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Giving North Carolinian’s more healthcare choices: Part 3

Welcome to Part 3 of my “healthcare freedom” blog series this week. In this small series, I am reviewing a federal report on healthcare reform initiatives that the states can implement to encourage more freedom, competition, and choice into the health care sector. In part 1 of the series, I discussed “Certificate-of-Need” laws and in part 2, I discussed “Scope-of-Practice” reform. For part 3, I am discussing workforce mobility as it relates to state medical licensure requirements.

Each state sets licensure requirements for what the minimum amount of training and education is required to practice medicine in their respective state. Each state also very rarely would recognize another state medical license as passing the requirement to practice medicine in the state. In parts 1 and 2 of this series, both of the issues we discussed focused on the states stringent requirements that one has to meet to practice the medicine.

Market distortion like this usually leads to negative consequences for almost all of the participants. Physicians and nurses are heavily restricted by current state licensure requirements.  This results in very little freedom to direct scarce resources across state lines to the areas which need them most. To do this, the physicians and nurses would have to meet another states licensure requirements, first:

State-based licensing requirements, by their nature, inhibit provider mobility. These requirements add time and expense when healthcare providers seek to move or work across state lines. Markets cannot be as responsive to economic change when workers cannot easily move to meet the demand for their services. State-based licensing also often inhibits delivery of healthcare services across state lines by making it more difficult for qualified healthcare professionals licensed in one state to work in another state, even though most healthcare providers complete nationally certified education and training programs and sit for national qualifying exams. Appropriate standards of care do not differ from state to state. Yet, even when a profession’s underlying standards are national in scope, and when state licensing requirements are similar throughout the United States, the process of obtaining a license in another state is often slow, burdensome, and costly. There is little economic justification for the redundant licensing processes that many states impose on licensed, out-of-state applicants. Even when there may be plausible consumer-protection concerns, the harm to consumers likely outweighs any benefits.

So if the licensure requirements are the same in two neighboring states, why wouldn’t the physician, who has met those requirements, be able to practice across state lines? It can be explained along the same lines as Certificate-of-Need laws. This is nothing more than a state-sponsored monopoly. It just so happens that in this case, every state raises their own barriers to any competitive physician forces coming from outside of the state. So, how can states mitigate some of the negative consequences that arise from state medical licensure barriers? One answer is interstate licensure compacts:

Interstate compacts and model laws can mitigate the effects of state-based licensing requirements by enhancing license portability. Professional associations and associations of licensing boards typically draft model laws, which may be passed with minor variations between jurisdictions. Almost all states and other United States jurisdictions have adopted model laws with license portability provisions in other professions such as accountancy
and pharmacy. By contrast, interstate compacts, which are binding contracts between two or more states authorized by the United States Constitution, must be identical and have been used only recently to improve licensure portability. The first interstate licensure compact, on nurse licensure, was initially implemented in 1999 and has been adopted by 30 states. Other licensure compacts in the health professions are in the early stages of implementation. Federal grants to state professional licensing boards have encouraged the development and implementation of various licensure compacts in several professions. Model laws and interstate compacts typically use one of two approaches to enhance licensure portability. One is reciprocity as practitioners licensed by one state are able to practice in other states without obtaining another license. Second, some states require a license in each state of practice but expedite the process. By making it easier to practice in multiple states, interstate compacts and model laws can enhance access to healthcare services and improve provider mobility.

Why does the state seem to interfere with the healthcare market so much? This comes from the notion that healthcare cannot operate as other markets do. Often, lawmakers and government bureaucrats try to exert their control over the healthcare market, which often results in physicians and consumers dealing with the unintended consequences. For physicians, it is hard to practice their trade without expensive and onerous requirements.  

A couple of important points to remember about provider licensing reform. First, as I said with the licensure reform concerning nurse practitioners, this isn’t going to create a world where medical professional is free from all oversight and are freely performing medical services all over the country. There are still very intense education and training requirements that these providers will have to abide by. The change will simply lower the barriers that people would have to face when trying to provide care in different states once they have completed the required training.

Second, this type of reform would open up competition between the states. If every citizen had the opportunity to get care around the country, there would be pressure on providers and facilities in each state to innovate and compete in the market for the consumers that are in their state. With licensure requirements in each state, there are 50 different markets where prices are determined by the participants in that state.

North Carolina could be a national leader on this issue. Lawmakers should take steps to infuse more freedom and competition into the provider market. First, North Carolina could start the conversation by creating studies in the General Assembly to learn the impacts of state licensure barriers. North Carolina could also start the discussion with neighboring states to create licensure compacts in order to reduce the market-distorting barriers of licensing.

Jordan Roberts / Health Policy Analyst

Jordan joined the Locke Foundation in the summer of 2018 as Health Care Policy Analyst. He analyzes state and national health policy issues with an eye toward removing governm...

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