John Locke Update / Research Brief

Report Calls for Medical Licensure Reform in the Wake of COVID-19

posted on in COVID-19 Series, Government Reform, Health Care, Health Care & Human Services, Law & Regulation
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At the beginning of the COVID-19 pandemic, public health leaders, politicians, researchers, and policy advocates worked quickly to come up with solutions to defeat the virus and protect the economy. At the John Locke Foundation, the research division released sets of North Carolina–based policy responses dealing with health care, the state budget, education, the workforce and economy, and regulation and red tape.

The health care response focused on removing unnecessary restrictions that were in place before the pandemic. Many of those restrictions were incompatible with a comprehensive health care response to the virus because they prevented qualified medical professionals from treating patients.

One area of our recommendations highlighted state licensing and scope of practice for health professionals. As it stands now, medical licensure and scope of practice regulations often reduce the supply and create barriers to health care for patients. They increase the cost of providing health care and inhibit the upward mobility of health care professionals. They give politicians and special interests too much control over the provision of health care.

Health care professionals are the core component of any health care system. One needed reform to our current system is to find ways to distribute well-qualified health professionals better. COVID-19 revealed severe issues in the U.S. health care system, including the distribution of health care professionals and the restrictions we put on those professionals.

A new report by Shirley Svorny and Michael Cannon of the Cato Institute calls for a massive overhaul of how states educate and credential health care professionals in light of the COVID-19 pandemic. 

Direct Government Licensing

As Svorny and Cannon explain, each state determines its “categories of clinicians, education and training requirements for each category, and the range of services each category of clinician may provide.” For example, here in North Carolina, the North Carolina Medical Society licenses and regulates the practice of medicine and professional licenses, and the NC Nursing Board does the same for nurses. Making changes to these long-established protocols, however, is very difficult because they are carefully guarded by state politicians and interest groups

While everyone wants their doctors and nurses to be well trained and competent, direct government licensing presents real conflicts of interest within health care. As the report details,

The self-interest of incumbent clinicians, who form a powerful political constituency, will motivate them to lobby to increase the levels of education and training that workers must receive to enter the health professions, and those higher standards will protect patients. The problem is, it is also in the self-interest of incumbent clinicians to bar market entry by lower-cost competitors whose clinical skills are of equal or higher quality, because those clinicians could take market share from incumbents. Indeed, incumbents have relatively little incentive to seek government protection from inadequately trained competitors because market competition and the medical malpractice liability system will themselves punish low-quality providers.

Incumbent control of a profession creates barriers to new market participants. For example, look at the battle between nurse practitioners and the NC Medical Society as they try to gain full practice authority. North Carolina is one of only twelve states that require nurse practitioners to enter into a collaborative practice agreement with physicians to practice. The NC Medical Society opposes qualified nurse practitioners being allowed to practice on their own. Last year the SAVE Act would have removed that restriction and others placed on nurses by the NC Medical Society, but unfortunately, it did not become law.

Right-skilling 

Correct medical licensing requires the right balance of training and flexibility among health professionals concerning education and scope of practice. The report refers to this proper balance as “right-skilling”:

Maximizing access to quality health care requires right-skilling (i.e., striking a balance between too little and too much education and training). Requiring clinicians to receive more education and training than is necessary to do their jobs is wrong-skilling, which harms clinicians by unnecessarily restricting employment opportunities and harms patients by reducing access to care.

Decades of incumbent control and cronyism in health care, however, has shifted the balance shifted from right-skilling in favor of wrong-skilling.

Cost and Access

Direct government licensing of physicians raises costs and reduces access to health care. In terms of cost, direct government licensing requires health professionals to obtain additional education and training that may not be required to do their job (wrong-skilling). These costs are passed on to consumers as the training for specific positions becomes more expensive.

In addition, incumbent health professionals, some who could be a part of or very close to the government-controlled boards regulate their profession, have a personal interest in keeping their market shares intact by restricting entry. As basic economics tells us, restricted supply with high demand results in higher costs.

Access is also critically impacted by direct government licensing. Wrong-skilled training and education requirements for health care professionals limit the number of individuals who can obtain the skills mandated to get licensed by the governing boards. By lobbying to raise the educational and training requirements of new market entrants, incumbent professionals attempt to thwart lower-skilled professionals from practicing for fear they may take away market share.

Furthermore, state licensing boards rely on profession-controlled national accrediting organizations as the lone entities to control the curriculum and number of accredited programs. This process stifles innovation in educational programs and further limits the supply of professionals by reducing their accreditation opportunities.

Flexible Education and Credentialing 

Svorny and Cannon call on states to reform the way they regulate the practice of medicine by removing government control and therefore limiting the opportunities for cronyism. Specifically, their report calls for more flexible education and training processes for states using third-party organizations not subject to political influence. The report explains how the system would operate:

In such a system, states would not directly license individual clinicians, determine which clinician categories could exist, or delineate scopes of practice. Instead, states would rely upon third-party private and public organizations to accredit education, training, and certification programs that would perform these functions.

Degree- or certificate-issuing organizations would determine the categories of clinicians they would certify, including new categories (e.g., dental therapists, primary care technicians, community paramedics, and assistant physicians), and the education requirements and scopes of practice for each category.

So what would ensure medical professionals deliver high-quality care? First is the medical malpractice insurance system. The threat of paying for maltreatment incentivizes physicians to deliver high-quality care.

Second, as the report states, health care systems, insurance companies, and medical malpractice liability insurers would have regularly conducted reviews of the professionals which with they work.

Third is market competition. Removing unnecessary barriers to care would mean more medical professionals with varying levels of certification. Providing high-quality care will become essential to maintaining a competitive edge over other professionals.

By removing government control of crucial medical licensing decisions, a third-party system of credentialing would benefit patients, future medical professionals, and the health care system as a whole. Moving from a direct government licensing regime to third-party certification would increase the supply of health professionals, reducing the burdens of those who wish to enter into the market.

While it would take quite a bit of political clout to remove control of the medical profession from incumbent, government-sanctioned boards like those in North Carolina, the premise of Svorny and Cannon’s report hits the heart of how we should approach health care reform in this country. Instead of looking for ways to grow government or implement new regulations, we should be looking at removing ways the government causes more dysfunction in the health care system.

Direct government licensing is undoubtedly a reason for the high cost of care, the maldistribution of health professionals, and the shortage of health professionals. Lawmakers should remove the political dynamics from health care decisions that affect patients in negative ways, such as the ones surrounding a system of direct government licensing.

Jordan joined the Locke Foundation in the summer of 2018 as Health Care Policy Analyst. He analyzes state and national health policy issues with an eye toward removing government barriers and instead infusing health care with free-market solutions that encourage… ...

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