Occupational licensing and health spending

Source: The Hill

Last month the Obama administration released an important report on the harmful effects of occupational licensing. Compiled by experts at the Department of the Treasury, the Council of Economic Advisers, and the Department of Labor, and bearing the imprimatur of the White House itself, the report concludes that:

There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines.

Reducing the burden of licensing would give consumers more choices at lower prices. Nowhere is this need more pressing than in healthcare, where licensing restrictions dominate. According to the report, almost 90 percent of health professionals need licenses to practice.

This seems reasonable. After all, most people don’t want just any old Joe ripping out their wisdom teeth or handing out medicines for any ailment. However, even in these cases, the argument for licensing is overblown.

Physicians are licensed by state medical boards. However, no responsible physician believes he is competent to practice every type of medicine. Physicians specialize and earn certification by national boards in their specialties. These boards are organized and governed by the profession, not the state. Patients and referring physicians value board certification. Would you allow a doctor to cut into your brain who was not certified by the American Board of Neurological Surgery?

The federal government can do something to reduce the burden of licensing, even though individual states have always governed the practice. While the Constitution does not appear to allow the federal government a role in licensing, its dominant role in financing healthcare spending might present an opportunity to reduce the burden of licensing. Further, an approach that promised to reduce spending on Medicare and other federal health commitments should win bipartisan support in Congress.

For example, nurse practitioners are nurses with some authority to prescribe medicines. These are the health professionals we usually see when we go to convenient walk-in clinics in drug stores. According to the Convenient Care Association, the industry’s trade association, the first retail-based clinic opened in 2000. Today there are 1,900 clinics in 43 states, and over 25 million patient consultations have taken place. They offer immunizations and preventive screenings, as well as diagnoses and treatments for common problems such as cold and flu, skin irritations, and muscle strains or sprains.

In some states, however, the business opportunity for convenient clinics is limited by laws that restrict the nurse practitioners’ independence. The Convenient Care Association reports that its members have no clinics in seven states. For example, in California nurse practitioners must be overseen by physicians, with each physician limited to four nurses. This adds to the cost.

Such restrictions in turn cost the federal government money. About a decade ago the federal government agreed that Medicare would reimburse convenient clinics at 85 percent the cost of going to a doctor. When restrictive licensing prevents convenient clinics from serving Medicare beneficiaries, the state imposes a cost on the nation’s taxpayers that the federal government has a duty to resist.

There are two solutions that Congress and President Obama should consider, each of which can be implemented independently. First, allow “site-neutral” payment. Why pay more for a flu shot in a doctor’s office than at a convenient clinic?  Second, encourage Medicare beneficiaries to take advantage of convenient clinics by sharing some of the savings with them. Many shots and preventive screenings are fully covered by Medicare with no copay or deductible. Offer the Medicare beneficiary a small financial bonus for getting them at a convenient clinic.

There would be exceptions if medically necessary, but this should not obscure the main policy objective: to prevent states from artificially increasing Medicare’s costs through burdensome licensing restrictions. This should be common ground for President Obama and the Republican-controlled Congress.

Graham is a senior fellow at Independent Institute (Independent.org) and a senior fellow at the National Center for Policy Analysis.