Medicare isn't the only part of America's health-care system where costs are spiraling out of control. Doctors have created a cartel by confining the delivery of treatment solely to M.D.s and by regulating the number and activities of M.D.s. This suppresses the supply of health-care professionals, raising costs and reducing choice. State governments could significantly lower both public and private health-care costs by reducing physicians' stranglehold over medical care and moving towards a freer market. For its part, the federal government could, if it is willing to use its vast power under the commerce clause of the Constitution, preempt state rules that hamper the cost-effective delivery of medical services.
The Clinton administration recognized the problem of supply, but sought to remedy it by manipulating federal funding to force more doctors to become general practitioners. Similarly, the Council on Graduate Medical Education has urged educational changes to change the ratio of primary-care physicians to specialists from 30:70 to 50:50 by the year 2040.
The critical question, however, is not what percentage of doctors should provide primary care, but who should be allowed to provide primary care. Doctors are not the only professionals qualified to treat patients, yet most states needlessly restrict the activities of advanced-practice nurses (A.P.N.s) (who include nurse practitioners, nurse-midwives, clinical nurse specialists, and nurse anesthetists), registered nurses (R.N.s), licensed practical nurses (L.P.N.s), physicians assistants (P.A.s), nurse's aides, and similar professionals. Even today, these providers dramatically outnumber doctors—there are 2.2 million R.N.s, three times the number of M.D.s, and nearly 1 million L.P.N.s alone, while the number of A.P.N.s, at well over 100,000, is about half the number of physicians providing primary care. Ellen Sanders, a vice-president of the American Nurses Association, estimates that 300,000 R.N.s could become A.P.N.s with an additional year or tw o of training.
Although A.P.N.s, R.N.s, and L.P.N.s are capable of handling many simple and routine health care procedures, most states, at the behest of physicians, allow only M.D.s to perform "medical acts." According to Arthur Caplan, director of the Center for Biomedical Ethics at the University of Minnesota, "You have highly trained people doing things that could be done by others." Doctors perform what A.P.N.s could do, A.P.N.s do what registered nurses could handle, and registered nurses handle what nurse's aides could perform. "I can take care of a patient who has broken an arm," complains Maddy Wiley, a nurse practitioner in Washington state, "treat them from top to bottom, but I can't give them an adequate painkiller." Instead, patients can receive such treatment only through the government-created doctors' oligopoly, into which entry is tightly restricted. Observes Michael Tanner of the Cato Institute: "In most states, nurse practitioners cannot treat a patient without direct physician supervision. Chiropractors cannot order blood tests or CAT scans. Nurses, psychologists, pharmacists, and other practitioners cannot prescribe even the most basic medications."
The problem is exacerbated by the nature of the medical marketplace, where the expansion of services is expensive. Much of the necessary capital already exists -- there are, for instance, a lot of unfilled hospital beds. The practice of medicine, however, has become increasingly labor intensive. The National Center for Policy Analysis figures that, because of the high cost of training medical personnel, "moving capital and labor from other sectors requires a price increase for medical services that is six times higher than that needed to expand other goods and services." As a result, the NCPA estimates, 57 cents of every additional dollar in U.S. medical expenditures is eaten away by higher prices rather than added services.
Physicians have shown unyielding resistance to alternative professionals. Medical societies have tried to prev ent chiropractors, for instance, from gaining privileges at local hospitals. M.D.s have similarly opposed osteopaths and podiatrists. Working through state legislatures, physicians have won statutory protection from competition. Many states ban midwives from handling deliveries. Optometrists are usually barred from such simple acts as prescribing eye drops. Half of the states permit only physicians to perform acupuncture. Overregulation of pharmaceuticals, which prevents patients from self-medicating, also acts as a limit on health-care competition. Allowing over-the-counter sales of penicillin, for instance, could save patients about $1 billion annually.
A recent episode in Georgia illustrates the arbitrariness of most occupational licensure regulations. According to Tanner, state legislation was introduced at the behest of dentists to prevent dental hygienists from cleaning teeth. Then an amendment was added for the ophthalmologists to bar optometrists from performing laser eye surgery. In the end, the bill prohibited anyone but physicians, veterinarians, podiatrists, and dentists from performing any procedure that pierced the skin, effectively outlawing nurses from drawing blood or giving injections. This unintended outcome would have brought most hospitals to a halt, and a court had to block its enforcement. Examples abound of legal restrictions promoted by self-serving professionals and harmful to consumers. In general, professional licensure has reduced the number of potential caregivers, cut the time spent with patients, and raised prices.
The second manifestation of physicians' monopoly power is the anticompetitive restrictions that the profession places upon itself. The doctors' lobby has helped drive proprietary medical schools out of business, reduced the inflow of new M.D.s, and for years prevented advertising and discouraged members of local medical associations from joining prepaid plans. Until the early 1980s, the American Medical Association attempted to restrict walk-in clinics that adv ertised themselves as providing "emergency" or "urgent" care. Explained John Coury, who was then chairman of the AMA, "Some of these facilities were set up by nonmedical people as money-making propositions" -- as if doctors don't seek to make money. Moreover, federal immigration law and state requirements limit the entry of foreign doctors into the country and often prevent them from finding work. None of these rules has much to do with consumer protection.
Allowing nurses to provide services for which they are qualified would expand people's options, allowing patients to decide on the more cost-effective course of their treatment. Some states have begun to allow greater competition among health-care providers. Mississippi does not regulate the practice of P.A.s. Nearly half the states, including New York, already allow nurse practitioners to write at least some prescriptions, while a handful, such as Oregon and Washington, give A.P.N.s significant autonomy. The Florida Department of Health and Rehabilitative Services is encouraging the training of nurse-midwives.
In this area, at least, the Clinton administration wanted to move in the right direction, pledging to "remove inappropriate barriers to practice." The Clinton proposal would have eliminated state laws that ban A.P.N.s from offering primary care—prenatal services, immunizations, prescription of medication, treatment of common health problems, and management of chronic but standard conditions like asthma -- and to receive insurance reimbursement for such services. Even these modest efforts did not go unchallenged: The California Medical Association attacked the Clintons' proposal as "dangerous to the public's health," and an AMA report argued that expanding the role of nurses would hurt patients, fragment the delivery of care, and even raise costs.
There is, however, no evidence that the public health would be threatened by allowing non-M.D.s to do more. Professionals should be allowed to perform work for which they are well trained -- witho ut direct supervision by a doctor. At the very least, states should relax restrictions in regions, particularly rural areas, that have difficulty in attracting physicians. In this way, those with few health-care options could choose to seek treatment from professionals with less intensive training. A recent Gallup poll found that 86 percent of Americans would accept a nurse as their primary-care practitioner. Why not give them that option? Says Leah Binder of the National League of Nursing, "Let the 'invisible hand' determine how much it should cost to get a primary-care checkup."
Physicians assistants, for instance, receive two years of instruction to work directly for doctors and could perform an estimated 80 percent of the primary-care tasks conducted by doctors, such as taking medical histories, performing physical exams, and ordering tests. Similarly, the Office of Technology Assessment figures that nurses with advanced practices could provide 60 to 80 percent of the clinical services now reserved for doctors. Explains Arthur Caplan of the University of Minnesota, nurse practitioners are "an underutilized, untapped resource that could help reduce the cost of health care significantly." Len Nichols, a Wellesley economist, estimates that removing restrictions on A.P.N.s could save between $6.4 billion and $8.8 billion annually. Mary Mundinger, the dean of Columbia University's School of Nursing, contends that nurse practitioners have been providing primary care for decades and no research, even that conducted by doctors, has ever documented any problems.
Lonnie Bristow, the chairman of the AMA, admits as much, but responds that those nurses were working under a doctor's supervision. But that supervision is often quite loose. Nurses regularly perform many simple aspects of primary care far more often than doctors and, as a result, are better qualified to handle them in the future, with or without the supervision of an M.D.
None of the AMA's arguments withstands analysis. For instance, the officia l AMA report claims that because nurses want to serve all populations and not just "underserved" groups in rural and inner-city areas, "there is virtually no evidence to support" the claim that empowering other medical professionals would improve access to care. But increasing the quantity of primary health-care providers would necessarily make additional medical professionals available to every area. Moreover, poor rural communities would likely be better able to afford the services of A.P.N.s, whose median salary nationwide is $43,600, than a general-practice M.D.s, with a median salary of $119,000. Even if allowing nurses to do more increased competition only in wealthier areas, it would thereby encourage some medical professionals, including doctors, to consider moving to underserved regions where the competition is less intense.
The most compelling argument against relaxing restrictions on nurses is that Americans' health care might somehow suffer. "A nurse with four to six years of education after high school does not have the same training, experience, or knowledge base as a physician who has 11 to 16 years," complains Daniel Johnson, the Speaker of the AMA's House of Delegates. True enough, but so what? No one is suggesting that nurses do anything but the tasks nurses are trained to do. In fact, the OTA study judged A.P.N. care in a dozen medical areas to be better than that of M.D.s.
The problem of occupational licensure is not confined to doctors. The nursing profession behaves the same way when it has a chance. Under severe cost pressures, hospitals have increasingly been relying on L.P.N.s, nurse's aides, and "patient-care assistants." The cost savings can be great: Nurses typically receive two to four times as much training as licensed practical nurses and command salaries 50 percent greater. Yet in many hospitals they still bathe and feed patients. Stanford University Hospital has saved $25 million over the last five years by reducing the share of R.N.s among patient-care employees from 90 percent to 60 percent. The consulting firm of APM, Inc. claims that, since 1987, it has assisted 80 hospitals in saving some $1 billion. Alas, professional groups like the American Nurses Association have opposed these efforts.
To bring competition to the medical profession, patients should also be allowed greater access to practitioners of unorthodox medicine. In 1990, a tenth of Americans -- primarily well-educated and middle- to upper-income -- went to chiropractors, herbal healers, massage therapists, and the like. Health insurance covered few such treatments. Some of these procedures may seem spurious, but then, practices like acupuncture were once regarded similarly before gaining credibility. The most important principle is to allow patients free choice to determine the medical treatments they wish to receive. This means relaxing legal restrictions on unconventional practitioners and creating a health-insurance system that would allow those inclined toward alternative treatments to acquire policies tailored to their preferences.
Most important, states should address the obstacles to becoming and practicing as an M.D. This nation suffers from an artificial limit on physicians. Observes Andrew Dolan of the University of Washington, the argument that occupational licensing is necessary "to protect patients against shoddy care" is "unproven by almost any standard." Experience suggests that licensure reflects professional rather than consumer interests.
At the least, states should eliminate the most anti-competitive aspects of the licensing framework, particularly barriers to qualifying as doctors and to competition. These include that power of doctors to control entry into their own profession and to restrict competitive practices. As the National Center for Policy Analysis's John Goodman and Gerald Musgrave explain, "Virtually every law designed to restrict the practice of medicine was enacted not on the crest of widespread public demand but because of intense pressure from the political repres entatives of physicians." Although licensure is defended as necessary to protect patients, local medical societies spent years fighting practices (such as advertising, discounting, and prepaid plans) that served patients' interests, as well as imposing fixed-fee schedules on their members. No existing licensing requirement should escape critical review.
More far-reaching reform proposals include substituting institutional licensure of hospitals and establishing a genuine free market in health care (backed by private certification and testing and continuing malpractice liability). Such approaches seem shocking today only in the context of the vast regulatory structure that has been erected over the years. If we are serious about increasing access to and reducing the expense of medical care, we should give careful consideration to full deregulation. Such steps would do much to achieve the Clinton administration's goal of encouraging more primary-care physicians and more physicians from racial minorities.
The federal government shares some of the blame for clogging the pipeline of medical professionals, because its Medicaid and Medicare reimbursement rules encourage needlessly large and over-trained medical staffs. Medicare, for instance, requires hospitals to use only licensed laboratory and radiological technicians, and engage a registered nurse to provide or supervise the nursing in every department. Only nurse practitioners operating in nursing homes or rural areas can be reimbursed under Medicare. Only 18 states allow Medicaid reimbursement for A.P.N.s. Non-hospital facilities such as community health centers, which play a particularly important role in poor and rural areas, also face tough staffing requirements. These sort of restrictions hamper the shift to less expensive outpatient services. With enough political will, the federal government could play a role in easing state licensure, just as the Federal Trade Commission fought professional strictures against advertising.
The collapse of the Cl inton campaign for radical reform was welcome, but the American medical system still needs fixing. The supply side would be a good place to start. Rising costs require us to look for cost-effective alternative providers. Even more important: Patients should have the largest possible range of options when determining their health care. It's time to integrate the practice of medicine into the market economy.