Unnecessary licensing restrictions raise cost of health care

Medical toolsWhy do we have licensing laws that restrict who can treat patients as a doctor and perform medical procedures?

Ostensibly, it is for the health and safety of people who need to visit the doctor (i.e. everyone). We don’t want John Doe off the street opening up a medical clinic, calling himself a doctor, and handing out drugs or performing surgery.

So what does it mean when we find out that some licensing rules meant to protect our health have no connection with health outcomes, and in fact harm us by making medical services more expensive?

A recent study published by the National Bureau of Economic Research reported that medical licensing rules that allow only physicians – not nurse practitioners – to prescribe drugs to patients “do not seem to influence health care quality.” Changing these licensing regulations does not seem to impact health outcomes such as infant mortality rates.

However, these licensing restrictions are connected with higher health care costs. For instance, the study “shows that more rigid regulations increase the price of a well-child medical exam by 3 to 16%.” This happens through various mechanisms, such as requiring a parent (or the parent’s insurance company, which charges premiums to cover those costs) to pay the more expensive rate charged by a physician for their child’s checkups, in order to access that physician’s ability to prescribe any drugs needed.

When nurse practitioners are allowed to prescribe drugs, the cost of a well-child exam goes down because the time of the nurse practitioner is less expensive than that of a physician. And as the study suggests, this less expensive medical option is likely to come without significant negative effects on health outcomes.

Why does this matter to Utah and Utah families? In every legislative session, without fail, there is a raft of new proposals to heighten licensing restrictions to prevent people from providing various services.

These proposals are always put forward by their supporters as necessary to protect the health and safety of unwary Utahns from untrained novices or malevolent swindlers. If we were to pick any area of the economy where the knowledge required to safely provide a service were specialized enough, and the health risks to Utahns high enough, to justify strict licensing restrictions, it would probably be health care. Yet even in health care there is evidence that some of these licensing restrictions do little more than protect the income and enrich a select few, at the expense of average Utahns.

When it turns out that the policy sold as protecting the health and safety of Utahns is only “protecting” them from alternative goods and services that are safe and more affordable, it is time for a change in policy … even if it means that some people will lose their privileged status of being protected from free market competition and enriched by restrictions in Utah’s licensing laws.

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