Break the Health

May 24, 2023

State agencies’ stranglehold on permitting thwarts innovation and efforts to develop more effective treatments.

Most Americans are unhappy with the nation’s health-care system, and for good reason. It’s expensive. It offers limited choice. And it failed during the pandemic and even after, as evidenced by a significant death spike. In short, our health-care system, despite its technological prowess, often does not live up to expectations.

But instead of accepting the status quo, as beneficiaries of the current system want, or adopting socialized medicine under the guise of extending Medicare—as Hillary Clinton, Bernie Sanders, and Pete Buttigieg, among others, desire—Americans should try an approach that has served them well in the past: open competition. A more competitive climate would be particularly beneficial in the area of licensure.

Everyone wants their health-care practitioner (HCP) to be licensed, but state-licensing agencies should not hold a monopoly on this power, as they do today. Under current conditions, a well-trained and experienced HCP who follows clinical judgement instead of the dictates of a single government-mandated licensing board can lose the lawful ability to practice. To be sure, loss of license is often justified by practitioner misconduct, but state boards have also ousted HCPs for “failing to meet the accepted standard of care,” even when such standards are lacking—or potentially harmful to patients. Examples abounded during the pandemic, thwarting efforts to develop more effective treatments, detection technologies, and prevention protocols.

A licensing monopoly can impede medical progress because alternative diagnostics and therapies often provide outcomes superior to prevailing standards. Consider, for example, the approaches to cardiovascular disease detection and treatment pioneered by Bradley Bale and Amy Doneen, or alternative Covid treatment protocols, like ample exercise and micronutrients, that often proved more effective than the respirators and drugs pushed by the medical establishment.

Patients need to understand that licensing indicates only that an HCP has acquired minimal competence. An HCP will not necessarily extend its best effort in individual instances. That’s where incentives come in. A few decades ago, most doctors owned their own practices, and they suffered financially if they earned a reputation for poor service. And Americans of an even earlier time could buy health insurance from commercial insurers, fraternal organizations, or HCPs. Even some life insurers offered health-related information and screenings because it was in their financial interest to keep their customers healthy. Each of these arrangements had problems, but they pale compared with those inherent in the system that largely emerged after the Second World War, in which group insurance, offered through employers rather than to individuals, predominates. Today, three in every four physicians are employees of large health-care systems or practices.

Policymakers should let alternative licensing, insurance, and pricing systems operate free from artificial constraints like “certificates of need” and “scope of practice” limitations. Airlines, freight railroads, trucking, and other industries were all successfully deregulated in the 1970s and 1980s, and efficiency gains—as measured by lower prices and higher quality service—soon followed. Health care would be no different. One model for consideration could be the Southeast Asian nation of Singapore, which, as Scripps College economist Sean Flynn observes, has forged a world-class health-care system that provides service at low prices without denying quality care to even the poorest of the poor. Thanks to competition, physicians are tethered to only one administrator—unlike in America, where at least four administrators weigh down every physician.

What about licensing as protection against quack medicine? The three main checks against quackery are not licensing but reputation, economic incentives, and insurance. In Singapore, customers rate HCPs publicly, just as Americans are accustomed to rating various service providers from auto mechanics to restaurants. Quacks are quickly exposed. Traditionally in America, word-of-mouth reputation was sufficient to weed out poorly performing HCPs because they owned their own practices and suffered financially if they did not treat their patients well. Today, however, most HCPs are mere employees who can hide their shortcomings in large bureaucracies, which can protect their licenses while shifting them to other facilities within their extensive networks if the bad doctors’ reputations ever threaten the reputation of the overall institution. Medical malpractice is the third main check against quackery but one that due to various U.S. regulations does not function as efficiently as it could, again as evidenced by Singapore. Performance bonds could serve a similar purpose as insurance, especially for surgeries and other one-off interventions; some doctors voluntarily have introduced guarantees that they will refund fees if patients do not heal after following the doctor’s recommendations.

At minimum, opening up competition in licensing would constitute a major improvement. A federal licensing option, for example, would make state licensing groups more accountable and less likely to interfere in the doctor-patient relationship while also opening up the health-care market to more competition by letting patients obtain services across state lines more readily. Similarly, if state licensing boards were more willing to accept licenses issued by other states, HCPs would find it easier to provide interstate services and to resist the dictates of boards prone to making licensing decisions based on ideological, rather than scientific, grounds.

HCPs throughout America want to innovate. They want to try different types of pricing and payment systems (transparent prices for cash), tests (blood, DNA, arterial sonograms, body-composition scales), treatments (micronutrients, sugar-intake reduction), interaction styles with patients (remote consultations, mobile offices), and ways of dividing duties among established and emerging specialties. Breaking the licensing monopoly would help put patients back in the driver’s seat to choose the arrangements that work best for them.

Robert E. Wright is a senior faculty fellow at the American Institute for Economic Research and the author of, among other books, Fubarnomics: A Lighthearted, Serious Look at America’s Economic Ills. Follow him on Twitter @robertewright.

Photo: Sam Edwards/iStock

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