the years on the dangers of occupational licensing regulations. In short, occupational licensure imposes additional legal requirements on someone entering a particular profession. These exist in industries ranging from medicine to hair-braiding (yes, really).
Often, defenders of such regulations point to their role in ensuring safety in fields such as medicine. However, a new paper from the National Bureau of Economic Research (NBER) highlights that even in critical sectors like healthcare, it can have negative effects.
Professors Yun taek Oh and Morris M. Kleiner examine the implementation of universal licensing recognition (ULR). ULR is a form of deregulation that allows doctors to practice medicine using out-of-state licenses, thereby decreasing bureaucratic burdens.
The theoretical reason for improved patient welfare is straightforward: if doctors can more freely move and provide services, they can better respond to varying patient demands across different states. Furthermore, customers could still choose to avoid doctors without an in-state license if they believed these out-of-state doctors’ credentials were inferior.
As part of the study, the researchers surveyed patients and asked: “Was there a time in the past 12 months when you needed to see a doctor but could not because you could not afford it?”
Their results showed “clear evidence that access to healthcare increased and the medical cost issues decreased after the universal reciprocity of physician licenses was adopted, implying a positive impact of regulatory relief on consumer welfare.”
They also found that patients 45 to 64 have more statistically significant results compared to those under 45. This makes sense: as we age, healthcare needs grow even if everything else remains constant. Policies allowing a flexible supply of medical providers are more beneficial to older patients.
Advocates of occupational licensing often make their case on the grounds of safety. It’s certainly theoretically true that licensing can help screen out practitioners lacking the adequate knowledge or experience. However, there is no such thing as “free” safety.
In the words of Thomas Sowell, “There are no solutions; there are only trade-offs.” Using licensure to filter out incompetent practitioners also increases the cost for competent ones.
When you increase the cost of something, economics teaches us that you get less of it. Strict, state-specific licensure requirements make it expensive for doctors to move, even when demand for care increases in a particular state. Even if safety improves marginally, it may come at the cost of decreasing the number of available physicians. That shortage of physicians might actually make care less safe than under a lighter regulatory framework. Again, there are no solutions, only trade-offs. ULR helps physicians bypass the extra relocation costs, leading to improved consumer welfare.
This study adds another piece of evidence that, even if some licensing is justified, our current regulatory system is bloated beyond what’s efficient. Suggesting that a physician licensed in Colorado would not be competent in Connecticut is not protecting patients, just reducing their options.
