Occupational Licensing Laws Hurt Patients and Increase Health Care Costs
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Occupational Licensing Laws Hurt Patients and Increase Health Care Costs

Nurse practitioners and physician assistants provide valuable medical care to oftentimes underserved communities at a lower cost.  

The United States is expected to face a shortage of 46,000 to 90,000 physicians by 2025. In rural communities, the shortage is already here—while 20 percent of Americans live in rural communities, only 10 percent of all doctors practice in them.

One potential solution is to decrease physician’s monopoly over primary care by increasing the autonomy and scope of nurse practitioners (NPs) and physician assistants (PAs). Non-physician health care providers deliver medical services that people would otherwise go without or would pay much more for, especially in rural areas where doctors are few and far between. NPs and PAs can increase competition in areas with few doctors and put downward pressure on prices for routine procedures.

Nurse practitioners are registered nurses, with either a master’s degree or clinical doctorate degrees, who are qualified to diagnose and treat diseases and prescribe medication. Physician assistants also have a master’s degree and usually work underneath a doctor as part of team-based medicine. They can review lab results, conduct physical examinations, and take medical histories. Both NPs and PAs must be nationally certified and licensed by the state.

Increasing the use of these non-physician providers is one recommendation from a Mercatus Center working paper, co-authored by former dean of Harvard Medical School Jeffery S. Flier and Jared Rhoads, research project manager at The Dartmouth Institute for Health Policy and Clinical Practice. In addition to greatly benefitting underserved communities, Dr. Flier told Reason that PAs and NPs can contribute to better medical care overall by allowing physicians to “operate at the ‘top of their licenses,’ spending more time doing the things others in the care team cannot, and handing off various tasks where appropriate to those who can complete them effectively at the top of their license. This would increase the efficiency of care delivery, which is viewed by all as a goal.”

The Flier and Rhoads recommendations have gradually caught on across the US, with most states now allowing NPs and PAs to prescribe medication. For example, before 1980 only two states allowed PAs to write prescriptions for controlled substances. Today, PAs can prescribe in all states but Florida and Kentucky and NPs can prescribe controlled substances in all states but Florida. Oftentimes, this license to write prescriptions still must be supervised by a physician.

Another Mercatus study conducted by Edward J. Timmons, an associate economics professor at Saint Francis University, looked at Medicaid claims in states with broad and restrictive PA and NP laws between 1999 and 2012. Timmons found that expanded scope of PA practice is associated with a $109-$133 decrease in outpatient Medicaid claims, without negatively impacting access to care. A study in the Journal of Law and Economics found similar results for NPs—more restrictive laws were associated with a 3-to-16 percent increase in the price of children’s wellness visits.

While beneficial to consumers, relaxing occupational licensing laws for NPs and PAs can hurt physicians’ bottom lines. The same study in the Journal of Law and Economics found that less restrictive licenses reduce physician salaries.

“Physician groups have historically had significant political clout with policymakers,” Timmons told Reason. “Opposition from physicians groups may block or significantly slow reform.”

Last month, Virginia finally passed legislation to allow NPs to practice without a supervising physician. Before the bill, NPs paid upwards of $500 for a collaborative practice agreement with a doctor. Collaborative physicians are typically collaborative in name only—NPs pay for their service to overcome a regulatory hurdle, not to get needed advice. Doctors can only supervise six NPs at a time which puts a severe cap on the supply of medical care.

The bill originally would have relived NPs of the collaborative requirement after six months of full-time work. By the time the bill was signed by the governor, the requirement had been raised to five years of clinical experience. The Medical Society of Virginia took credit for the increase in required experience.

Despite lobbying from state and national doctor groups, the gradual trend in the U.S. is to relax occupational licensing laws for NPs and PAs and recognize them as a reputable and affordable alternative to primary care physicians. Legislation just signed by the governor in South Carolina will increase the scope of NPs, and Mississippi removed a two-person limit on the number of PAs a physician can supervise last year. The American Academy of PAs stated that 16 states recently made improvements to PA practice.

It is important that medical licenses are included in any occupational licensing debate. Freeing NPs and PAs from restrictions will increase the supply of primary care and reduce costs. States like Florida and Kentucky with the most burdensome licensing would be wise to give nurse practitioners and physician assistants the freedom to do what they have been trained to do—without giving doctors any extra political favors.

Allie Howell is a research intern at Reason Foundation.