Blockchain and Healthcare Possibilities: Optional Medical Licensure and Healthcare Vouchers

Milton Friedman provided an exemplary explanation of how a publicly-funded healthcare system (through healthcare vouchers) in a free(r) market where consumers have the choice to spend their healthcare vouchers on the producers/firms of their choice (rather than being confined to a state-imposed monopoly) as well as there being no imposed medical licensure requirements could produce much larger welfare gains for society in Capitalism and Freedom. Nevertheless, there are a myriad of barriers to this and one of the reasons healthcare vouchers have not been adopted is because many estimate that there could be higher average costs as a result of publicly-funded, privately-provided healthcare (such as in the USA, despite its higher quality of healthcare at the cost of not being able to provide quantity of healthcare to all) in the UK, for example (where the NHS is, essentially, the state-imposed monopoly that largely dominates the marketplace). Furthermore, medical licensure is intended to regulate quality in a marketplace where consumers are at significant risk of being exploited due to asymmetric information; this provides ample justification for a well-intentioned but ultimately adverse intervention. The emergence of Blockchain technology, however, could be a means through which this problem can be solved.


Firstly, I must confess that I possess only a cursory knowledge of Blockchain technology but I think that it definitely has the potential to greatly benefit society although I remain somewhat sceptical of it for several reasons. My scepticism stems from the paper by Satoshi Nakamoto where I truly do not understand a lot of the terminology used and I am more sceptical still because the identity of the author(s) remains largely unknown. Although Blockchain has been likened to the Internet in terms of its revolutionary potential, everyone knows who Sir Tim Berners Lee is and, for that reason, I do not fully understand why, if someone thinks they have something good for society, they would be so wary of releasing their identity (even if they think they may face state-led repercussions or otherwise). Furthermore, there are also concerns regarding the purported privacy of Blockchain technology in itself; for example, Dr. Sarah Meiklejohn (a Lecturer/Assistant Professor at University College London’s Department of Computer Science) is thought by many to have written the definitive paper on how transactions on the Blockchain can be traced. I must also say that I would not know how to technically implement this, although there are many companies in this exciting space (such as Guardtime) who may. However, in what follows, I will seek to explain how the application of Blockchain technology can solve the myriad of problems that optional medical licensure, healthcare vouchers and so on may otherwise entail. Even if I do not adequately understand Blockchain technology, I think even the most sinister minds would find it difficult or at least significantly morally problematic to tamper with records that concern peoples’ healthcare.


The rationale behind (medical) licensure is sound in the sense that it is designed to ensure quality of the product. In the case of healthcare services in particular, the licensing body (whether that be the American Medical Association in the USA that Milton Friedman takes aim at or the British Medical Association in the UK) ensures that healthcare practitioners are up to a certain standard in a field where the patients most often have lesser information than their treating physicians. Nevertheless, this has evolved in all jurisdictions into something more malign because these medical licensure bodies are one and the same as trade unions that impose a monopoly upon healthcare services within their respective jurisdictions. Put quite simply, this means that there are barriers to entry for producers in the marketplace which artificially increases the price at which they can supply their services to consumers (thereby increasing the cost of healthcare across the market – whether that be in the USA or the UK). However, what if, in principle, consumers, firms and so on could choose to decide what licensure bodies they trust and whether they are fit to provide them healthcare services (rather than being confined to healthcare practitioners from the American Medical Association or the British Medical Association, they could also choose to transact with practitioners from the Indian Medical Association, the Chinese Medical Association and so on from around the world)? The only way through which the benefits of optional licensure could not be reaped is if all the medical trade unions of the world were to collude.


This would also be politically palatable and feasible since public sentiment is largely non-averse to skilled immigration. If consumers, firms and so on could choose which healthcare standards or licensure (if any) they want their practitioners to abide by, this would massively lower the cost of healthcare provision since healthcare workers would now face more global competition. Indeed, if it is found that a disproportionately high number of practitioners from a particular licensing body are not performing adequately for consumers’ or firms’ liking, then consumers will simply switch to alternative practitioners from alternative licensing bodies and these same bodies would have to improve themselves in order to ensure adequate quality. It would also lead to a greater rationalisation of society on the whole with respect to healthcare services and so on which relates back to a post I previously wrote on The Civilisation of Capitalism that speaks of how increasing the choices available to individuals will naturally enable them to become more rational, creative, innovative and so on within a free society. Nevertheless, the arguments against such an arrangement is that it would be too complicated and that it would take far too much time for each individual and/or firm to verify the authenticity of each practitioner’s license to practice corresponding to the original licensing body. Blockchain can solve this through a global blockchain, several interconnected blockchains or even separate blockchains that licensing bodies, practitioners, consumers, firms and so on can choose to participate in according to their preferences which would thereby immediately allow the parties to verify authenticity in a seamless, convenient and low-cost manner.


Therefore, consumers would be able to access healthcare at a lower cost since healthcare professionals in each jurisdiction would face greater competition but, at the same time, healthcare professionals would gain, in the long-run, through higher (monetary) compensation through privately-provided, publicly-funded healthcare since firms would also have to compete amongst each other to pay a fair wage to healthcare practitioners. In the case of the UK, people could choose to stay with NHS (National Health Service) and provide their vouchers to them completely or to use their vouchers with alternative service provider or even top it up (and Milton Friedman does conceptually outline the economic mechanism for this in Capitalism and Freedom). For the NHS, this would mean somewhat of a loss of revenue as people switch to private healthcare providers but it would also mean fewer patients to deal with so the NHS could still be preserved and provide a quality service so long as people choose to spend their healthcare vouchers there and not elsewhere (since they would also face greater competition from firms and other private healthcare providers). In terms of ensuring healthcare vouchers are spent solely for healthcare purposes, Blockchain technology could be used for precisely this and ensuring that we can verify it is being used for this purpose only since the rationale behind publicly-provided healthcare is that it is a public good in the strictest sense of the term because if one person is healthy that is likely to mean that the spread of disease, loss of productivity etc. is likely to be limited and this thereby benefits society more broadly; it is only this sense that a ‘public good’ can be morally justifiable (and if it is voluntarily funded rather than imposed upon others through imposed taxes but we still appear to be a long way away from seeing voluntarily-funded state-provided services).


This would also see the simultaneous weakening of artificially empowered (medical) trade unions and a proliferation of (medical) trade unions that would compete with each other and represent the interests of their constituents more broadly whilst also ensuring that they remain democratically accountable in a freer society with freer markets.


Additionally, this would benefit aspiring medical students and healthcare practitioners more broadly across the world since people would no longer need to study in a particular country in order to gain favourable status for passing that jurisdiction’s licensing examinations, keeping up with their professional standards etc. and, therefore, such people would be free to study anywhere in the world and subsequently practice anywhere depending on immigration restrictions, consumers’ and firms’ appetites for their particular professional standards, licenses etc. In countries where medical education is relatively cheap (India and parts of mainland Europe, for example) compared to places where the costs are exorbitant (like the USA), this would mean that students from the latter countries could study in the former countries and return to their home countries to practice medicine more easily and with fewer complications and barriers to entry. This would also mean that healthcare educators in countries such as the USA and UK would have to lower costs in the face of more global competition and, therefore, it would make medical education not only accessible to a greater range of people but enable medical practitioners to offer their services at a lower price upon qualification since they would not be straddled with so much debt.


It will be clear, furthermore, to the reader that this has applications for licensure more broadly (that is, outside of solely medical licensure) since licensing restrictions are at the heart of massive trade restrictions (within the EU and elsewhere – which is why it frustrates your author when people say that the EU is the world’s largest free trade zone because it is not truly free trade in the strictest sense of the term). Indeed, Milton Friedman targeted medical licensure specifically because it is this argument that is the most difficult and most justifiable when it comes to licensure; after defeating the arguments for medical licensure (or arguments against its abolition or implementation in a manner that is optional rather than compulsory), the arguments for other sorts of licensure fall down like straw men.


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