Occupational licensing rules restrict entry into certain occupations, effectively limiting the supply of goods and services. It stands to reason, then, that loosening licensing rules would improve access to goods and services and lower prices.
Indeed, a recent National Bureau of Economic Research (NBER) working paper suggests Universal Licensure Recognition (ULR) has such an effect on healthcare services.
Researchers Morris M. Kleiner — a long-time national expert on occupational licensing — and Yun Taek Oh use data to explain the relationship, if any, between changes in physician labor supply due to ULR adoption and access to healthcare services.
The authors conclude that,
adopting universal reciprocity of physician licenses raises the proportion of individuals who have personal doctors or healthcare providers, especially for older individuals, and reduces the proportion of individuals who did not see doctors because of costs
Evidence from the coronavirus pandemic
The restrictive nature of licensing rules was especially revealed during the pandemic.
As lockdown orders, in combination with increased demand for certain services, restricted supply, states rushed to suspend licensing rules for out-of-state healthcare practitioners.
In April 2020, Gov. Walz signed an executive order allowing out-of-state practitioners to practice in Minnesota without obtaining a Minnesota license. This waiver expired after the pandemic. Similarly, other waivers enabling the remote provision of mental healthcare services by out-of-state providers expired after the pandemic.
Despite their expiration, these waivers have an important implication for the nature of licensing policy. They show that, if licensing rules can be suspended during a pandemic without affecting patient safety, the same can be done during non-pandemic times. Certainly, the pandemic created a heightened need for flexibility. But such a need is also present during non-pandemic times, especially for harder-to-reach areas like Greater Minnesota.
In 2024, the Minnesota legislature passed a bill creating interstate compacts for several healthcare occupations. Such a move will likely improve supply and ease shortages. More needs to be done, however, to loosen licensing rules.
Given its proven benefits, Minnesota lawmakers should strongly consider adopting Universal Licensure Recognition for healthcare workers.
