The Medical Monopoly: Protecting Consumers Or Limiting Competition?

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SOURCE:   The Cato Institute Policy Analysis No. 246

by Sue A. Blevins

Writer and health policy consultant, based in Boston.

Executive Summary

Nonphysician providers of medical care are in high demand in the United States. But licensure laws and federal regulations limit their scope of practice and restrict access to their services. The result has almost inevitably been less choice and higher prices for consumers.

Safety and consumer protection issues are often cited as reasons for restricting nonphysician services. But the restrictions appear not to be based on empirical findings. Studies have repeatedly shown that qualified nonphysician providers–such as midwives, nurses, and chiropractors — can perform many health and medical services traditionally performed by physicians — with comparable health outcomes, lower costs, and high patient satisfaction.

Licensure laws appear to be designed to limit the supply of health care providers and restrict competition to physicians from nonphysician practitioners. The primary result is an increase in physician fees and income that drives up health care costs.

At a time government is trying to cut health spending and improve access to health care, it is imperative to examine critically the extent to which government policies are responsible for rising health costs and the unavailability of health services. Eliminating the roadblocks to competition among health care providers could improve access to health services, lower health costs, and reduce government spending.


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Although broad-based health care reform has temporarily moved to the back of the public agenda, there remain serious problems of cost and access in the American health care system. The underlying reason for those problems is the lack of a functioning free market in health care in this country. There is privately owned health care, but there is not a living, vibrant free marketplace in health care like there is in other products and services.

Healthy markets have certain common characteristics. On the supply side, there is a choice of providers, in competition with one another, trying to gain customers on the basis of price and quality. And on the demand side, there are consumers seeking the best deal for their dollar. In today’s health care system, neither of those conditions obtains.

During the 1994 health care reform debate, much attention was given to the demand side of the market. [1] That attention led to the development of ideas such as medical savings accounts to make health care consumers more cost conscious. [2]

However, true reform requires that the supply side of the health care market be addressed as well. Currently, a wide variety of licensing laws and other regulatory restricions limits the scope of practice of nonphysician professionals and restricts access to their services. Moreover, at the same time that it is restricting the practices of nontraditional health care professionals, government is providing subsidies for the education and training of physcians who fit the medical orthodoxy. The result has been the creation of a de facto medical monopoly, leading to less choice and higher prices for consumers.

Therefore, true health care reform must involve ending the government-imposed medical monopoly and providing consumers with a full array of health care choices.

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