Research & Commentary: How States Can Address America’s Doctor Shortage

Published October 20, 2017

Supporters of strict state licensing standards argue they assure quality, but critics argue the arduous and often expensive licensing process harms the health care market by hindering entry for new physicians and thereby impeding the competition that lowers costs and improves consumer access to healthcare services. Shirley Svorny of California State University at Northridge and the Cato Institute argued in a 2008 paper, “Licensure not only fails to protect consumers from incompetent physicians but, by raising barriers to entry, makes health care more expensive and less accessible.”

There are several paths state legislatures and medical boards can choose to lower these regulatory barriers. The first proposal is the creation of an interstate compact that would free doctors to practice medicine across numerous states with one license. The framework of such an agreement already exists. Eighteen states have joined the Interstate Medical Licensure Compact, an agreement between states that allows physicians in member states to obtain expedited licenses to treat patients located in other member states. However, Svorny says the compact continues to require duplicative licensing processes among the states and does not allow physicians to practice across states with one license.

Current state laws require physicians to hold a license from the state in which a patient receives care. These laws also have state-specific regulations and licensing fees, all which discourage physician participation in interstate telemedicine. The compact is designed to overcome some of these barriers by allowing physicians to prove their qualification through their own state medical licensure board; eligible physicians would then qualify for an expedited license with other member states’ medical boards.

Instead of a compact, Darcy N. Bryan, Jared Rhoads, and Robert Graboyes argue in the Mercatus Center’s Healthcare Openness and Access Project in favor of reciprocity laws between states. Reciprocity laws would allow a physician in one state to use his license in another state without needing to reapply. Bryan, Rhoads, and Graboyes believe reciprocity laws are “the easiest and least controversial ways for states to minimize restraints on physicians, yet a substantial number of states do not allow reciprocity.”

Reciprocity would only be allowed if one state were to agree to set up the arrangement with another state; they would never be forced to accept physicians who were licensed under standards they found to be less vigorous. Reciprocity would require less regulation and paperwork beyond what is currently done, and it could make telehealth available for thousands of new patients.

Another way to expand licensure is the creation of provisional or restricted medical licenses.

According to The Heritage Foundation, these licenses “enable medical graduates to work under the supervision of a primary care physician or a hospital to assist in care and acquire training.” Several states have pursued these laws.

In 2009, the Texas legislature approved the creation of provisional medical licenses that can be used to practice in underserved areas. Applicants for these licenses must already be applicants for a full medical license and are allowed “to practice for a maximum of 270 days in a medically underserved or health professional shortage area.” 

In 2014, the Missouri General Assembly passed a similar law. It allows medical school graduates to receive temporary assistant physician licenses but limits their work to “medically underserved rural or urban parts of [Missouri] or in any pilot project areas.”

The Heritage Foundation argues medical licensing reform is essential to addressing the physician shortage as “the existing framework for physician training and licensure restricts the supply of practicing physicians.” Heritage concludes granting provisional licenses to medical school graduates could help to resolve important issues related to health care, “especially in rural areas and for primary care, where there is a significant demand and a shortage of physicians.”

Interstate compacts, reciprocity, and provisional licenses are three incremental steps states can take to address the doctor shortage.

The following documents examine the doctor shortage and medical licensing in greater detail.

Healthcare Openness and Access Project: Mapping the Frontier for the Next Generation of American Health Care
The Healthcare Openness and Access Project (HOAP) is a collection of state-by-state comparative data on the flexibility and discretion U.S. patients and providers have in managing health care. HOAP combines these data to produce 38 indicators of openness and accessibility. The project provides state-by-state rankings over a number of variables, including occupational licensing.


End State Licensing of Physicians
Shirley Svorny of the Cato Institute argues in this article for the ending of state licensing for physicians. Svorny says the state licensing system is both costly and unneeded. “The benefits of state licensing are overstated. Licensing authorities verify education and training, but little else. State licenses do not indicate an individual physician’s specialty-specific skills. Specialty certification is the purview of medical specialty boards, which are private,” wrote Svorny.

Medical Licensing: An Obstacle to Affordable, Quality Care
Shirley Svorny of the Cato Institute argues licensure not only fails to protect consumers from incompetent physicians but also makes health care more expensive and less accessible by raising barriers to entry. Only institutional oversight and a complex network of private accrediting and certification organizations, all motivated by the need to protect reputations and avoid legal liability, offer whatever consumer protections exist today.

The Medical Monopoly: Protecting Consumers or Limiting Competition?
Sue A. Blevins of the Cato Institute examines the effect of government health care policies on the health care market. Blevins finds licensure laws appear to limit the supply of health care providers and restrict competition to physicians from non-physician practitioners. The primary result is an increase in physician fees and income, driving up health care costs.

Research & Commentary: Reimbursement Flaws in Medicaid and the ACA
Heartland Institute Senior Policy Analyst Matthew Glans examines the growing problem of physician reimbursement under the ACA. Fewer doctors are accepting new Medicaid patients today, in part due to low reimbursement rates and a sharp increase in Medicaid enrollment caused by states expanding Medicaid programs in response to the promise of additional federal funds under the Affordable Care Act (ACA).

Medical Licensing in the States: Some Room for Agreement—and Reform
Charles Hughes of the Cato Institute discusses the growing doctor shortage, how it is likely to increase with the implementation of Obamacare, and the steps some states are taking to address the issue.

A Cure for what Ails Us
Justin Owen, Trey Moore, and Christina Weber of the Beacon Center of Tennessee analyze the current predicament facing Tennessee policymakers in the wake of the ACA. The report also offers state-led solutions that would move the nation’s healthcare system in the proper direction, treating the diseases that weaken the system themselves, rather than merely treating symptoms.

Medical Licensing Impedes Quality, Affordability of Care
This article from the Heartlander discusses a report by Shirley Svorny of the Cato Institute that argues medical licensing is ineffective and inefficient, and that patients would be better served relying on brand recognition when choosing doctors.


Six Reforms to Occupational Licensing Laws to Increase Jobs and Lower Costs
Byron Schlomach of the Goldwater Institute argues reforming licensing could open career opportunities and reduce costs without sacrificing consumer safety. The paper recommends six reforms.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database. 

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.