How Do Occupational Licensing Rules Affect the Health Care Sector?

By , and ·October 9, 2018
Emory University and The Hamilton Project, Brookings Institution

The Issue:

Health care professionals work within the boundaries of state licensing rules which vary from one state to another, often restrict what nurses and other non-physician health care workers can do, and determine to what extent they must be supervised by physicians. These rules have to strike a balance between protecting public health and introducing barriers that restrict competition and raise health care costs. In the context of high (and growing) health care expenditures in the United States—as well as new evidence on the quality impacts of licensing rules—many states are relaxing some of these restrictions. Could changing the state laws that regulate health care professionals help reduce costs and increase availability of health care without having an adverse effect on the quality of health care services?

Reducing the restrictions that scope-of-practice rules place on advanced practice registered nurses and physician assistants is likely associated with sizable benefits for the public.

The Facts:

  • Scope-of-practice rules, which govern the permissible conduct of physician assistants and advanced practice registered nurses, restrict what many health care providers can do. After completing national exams and satisfying other licensing requirements, advanced practice providers (a category that includes physician assistants, nurse practitioners, clinical nurse specialists, certified nurse midwives, and certified registered nurse anesthetists) receive their license from the state(s) in which they practice. This is intended to ensure practitioner competency, protect the public from harm, and raise the quality of health care. Because of the way these occupations are regulated, many health care practitioners are subject to scope-of-practice (SOP) license restrictions that determine what tasks they may do, including whether they are authorized to write prescriptions, and the degree of independence they have in performing these tasks. Restrictions differ by state. In Oregon, for example, nurse practitioners can diagnose and treat patients and issue prescriptions without physician involvement. In contrast, nurse practitioners in Georgia must have a supervising physician and may be limited in their ability to write prescriptions (see here). Physicians are not similarly limited in their scope of practice.
  • Scope-of-practice rules are especially consequential in health care. One quarter of all licensed workers are in the health care sector, and 66 percent of health-care workers (defined as practitioners and support occupations) are licensed. Spending on office-based physician assistant and nurse practitioner services totaled $4.9 billion and $21.7 billion, respectively, in recent years. The relevance of the issue is likely to grow in the future. The Bureau of Labor Statistics projects that the ranks of physician assistants and nurse practitioners will both grow by more than a third from 2016 to 2026. The rising demand for health-care services generated by the ageing of the population and the expansion of coverage under the Affordable Care Act increases the importance of making efficient use of advanced practice providers.
  • There has been a movement toward loosening restrictions, allowing non-physicians to perform more tasks and practice more independently. In 2017, 25 states allowed nurse practitioners to practice independently, 29 states allowed certified nurse midwives to practice independently, and 30 states allowed the details of the physician assistant-physician relationship to be determined by the medical practice rather than the state or medical board. This marks an increase from previous years. For example, the number of states allowing certified nurse midwives to practice independently and write prescriptions more than tripled from 9 to 29 between 1994 and 2017. Proponents of the trend argue that loosened restrictions allow advanced practice providers to supply care that is similar in quality as that of physicians while improving the efficiency of the system and reducing the costs. Opponents contend that quality of care may suffer given the shorter length of training and clinical experience required of these professionals relative to that of physicians. New research on the impacts of reducing scope-of-practice restrictions has been emerging to answer these questions.
  • Research finds that the quality of health care services has not suffered when scope of practice restrictions on health professionals have been relaxed. A study that compared states with more and less restrictive practice laws for nurse practitioners found no association between the restrictiveness of laws and the quality of primary care provided to Medicare recipients. States that have expanded the ability of nurse practitioners to perform tasks without the supervision of medical doctors have not seen an effect on infant mortality. In fact, several studies have found that relaxing some of these laws is associated with better health outcomes, such as a decrease in emergency room use when nurse practitioners practice independently. And, there is evidence that maternal and infant health care outcomes are somewhat better when certified nurse midwives practice independently as women in these states have lower rates of cesarean sections and of pre-term and low birth weight births.
  • Less restrictive scope-of-practice rules seem to improve the employment and wages of non-physician health care practitioners. Most research suggests higher employment (or no effect, in some cases) for advanced practice providers with less restrictive laws. Little research exists on how the wages of physicians and non-physicians are affected by restrictive scope-of-practice laws, but one study finds that the more restrictive laws benefit physicians at the expense of nurse practitioners.
  • There is some evidence that fully authorized scope of practice can allow for a more efficient use of health care professionals’ time, resulting in both lower health care costs and increased access to health care services. With fewer restrictions, all health care professionals could specialize in the service in which they are most productive. This specialization with more appropriate use of non-physician medical professionals would improve the overall efficiency in the system, resulting in improved access to care as gains in productivity increase capacity in the health-care system, and at the same time resulting in lower health care costs. For example, research on access to care shows that where practitioners have greater independence this is associated with measures of improved access such as: having a usual source of care; a higher probability of having routine check-ups and getting an appointment when wanted; more office-based visits; and a higher probability of getting prescriptions filled. Moreover, more extensive use of advanced practice providers is associated with savings on total labor costs per visit for primary-care services. More specifically, studies find that allowing physician assistants to write prescriptions was associated with a 12-14 percent reduction in spending on outpatient claims by Medicaid patients; allowing nurse practitioners to practice independently lowered the price of routine children’s checkups by 3-16 percent; and reduced restrictions on certified nurse midwives resulted in savings of $101 million from reduced use of C-sections at delivery for first time births.

What this Means:

Reducing the restrictions that scope-of-practice rules place on advanced practice registered nurses and physician assistants is likely associated with sizable benefits for the public. Many restrictions that are not uniformly applied across the United States — including those limiting practitioner autonomy and the ability to write prescriptions — do not appear to be justified by better health care outcomes. Given that these limitations hinder access to care and impose costs on providers themselves and on the flexible operation of health-care labor markets, they generally do not seem to provide benefits that exceed their costs.


Deregulation / Employment / Public Health
Written by The EconoFact Network. To contact with any questions or comments, please email [email protected].
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