Research & Commentary: Medical Licensing and the Doctor Shortage

Published July 22, 2014

A 2011 study published in the Milbank Quarterly found Obamacare would create a need for between 4,300 and 7,000 more physicians in the United States by 2019. Avoiding a physician shortage is complicated by the fact that becoming a licensed physician is an expensive and slow process. Strict licensing standards have become a significant barrier to entry in many fields, but nowhere is the influence of licensing more sharply felt than in the health care industry. In many instances, states control licensing standards, professional discipline, and the various costs associated with the process. These standards are usually championed by existing practitioners to slow or block entry of new competitors. 

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 that the current licensing system for physicians serves to benefit incumbent clinicians instead of consumers, and that the health care market would be better served by eliminating professional licensing. 

“Licensure not only fails to protect consumers from incompetent physicians, but, by raising barriers to entry, makes health care more expensive and less accessible,” Svorny wrote. Institutional oversight and a sophisticated 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. Consumers would benefit were states to eliminate professional licensing in medicine and leave education, credentialing, and scope-of-practice decisions entirely to the private sector and the courts.” 

There are several paths state legislators and medical boards can choose to lower these regulatory barriers. The first proposal, recently introduced as a piece of model legislation by the Federation of State Medical Boards, would make it easier for doctors licensed in one state to treat patients in another. According to the New York Times, this reform would not only cover in-person visits but also videoconferencing and online visits. The proposed legislation would create an interstate compact, and the Times reports it has political support from both sides of the aisle. 

The second proposal, supported by the Institute of Medicine and National Governor’s Association, would expand the scope of responsibilities for nurse practitioners (NPs), allowing them to provide additional health care services. This extension would only apply to registered nurses who have also received a graduate degree in nursing. Allowing NPs to administer care would greatly reduce the upcoming doctor shortage and increase access to care. Currently, 19 states and the District of Columbia allow NPs to diagnose and provide some form of treatment for certain illnesses. Although critics of these efforts claim expanding the scope of practice will lower the overall quality of care, a 2012 article in Health Affairs reviewing 26 studies noted the “health status, treatment practices, and prescribing behavior [of NPs] were consistent between nurse practitioners and physicians.” 

Although a complete repeal of medical licensing may not be practical, allowing physicians to treat patients across state lines and expanding the scope of practice of nurse practitioners are two incremental steps states can take to address the doctor shortage. 

The following articles examine the doctor shortage, scope of practice, and medical licensing from varied perspectives.

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. 

Obama Health Care Law Exacerbates Primary Care Physician Shortage
Writing in the Heartlander, Loren Heal reports President Obama’s health care law is likely to increase demand for primary care physicians, even as the nation already faces shortages of doctors in this field. 

The Role of Nurse Practioners in Meeting Increasing Demand for Primary Care
This paper from the National Governors Association summarizes the literature on nurse practitioners and the current practice rules governing NPs.

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 Health Care News at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database at  

The Heartland Institute is available to send an expert to your state to testify or brief your caucus, host an event in your state, or send you further information on this or any other topic. If you have any questions or comments, feel free to contact Heartland Institute Senior Policy Analyst Matthew Glans at [email protected] or 312/377-4000.