April 10, 2023 • 30 mins
Dr. Dan Sutter, of the Manuel Johnson Center for Political Economy, hosts EconVersations, a program that explores the role of free markets in promoting prosperity through conversations with Manuel Johnson Center faculty and guests. In this episode, Dr. Sutter interviews Dr. David Mitchell, a Distinguished Professor of Political Economy at Ball State University, and Mr. Macy Scheck, a Ph.D. candidate at Middle Tennessee State University and a fellow with the Political Economy Research Institute there, as they discuss the possibilities for healthcare deregulation in Alabama.
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The opinions expressed on
this programrepresent the viewpoints
of individual authorsor contributors,
and do not necessarily reflectthose of Troy University.
This is E Conversations,
a joint production of Joy TrojanVision and the Manual A.H.
Johnson Centerfor Political Economy.
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Now here's your host, Dr.
Dan Sutter.
Hello and welcome to E!
Conversations.I'm your host, Dr.
Dan Sutter of the Johnson Center
for Political Economy at TroyUniversity.
Alabama has a documentedshortage
of medical professionalsin rural areas,
and these shortages are linkedto poor health
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outcomes for our residents.
One way to addressthese shortages
might be to expand Medicaidand spend
more tax dollars on health care.
Another alternativeis deregulation.
Removingtwo types of regulations
Alabama imposeson our health care system,
which restrict the supply
of lower cost health care,particularly in rural areas.
These are known as certificateof need
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and scope of practiceregulations.
What do they involve?
What are the rationale for them?
And what does the evidence show
about their impactson health care?
Joining me on
the conversationsare two economists
who have examinedthese regulations.
Dr. David
Mitchell is distinguishedprofessor of political economy
at Ball State University,where he directs the Institute
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for the Studyof Free Enterprise.
Dr. Mitchell has publisheddozens of papers in the areas
of public choiceand also health economics.
Mr. MasseySchack is a doctoral candidate
in economics at Middle TennesseeState University and a fellow
with NHTSA's Political EconomyResearch Institute,
which is directed by our formerTroy Professor.
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My former colleague, Dan Smith.
Welcometo Conversations, gentlemen.
Thank you.
Thank you.
So let's get started here.
And if you could briefly eachwe may see you're going to talk
about of Certificate of Needs.
And Mitt,
you're going to be talkingabout a scope of practice.
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So, Macey, start off by tellingus briefly just what it is that
this certificate of needis about.
So certificate of need.
We may I mayreference entered a Dr.
Mitchell here am you myselfor all of us
included may referenceas con going forward.
I'm not pros and conscon being certificate of need,
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but really it's just tryingis speaking to this regulatory
mechanism for the stateto try to control
expenditures on certain healthcare facilities
or even the operationor opening of new facilities.
And how a scope of practice.
So you've done research on this?
Yes. Scope of practice isthese rules are regulations
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delineating what differenthealth professionals can do.
And my researchis about nurse practitioners.
Some states have very strictrules
on what nurse practitionerscan do by themselves.
Other stateslet nurse practitioners practice
independently what we callfull scope of practice.
No. And the rules are designed
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to sound likethey're safety enhancing
and sometimes they are,and sometimes they are
to protect special interests.All right.
So we'll get much into thesein a little bit.
But one problemAlabama does have that I think
is pretty widely recognized iswe have a health care shortage,
health carepractitioner shortage.
This is a
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map showing counties in Alabamaand there's actually supposed
to be white on this map.
And any countythat didn't have any health care
professional shortagewould be colored and white.
And you see that no counties inAlabama are colored and white.
A few of them are in the lightblue,
which is sort of showinga moderate level of shortage.
And then dark blue is a shortagethroughout the county.
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So we do have a problemhere, right?
This isa shortage of health care.
Oh, yeah.
It's areal it's a real shortage.
So Alabama has 127designated health
professionals shortage areas.
So health professionals shortagearea is an area where there's
less than one doctorfor 3500 patients.
Or for some reason, the patientsare extra sick or extra poor.
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Then you need one doctorper 3000.
If you don't have that,
you have what's called a healthprofessional shortage.
In Alabama, over 2.7 millionpeople are affected by that.
And you need in Alabamaanother 349 physicians
to even come close to solvingthat would
that would give you the bareminimum
if you had another 349primary care physicians,
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that would get you at the bareminimum on.
Also be assumingthat they'd want to go
live in these areaswhere we need them.
In the areas.
And that's often the dilemma
is that you don't have enoughphysicians, but also that
physicians don't want to live in
some of these rural areasyou just can't attract.
Yeah.
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And the only way toto get health care providers
spreading out into these morerural areas is to expand supply.
And that usually means nursepractitioners.
Now, both of these lawsare established by states,
and that meansfrom an economic standpoint,
if you're an economicsresearcher,
you get very excitedwhen you hear that.
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So basically,if you call and tell us
why is it so greatfrom a research perspective
that these are laws areestablished at the state level
and that not all stateshave all of these regulations?
Well, again, like yousort of hinted at there.
Economistslove variation, right?
So we want to see differencesacross states.
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We want to see statesthat have programs, states
that don't have programs.
And so in terms of certificateof need, there
I think are 35 states and D.C.
operatesome sort of common program.
So that leaves a handfulthat don't.
And that's us as researchers
sort of examinethe health outcomes
across these different states.
And like you mentioned,the programs cover different
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facilities and differentcapital expenditures as well.
So this allows sort of
for goodresearch, we can see, oh,
what is what is this state doingversus another state?
How can we improve andhow can we try to make health
health care more accessibleto these rural, rural patients?
All right.
So now let's divea little deeper
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into both of these typesof regulations.
We'llstart with the con regulations.
So I was actually interested, is
the studythat you coauthored with Dr.
Smith
see that these are regulationsactually go back to the 1970s,
really started nationwide
and tell usa little bit about that
and then also tell us a littlebit about what do people think
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that these regulationsare going to accomplish
for the good.
Yeah.
So again, you're right,This started in the mid
seventies and in 1974there was a federal mandate
that required all states to open
sort of a healthplanning agency.
So some statessort of retain that name,
and that'swhat they'll be called now.
And they won't necessarilycall themselves con or con laws.
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And a lot of them, I think, evenin the case of Alabama,
it's called the State HealthPlanning Development Agency.
So not
necessarily con program, butit is a con program in disguise.
And what happenedis the federal government
implemented this mandate acrossall the states
sometime in the eighties
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and the federal mandatewas actually repealed.
And again, it's hardto find sort of in politicians
who don't want to come outand say explicitly,
this is whywe repealed this program.
But I think it's safe to say itprobably wasn't very effective.
And then in mid-eighties,you had
states had the choice, right?
They could keep the program.
They could repeal the
these con programs alongwith the federal mandate repeal.
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And so we saw some,like I mentioned before,
variationtake place in the 1980s.
So some states completelyrepealed their con program.
States like California, Texas,Pennsylvania,
other states decided to keep
their con programslike Tennessee and Alabama.
And then some states likeTennessee and Alabama actually
just decided to expandwhat facilities
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are coveredunder this under these laws.
And it actually turns outI mean,
I think there's something on
the order of about three dozenor so different very types
of different facilitiesthat could be covered by this.
And so it variesfrom state to state.
When we saylike states are a state,
they actually could haveanywhere
as long as they haveat least one.
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They they sort of fall in thatthat heading.
But I think it wassomething like that,
the one with the mostthat's about 37 or so different
things, right?
Yes, that's true.
I believe it's Hawaii has themost most facilities and action.
So the con breakstwo things apart.
So sometimes it's
they're speaking about facilityrequirements.
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You'renot able to open a hospital.
And then additionally,there's actions
that require approval as wellbeing we want to expand beds.
We want to invest intothis new medical technology.
So the restrictionsactually two part.
And so like you said, itsort of varies, right?
Tennessee has where I'm at nowhas I think a little bit
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a couple more, maybe four
or fivemore different facilities
that they regulatecompared to Alabama.
But I believe I think Alabama'swith 17 or so different types
of facilities and right.
These range from hospitalsto drug abuse facilities
and all sorts of differentactions within these facilities.
And and so then
on the one hand,
the thought is that if you havethese medical professionals
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who are in actually
this certificate needmodel can actually be applied
in other industriesand not just medicine,
where the idea is
if you have health professionalsin the industry,
they might be able to judge
what facilities
would be necessary and then whatmight be unnecessary.
And if they don't approvethe unnecessary ones,
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then we don't even know and endup having to pay for them.
And it might end updriving costs higher.
But it seems like there isa obvious problem with that,
and that is if you give peoplewho are already in the industry
the ability to veto theirability, their people entering
the industry, that'sgoing to cause a problem, right?
Yeah, 100%So and what's important,
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I think, to
recognize is in the seventies,the issue and the reason
this federal mandate came aboutwas trying to limit this
excess spending
and the source of the excessspending was actually due
to the insuranceincentives at the time.
So we functionedon the hospitals, functioned on
a cost plus reimbursement.
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So anyany health health facility,
any cost that they incurred,
they would get reimbursedthrough insurance
plus some on top,I think around 10%.
And sort of as the insurance
as insurance sort of fixed
or changedto a fixed cost structure
and started adopting like we seenow today, there's codes
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and there's certain universal
refunds that are doneon behalf of insurance.
And it's not this arbitrary.
Whatever you cost, you incurplus 10%.
That original reason for goneis sort of sort of evaporated.
Right.
And now we see there's three
new modern claims as towhat kind of programs allow for.
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And this is going to be higherquality
facilities, increased accessto care and
lower prices. Right.
And we can getinto the specifics later.
But that's kind of what's goingon, is originally
there was this perverseincentive
and we've seen itsort of change over time
and it sort of questions why?
Why are these programsstill operating?
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Okay. So let's turn to
Mitchhere in the scope of practice.
And again,
this is what we're talking aboutwithin the health care
context,but it's a type of regulation
that also gets appliedelsewhere.
I think
in the field of dentistrywhere there dental hygiene is
allowed to cleanteeth on their own or not is
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is also relatedto the scope of practice.
So just in case you couldsometimes hear these
these actual typesof regulations
I talked about inother contexts, but we are
in the health care context.
What sort of the rationalefor scope of practice.
So the idea behindscope of practice,
the public, the ideathat it's a good law,
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the way that is soldby proponents,
is alwaysthat this will protect patients
and the reason is thatphysicians have more training
than nurse practitioners.So let's go through that.
Nursepractitioners have a bachelor's
degree in an hour
and they have to be registered
nursesas well as nurse practitioners.
Then they go to graduate schoolin nursing, they take 2
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to 3 years of graduatecourses plus clinical hours.
Physicianshave an undergraduate degree,
then they go to med schoolfor four years,
then they do their residency.
That's where physiciansreally learn to be.
Physiciansis in their residency.
Then they mayor may not do a fellowship
of dependingon what their specialty is.
But for primary care, they dotheir residency normally,
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so they have more training.
It would seem likethe more training
would lead to being betterhealth care providers.
What we see in the evidenceis that they're about the same.
And I don't really carehow hard you worked.
What I care aboutis how good you are.
I want to measure the outputof health care,
not the input of how hardyou worked to get to become
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a provider.
And that's reallyhard for people to understand,
is that physicians work harderto become providers,
but then
they don't seem to provideprimary care
any better than nursepractitioners.
And there's even some randomizedcontrolled trials about that
where they comparenurse practitioners
to physicians in primary careand the results are the same.
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So yeah,we'll talk some more about that.
But one of the issues islike with
if we're going to continuerelying on physicians is that,
you know, you mentionedthat we might need an extra 350
general practitioner nursephysicians here in Alabama,
but one is that the supply ofor the number of doctors,
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medical doctors hasn'tbeen increasing very much.
But by contrast,
nurse practitioners
have been increasingpretty dramatically, right?
Yeah.
The number of nursepractitioners
the last 12years has more than doubled.
And that's really impressive.
That's really impressive.
It's like they're justspreading out everywhere.
I think that makesphysicians nervous.
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But the scope of practiceregulation means
that those nurse practitioners,
when they want to spread outeverywhere,
can'tbecause they have to work under
either under the supervisionor sometimes
called the collaborationof a physician.
So that means a physician overis overseeing them,
and that makes it harderfor them to move out.
And sometimes nursepractitioners will sit up on
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their own under a cloudor practice agreement
with physicianstheoretically overseeing them.
But, you know,physicians charge for that
and they charge between 515hundred dollars per per month.
And if you think abouta small business
paying an extra 500 to 1500 permonth, that's a lot of money.
That's justa tremendous amount of money.
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And it really meansyou could never go somewhere
where most of your patientsare on Medicaid or medical care.
Medicaid just doesn't reimbursewell, reimburse
the fancy health word
for how much you get paidfor each procedure you do.
And Medicaid pays very little.
And so you couldnever have a practitioner
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go to a
poor rural area wherea lot of people are on Medicaid
if they also have to paythis additional fee.
Well, all right. So.
Yeah, that'swhat the scope of practice
rules are in Alabamathat nurse practitioners
have to be supervisedby a physician.
So let's turnnow to a little bit because
because we have this variationacross states, economists
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and economists need to publishand they want to publish.
They can take advantage of this.
And investigate.
So maybe start with someone.
Tell us a little bit
about some of the findingsfrom this research having to do
with Certificate of Need roles.
Yeah.
So they're the most ofthe research is done
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focuses on the threegoals, right.
I think that's the best wayto sort of analyze
whether something's fulfillingwhat it's designed to do, right?
So we want higher quality,we want lower prices,
and we want
especially rural accessor increased access overall.
Most of theresearch and there are few
a few studies that find that
common programs are effectivein doing some of their goals.
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But most of the overwhelming
body of research pointsto actually lower quality
health care
at increased costs and no realeffect for rural residents.
Right.
So I think
if any policy has eitherno effect or a negative effect,
people would sort of
maybe want to step backand question what
what is this policy achieving,if not if anything?
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And the way they look atthis is multiple ways.
So there's just general, does itlimit expenditure?
And so the studies that do findthat it does limit hospital
investment or expenditure,it's it's
what you would expectto find, right?
So if you make the processof expanding beds
or investing in medical care,more medical equipment,
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you make it more tediousand a long, drawn out process,
you would expectto see less investment.
So on that front, it'sno surprise.
But the question is,does this really lead
to higher qualityand increased access?
And the researchjust really doesn't show
that that's the case.
So tell us elaboratea little bit for our listeners,
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because you mentionedabout how it is, you know,
there's lots of studies doneand a few of them show sometimes
occasionally thatCertificate of Need was might
be accomplishing these goals,but the majority of them don't.
So how do we sortof make sense of this?
Is it just a matter of like,oh, well, he said she said
or, yeah,how do we make sense of this?
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And what does it meanwhen you see some results
across different thingsas a means?
We don't we can't really learnanything or what?
No, I think naturally
there'sgoing to be disagreement, right?
Because I think there's
going to be variation acrosshow many services.
I don't think that you can arguethat in Tennessee,
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one of the regulators
or one of the facilities that isregulated is burn centers.
Okay.
I think there's only twoin the whole state.
But so you got to takesome of these results
with a grain of salt,because you have to imagine
that a standaloneburn center operates
a little differently than maybea full general hospital. Right.
So and that can explain
why researchersmay look at different things.
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They may lookat different measures. Right.
And they may have
a certain rationaleas to why this measure or this
this hospitalthat deals exclusively
with Medicaid patients
has different resultsthan this other hospital
that deals with a different kindof patient base.
So I think
it can be
confusingat times, but I think time is
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ultimately on our side as we canmore and more researchers
dig into it.
And in that policy studythat Dr.
Smith and I wrote
that you
showed here at the beginning,we go through service by service
every single study and try to,
I guess, summarizethe results the best we can.
And there's very littledissenting evidence, right?
There's two or three papershere or there, but overwhelming,
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overwhelming evidencefor lack of quality,
higher pricesand no real effect on access.
And actuallyin some cases, patients
even driving out of stateto a non-carbon state
in order to receive health care.
And so then turning to DoctorMachover
to tell us a little bit
about this research,because you mentioned that
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there has been some randomizedcontrolled trials which
tell us a little bit about what
that involves,because in the health care
field,that's like the gold standard of
of researchwhen you can do that.
And that's really thatthat's the top of the line.
So I mean, there's a study,it's in JAMA,
it's a journal you've heard of,it's in JAMA, it's in 2000.
Right.
So this is
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this is old papers paper
that we've known aboutfor a long time.
And they take the peoplecoming in who need primary care
and they just randomly assignthem to physicians around fees
and theyget the same the same result.
Awesome.
I know.
I'm going to. Go ahead.Go ahead.
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Okay. Yeah.
I mean,
I guess a physician
theoretically could say, well,you know,
they do take the absolutesickest people
and and who didn't needprimary care.
We need something beyondprimary care
and give them to physicians.
And I would say, yeah,
there's practice for specialistprimary care mostly.
Right. On. That's what they do.
And so when you compare
nurse practitionersto people who do, physicians
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who do primary care, nursepractitioners do a great job,
I, I don't really know whyyou would compare them to people
who don't do primary care.That would be kind of weird.
Yeah, it would be like comparingeconomists
to theater professorsand whether or not
we were good at doing theater.That would be strange. Yeah,
but we
are nurse practitionersto primary care physicians.
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Respect.You should do a great job.
And when you let nursepractitioners do work,
we get a lot of stuff.
So one, there's a paper by
Chanel out, Crikey,I'm blanking on her name.
There's there's some research
looking at what happens whennurse practitioners can provide
prescriptionsfor anxiety and depression.
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Suicide goes down.
That sounds like a good thingto me.
My own work is on primary care.
I look at diabetic debridement.
So diabetes is very commonand Alabama's got a lot of it.
And those countiesthat you looked at where
there's not enough healthprofessionals to go around,
those are placesthat have a lot of diabetes.
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And so we lookedat diabetic debridement
because it's somethingthat shows
that your diabeteswas not treated properly.
Ideally, your diabetes is takencare of and you need to prevent
debris. Ms..
When they have to scrapelike the dead
and dying skin off of your feet,usually nurse practitioners
don't do that.
It's not only podiatrists, it's
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it is one of those thingsthat makes you, as an economist,
very glad that you don't haveto touch people, that you don't
actually know.
But we found thatwhen states changed their laws,
that people in rural countiesgot their diabetes
treated better by not needingdiabetic debridement.
The following year.
The following year.
And it wasn't that
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your practitioner
suddenly opening up new clinicsall over the rural areas.
It's that the scope of practicerules where they have to be
supervised by physiciansis actually very time consuming.
And if you think about it,if a nurse practitioner
spends a couple of hourseach week getting permission
to do various treatmentsfrom physicians,
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that means the physician'snot seeing a patient
and the nurse practitioneris not seeing a patient.
So we didn't see any anythingin urban areas.
But in rural areas where there'sso few physician providers
just having an extra houra week made a huge difference.
We saw dramatic dropin the number of debris events
that people needed in ruralcounties in the states that did,
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and that was
the immediate effect that wasn'ta chance to sort of say, hey,
now that we've done this,
can we attract new nursepractitioners?
Can we get new structuresto open up new clinics?
Can we get more
practitioners, startthinking about
working more hoursthan they already do?
This is just the immediate,quick down and dirty impact.
And it was it'sreally impressive
that people got throughdiabetes, treated better.
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Well, that's awesome to hear.
Now let's think overall.
So we've seen that the evidenceshows that these regulations
don't work so well, certainlydon't work as advertised
when it comesto possibly thinking
about deregulatingor eliminating these regulations
here in Alabama.
How much of a benefitmight we possibly
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be seeing here?
So, I mean, Macy, you mentioned
that the costs are a little bithigher.
Well, about how much higher,
you know,what are we talking about here?
A little bit or a lotor what are we looking at?
Yeah, so I actuallyMercatus does a lot of work
on certificate of needand they and
(24:36):
if specifically about Alabama
and they estimated thatif Alabama
did a full repealof their cotton program,
the per capita savingswould be about $200 a year,
which is pretty sizable.
And they also admittedthat they would go from
41 rural hospitals up to 58.
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So that would be an increaseof 17
rural hospitalsthat they don't have now.
Well, and it's importantto think about that because,
I mean, you know,that's shorter.
You know, there's shorter
trips to the hospitalthat shorter ambulance rides.
And in the time of emergency.
And, you know, so not just likethey are the care there,
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but there is also a lotof extra burdens on consumers.
The farther you have togo to get treatment, Right?
Yeah.
And that'sonly half of the story. Right?
This up until this point,we've only been thinking
about the patientor the consumer.
But these laws affect workersas well, right?
They affect
nurse practitioners,they affect doctors,
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they affect all of these people.
And and think about the kindof jobs that come with 17
additional hospitals. Right.
You have
you have nurses, you have staff,
you have peopleworking in the cafeteria.
You have tons of roomfor growth.
And I think that's that'salso the other side of the coin
that a lot of peopledon't think about is
by restricting access.
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You're also making it harderfor these nurses
to find competitive wagesor doctors to
find competitive wagesacross these different
surgical centers or hospitals.
Yeah, because after all, it iscompetition between different
businesses thatwould be that we believe bids
people's salaries and wagesup to the level that that
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that their productivityallows them to be paid.
So that's an importantconsideration.
And then I mean, there'salso the element
from economic developmentin rural areas.
If you're a county, you know,
if your area doesn't
have a hospitalor medical center,
then I mean, that'sjust another strike against you
when it comes to tryingto recruit or retain businesses.
(26:42):
I'm sure it'svery high up on the list of like
how close is the nearest
hospital if you're thinkingabout locating
a business somewhere right?
Yeah, 100%.
And that is kind of wherethese two sort of
laws come hand to hand, right?Scope of practice.
And can
this naturally why they'rein an episode here together
(27:02):
because Collin sort of
is regulation surrounding
how can you establish medicalfacilities and then to Dr.
Mitchell's point,
scope of practicelaws are really speaking
to what are these peoplein these facilities able to do?
And both of thoseneed to be addressed
in order to ensure
we have really good rural accessto health care.
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And it's importantto point out here is
this is notwe could achieve these two
forms of of deregulateand without spending
more taxpayer dollars on this,we're usually
when are talkingabout improving health care,
improving anything else.
And you talk aboutthe government doing it,
it's usually like, okay,how big of a tract is that?
Do you have to writefrom the Treasury
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to to makethese good things happen?
But this wouldn'tactually cost us
anything off the budget, right?
Yeah, Yeah, 100% similar things.
That's really excitingis, you know, a
big part of every state budgetis the Medicaid part of budgets.
It's just a big chunk.
It's like $7 billion in Alabama.
So nurse practitioners saveyou money in two different ways.
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One, they make less money,they actually earn less money,
they get reimbursed at a lowerrate to physicians, too.
So that is pushing prices down.
On shifting the supply curve outis pushing prices down.
So there's that sort ofso shifting supply
curve out with lower crossingsis pushing prices down.
The other thing that's happeningis you're getting things
(28:28):
taken care of quickly earlyon, where it's cheaper.
It's always cheaper to deal withthings early than it is late.
If you have diabetes, it'scheaper
to see a primary care providerand get that taken care of
early than it is late,because late means
you have diabetic blindnessand diabetic necrophilia
and you're getting likeamputations.
It's all terrible.
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So there's a range of estimatesabout how much just the prices
would come down, not the savingson getting things done
early as opposed to late,but just pushing prices down.
So if you takethe most conservative estimate,
the most conservative estimate
with the pricescoming down would be is 3%.
You say, well, that doesn'tsound like very much money.
Then you remember that
Alabama spent about 7 billionwell on on Medicaid.
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So you say, well, 3% of that,if that price could come down
3%, you know, that's $21million,
21 million here,21 million there to him before,
you know, he's got real moneyin a state budget.
Yeah, well,hope it's okay if you can
save 21 million a year.
If you save 21 million a year,what would you do with it?
(29:34):
Well, first
you could give it back to
the taxpayers,so you could do education.
You could do all kinds of thingslike 21 million a year.
That's a lot.
Well, well, thanks very much,both of you,
for coming onto talk about this.
I appreciate it very much.
And thank you allfor joining us.
Join us again next timefor another E Conversations.
(29:54):
This has been e conversations,
a joint productionof Joy, Torture,
Vision and the Manuel H.
Johnson Center for Political.
The opinions expressed on
this programrepresent the viewpoints
of individual authorsor contributors,
and do not necessarily reflectthose of Troy University.
This is E Conversations,
a joint production of Joy TrojanVision and the Manual A.H.
Johnson Centerfor Political Economy.
(00:20):
Now here's your host, Dr.
Dan Sutter.
Hello and welcome to E!
Conversations.I'm your host, Dr.
Dan Sutter of the Johnson Center
for Political Economy at TroyUniversity.
Alabama has a documentedshortage
of medical professionalsin rural areas,
and these shortages are linkedto poor health
(00:41):
outcomes for our residents.
One way to addressthese shortages
might be to expand Medicaidand spend
more tax dollars on health care.
Another alternativeis deregulation.
Removingtwo types of regulations
Alabama imposeson our health care system,
which restrict the supply
of lower cost health care,particularly in rural areas.
These are known as certificateof need
(01:02):
and scope of practiceregulations.
What do they involve?
What are the rationale for them?
And what does the evidence show
about their impactson health care?
Joining me on
the conversationsare two economists
who have examinedthese regulations.
Dr. David
Mitchell is distinguishedprofessor of political economy
at Ball State University,where he directs the Institute
(01:22):
for the Studyof Free Enterprise.
Dr. Mitchell has publisheddozens of papers in the areas
of public choiceand also health economics.
Mr. MasseySchack is a doctoral candidate
in economics at Middle TennesseeState University and a fellow
with NHTSA's Political EconomyResearch Institute,
which is directed by our formerTroy Professor.
(01:42):
My former colleague, Dan Smith.
Welcometo Conversations, gentlemen.
Thank you.
Thank you.
So let's get started here.
And if you could briefly eachwe may see you're going to talk
about of Certificate of Needs.
And Mitt,
you're going to be talkingabout a scope of practice.
(02:03):
So, Macey, start off by tellingus briefly just what it is that
this certificate of needis about.
So certificate of need.
We may I mayreference entered a Dr.
Mitchell here am you myselfor all of us
included may referenceas con going forward.
I'm not pros and conscon being certificate of need,
(02:24):
but really it's just tryingis speaking to this regulatory
mechanism for the stateto try to control
expenditures on certain healthcare facilities
or even the operationor opening of new facilities.
And how a scope of practice.
So you've done research on this?
Yes. Scope of practice isthese rules are regulations
(02:47):
delineating what differenthealth professionals can do.
And my researchis about nurse practitioners.
Some states have very strictrules
on what nurse practitionerscan do by themselves.
Other stateslet nurse practitioners practice
independently what we callfull scope of practice.
No. And the rules are designed
(03:07):
to sound likethey're safety enhancing
and sometimes they are,and sometimes they are
to protect special interests.All right.
So we'll get much into thesein a little bit.
But one problemAlabama does have that I think
is pretty widely recognized iswe have a health care shortage,
health carepractitioner shortage.
This is a
(03:28):
map showing counties in Alabamaand there's actually supposed
to be white on this map.
And any countythat didn't have any health care
professional shortagewould be colored and white.
And you see that no counties inAlabama are colored and white.
A few of them are in the lightblue,
which is sort of showinga moderate level of shortage.
And then dark blue is a shortagethroughout the county.
(03:50):
So we do have a problemhere, right?
This isa shortage of health care.
Oh, yeah.
It's areal it's a real shortage.
So Alabama has 127designated health
professionals shortage areas.
So health professionals shortagearea is an area where there's
less than one doctorfor 3500 patients.
Or for some reason, the patientsare extra sick or extra poor.
(04:13):
Then you need one doctorper 3000.
If you don't have that,
you have what's called a healthprofessional shortage.
In Alabama, over 2.7 millionpeople are affected by that.
And you need in Alabamaanother 349 physicians
to even come close to solvingthat would
that would give you the bareminimum
if you had another 349primary care physicians,
(04:36):
that would get you at the bareminimum on.
Also be assumingthat they'd want to go
live in these areaswhere we need them.
In the areas.
And that's often the dilemma
is that you don't have enoughphysicians, but also that
physicians don't want to live in
some of these rural areasyou just can't attract.
Yeah.
(04:56):
And the only way toto get health care providers
spreading out into these morerural areas is to expand supply.
And that usually means nursepractitioners.
Now, both of these lawsare established by states,
and that meansfrom an economic standpoint,
if you're an economicsresearcher,
you get very excitedwhen you hear that.
(05:16):
So basically,if you call and tell us
why is it so greatfrom a research perspective
that these are laws areestablished at the state level
and that not all stateshave all of these regulations?
Well, again, like yousort of hinted at there.
Economistslove variation, right?
So we want to see differencesacross states.
(05:38):
We want to see statesthat have programs, states
that don't have programs.
And so in terms of certificateof need, there
I think are 35 states and D.C.
operatesome sort of common program.
So that leaves a handfulthat don't.
And that's us as researchers
sort of examinethe health outcomes
across these different states.
And like you mentioned,the programs cover different
(06:00):
facilities and differentcapital expenditures as well.
So this allows sort of
for goodresearch, we can see, oh,
what is what is this state doingversus another state?
How can we improve andhow can we try to make health
health care more accessibleto these rural, rural patients?
All right.
So now let's divea little deeper
(06:21):
into both of these typesof regulations.
We'llstart with the con regulations.
So I was actually interested, is
the studythat you coauthored with Dr.
Smith
see that these are regulationsactually go back to the 1970s,
really started nationwide
and tell usa little bit about that
and then also tell us a littlebit about what do people think
(06:43):
that these regulationsare going to accomplish
for the good.
Yeah.
So again, you're right,This started in the mid
seventies and in 1974there was a federal mandate
that required all states to open
sort of a healthplanning agency.
So some statessort of retain that name,
and that'swhat they'll be called now.
And they won't necessarilycall themselves con or con laws.
(07:05):
And a lot of them, I think, evenin the case of Alabama,
it's called the State HealthPlanning Development Agency.
So not
necessarily con program, butit is a con program in disguise.
And what happenedis the federal government
implemented this mandate acrossall the states
sometime in the eighties
(07:26):
and the federal mandatewas actually repealed.
And again, it's hardto find sort of in politicians
who don't want to come outand say explicitly,
this is whywe repealed this program.
But I think it's safe to say itprobably wasn't very effective.
And then in mid-eighties,you had
states had the choice, right?
They could keep the program.
They could repeal the
these con programs alongwith the federal mandate repeal.
(07:49):
And so we saw some,like I mentioned before,
variationtake place in the 1980s.
So some states completelyrepealed their con program.
States like California, Texas,Pennsylvania,
other states decided to keep
their con programslike Tennessee and Alabama.
And then some states likeTennessee and Alabama actually
just decided to expandwhat facilities
(08:12):
are coveredunder this under these laws.
And it actually turns outI mean,
I think there's something on
the order of about three dozenor so different very types
of different facilitiesthat could be covered by this.
And so it variesfrom state to state.
When we saylike states are a state,
they actually could haveanywhere
as long as they haveat least one.
(08:33):
They they sort of fall in thatthat heading.
But I think it wassomething like that,
the one with the mostthat's about 37 or so different
things, right?
Yes, that's true.
I believe it's Hawaii has themost most facilities and action.
So the con breakstwo things apart.
So sometimes it's
they're speaking about facilityrequirements.
(08:54):
You'renot able to open a hospital.
And then additionally,there's actions
that require approval as wellbeing we want to expand beds.
We want to invest intothis new medical technology.
So the restrictionsactually two part.
And so like you said, itsort of varies, right?
Tennessee has where I'm at nowhas I think a little bit
(09:14):
a couple more, maybe four
or fivemore different facilities
that they regulatecompared to Alabama.
But I believe I think Alabama'swith 17 or so different types
of facilities and right.
These range from hospitalsto drug abuse facilities
and all sorts of differentactions within these facilities.
And and so then
on the one hand,
the thought is that if you havethese medical professionals
(09:36):
who are in actually
this certificate needmodel can actually be applied
in other industriesand not just medicine,
where the idea is
if you have health professionalsin the industry,
they might be able to judge
what facilities
would be necessary and then whatmight be unnecessary.
And if they don't approvethe unnecessary ones,
(09:58):
then we don't even know and endup having to pay for them.
And it might end updriving costs higher.
But it seems like there isa obvious problem with that,
and that is if you give peoplewho are already in the industry
the ability to veto theirability, their people entering
the industry, that'sgoing to cause a problem, right?
Yeah, 100%So and what's important,
(10:19):
I think, to
recognize is in the seventies,the issue and the reason
this federal mandate came aboutwas trying to limit this
excess spending
and the source of the excessspending was actually due
to the insuranceincentives at the time.
So we functionedon the hospitals, functioned on
a cost plus reimbursement.
(10:40):
So anyany health health facility,
any cost that they incurred,
they would get reimbursedthrough insurance
plus some on top,I think around 10%.
And sort of as the insurance
as insurance sort of fixed
or changedto a fixed cost structure
and started adopting like we seenow today, there's codes
(11:00):
and there's certain universal
refunds that are doneon behalf of insurance.
And it's not this arbitrary.
Whatever you cost, you incurplus 10%.
That original reason for goneis sort of sort of evaporated.
Right.
And now we see there's three
new modern claims as towhat kind of programs allow for.
(11:21):
And this is going to be higherquality
facilities, increased accessto care and
lower prices. Right.
And we can getinto the specifics later.
But that's kind of what's goingon, is originally
there was this perverseincentive
and we've seen itsort of change over time
and it sort of questions why?
Why are these programsstill operating?
(11:42):
Okay. So let's turn to
Mitchhere in the scope of practice.
And again,
this is what we're talking aboutwithin the health care
context,but it's a type of regulation
that also gets appliedelsewhere.
I think
in the field of dentistrywhere there dental hygiene is
allowed to cleanteeth on their own or not is
(12:02):
is also relatedto the scope of practice.
So just in case you couldsometimes hear these
these actual typesof regulations
I talked about inother contexts, but we are
in the health care context.
What sort of the rationalefor scope of practice.
So the idea behindscope of practice,
the public, the ideathat it's a good law,
(12:27):
the way that is soldby proponents,
is alwaysthat this will protect patients
and the reason is thatphysicians have more training
than nurse practitioners.So let's go through that.
Nursepractitioners have a bachelor's
degree in an hour
and they have to be registered
nursesas well as nurse practitioners.
Then they go to graduate schoolin nursing, they take 2
(12:47):
to 3 years of graduatecourses plus clinical hours.
Physicianshave an undergraduate degree,
then they go to med schoolfor four years,
then they do their residency.
That's where physiciansreally learn to be.
Physiciansis in their residency.
Then they mayor may not do a fellowship
of dependingon what their specialty is.
But for primary care, they dotheir residency normally,
(13:10):
so they have more training.
It would seem likethe more training
would lead to being betterhealth care providers.
What we see in the evidenceis that they're about the same.
And I don't really carehow hard you worked.
What I care aboutis how good you are.
I want to measure the outputof health care,
not the input of how hardyou worked to get to become
(13:30):
a provider.
And that's reallyhard for people to understand,
is that physicians work harderto become providers,
but then
they don't seem to provideprimary care
any better than nursepractitioners.
And there's even some randomizedcontrolled trials about that
where they comparenurse practitioners
to physicians in primary careand the results are the same.
(13:52):
So yeah,we'll talk some more about that.
But one of the issues islike with
if we're going to continuerelying on physicians is that,
you know, you mentionedthat we might need an extra 350
general practitioner nursephysicians here in Alabama,
but one is that the supply ofor the number of doctors,
(14:15):
medical doctors hasn'tbeen increasing very much.
But by contrast,
nurse practitioners
have been increasingpretty dramatically, right?
Yeah.
The number of nursepractitioners
the last 12years has more than doubled.
And that's really impressive.
That's really impressive.
It's like they're justspreading out everywhere.
I think that makesphysicians nervous.
(14:37):
But the scope of practiceregulation means
that those nurse practitioners,
when they want to spread outeverywhere,
can'tbecause they have to work under
either under the supervisionor sometimes
called the collaborationof a physician.
So that means a physician overis overseeing them,
and that makes it harderfor them to move out.
And sometimes nursepractitioners will sit up on
(14:58):
their own under a cloudor practice agreement
with physicianstheoretically overseeing them.
But, you know,physicians charge for that
and they charge between 515hundred dollars per per month.
And if you think abouta small business
paying an extra 500 to 1500 permonth, that's a lot of money.
That's justa tremendous amount of money.
(15:18):
And it really meansyou could never go somewhere
where most of your patientsare on Medicaid or medical care.
Medicaid just doesn't reimbursewell, reimburse
the fancy health word
for how much you get paidfor each procedure you do.
And Medicaid pays very little.
And so you couldnever have a practitioner
(15:41):
go to a
poor rural area wherea lot of people are on Medicaid
if they also have to paythis additional fee.
Well, all right. So.
Yeah, that'swhat the scope of practice
rules are in Alabamathat nurse practitioners
have to be supervisedby a physician.
So let's turnnow to a little bit because
because we have this variationacross states, economists
(16:02):
and economists need to publishand they want to publish.
They can take advantage of this.
And investigate.
So maybe start with someone.
Tell us a little bit
about some of the findingsfrom this research having to do
with Certificate of Need roles.
Yeah.
So they're the most ofthe research is done
(16:24):
focuses on the threegoals, right.
I think that's the best wayto sort of analyze
whether something's fulfillingwhat it's designed to do, right?
So we want higher quality,we want lower prices,
and we want
especially rural accessor increased access overall.
Most of theresearch and there are few
a few studies that find that
common programs are effectivein doing some of their goals.
(16:45):
But most of the overwhelming
body of research pointsto actually lower quality
health care
at increased costs and no realeffect for rural residents.
Right.
So I think
if any policy has eitherno effect or a negative effect,
people would sort of
maybe want to step backand question what
what is this policy achieving,if not if anything?
(17:09):
And the way they look atthis is multiple ways.
So there's just general, does itlimit expenditure?
And so the studies that do findthat it does limit hospital
investment or expenditure,it's it's
what you would expectto find, right?
So if you make the processof expanding beds
or investing in medical care,more medical equipment,
(17:31):
you make it more tediousand a long, drawn out process,
you would expectto see less investment.
So on that front, it'sno surprise.
But the question is,does this really lead
to higher qualityand increased access?
And the researchjust really doesn't show
that that's the case.
So tell us elaboratea little bit for our listeners,
(17:52):
because you mentionedabout how it is, you know,
there's lots of studies doneand a few of them show sometimes
occasionally thatCertificate of Need was might
be accomplishing these goals,but the majority of them don't.
So how do we sortof make sense of this?
Is it just a matter of like,oh, well, he said she said
or, yeah,how do we make sense of this?
(18:13):
And what does it meanwhen you see some results
across different thingsas a means?
We don't we can't really learnanything or what?
No, I think naturally
there'sgoing to be disagreement, right?
Because I think there's
going to be variation acrosshow many services.
I don't think that you can arguethat in Tennessee,
(18:34):
one of the regulators
or one of the facilities that isregulated is burn centers.
Okay.
I think there's only twoin the whole state.
But so you got to takesome of these results
with a grain of salt,because you have to imagine
that a standaloneburn center operates
a little differently than maybea full general hospital. Right.
So and that can explain
why researchersmay look at different things.
(18:54):
They may lookat different measures. Right.
And they may have
a certain rationaleas to why this measure or this
this hospitalthat deals exclusively
with Medicaid patients
has different resultsthan this other hospital
that deals with a different kindof patient base.
So I think
it can be
confusingat times, but I think time is
(19:17):
ultimately on our side as we canmore and more researchers
dig into it.
And in that policy studythat Dr.
Smith and I wrote
that you
showed here at the beginning,we go through service by service
every single study and try to,
I guess, summarizethe results the best we can.
And there's very littledissenting evidence, right?
There's two or three papershere or there, but overwhelming,
(19:38):
overwhelming evidencefor lack of quality,
higher pricesand no real effect on access.
And actuallyin some cases, patients
even driving out of stateto a non-carbon state
in order to receive health care.
And so then turning to DoctorMachover
to tell us a little bit
about this research,because you mentioned that
(20:00):
there has been some randomizedcontrolled trials which
tell us a little bit about what
that involves,because in the health care
field,that's like the gold standard of
of researchwhen you can do that.
And that's really thatthat's the top of the line.
So I mean, there's a study,it's in JAMA,
it's a journal you've heard of,it's in JAMA, it's in 2000.
Right.
So this is
(20:20):
this is old papers paper
that we've known aboutfor a long time.
And they take the peoplecoming in who need primary care
and they just randomly assignthem to physicians around fees
and theyget the same the same result.
Awesome.
I know.
I'm going to. Go ahead.Go ahead.
(20:42):
Okay. Yeah.
I mean,
I guess a physician
theoretically could say, well,you know,
they do take the absolutesickest people
and and who didn't needprimary care.
We need something beyondprimary care
and give them to physicians.
And I would say, yeah,
there's practice for specialistprimary care mostly.
Right. On. That's what they do.
And so when you compare
nurse practitionersto people who do, physicians
(21:04):
who do primary care, nursepractitioners do a great job,
I, I don't really know whyyou would compare them to people
who don't do primary care.That would be kind of weird.
Yeah, it would be like comparingeconomists
to theater professorsand whether or not
we were good at doing theater.That would be strange. Yeah,
but we
are nurse practitionersto primary care physicians.
(21:25):
Respect.You should do a great job.
And when you let nursepractitioners do work,
we get a lot of stuff.
So one, there's a paper by
Chanel out, Crikey,I'm blanking on her name.
There's there's some research
looking at what happens whennurse practitioners can provide
prescriptionsfor anxiety and depression.
(21:45):
Suicide goes down.
That sounds like a good thingto me.
My own work is on primary care.
I look at diabetic debridement.
So diabetes is very commonand Alabama's got a lot of it.
And those countiesthat you looked at where
there's not enough healthprofessionals to go around,
those are placesthat have a lot of diabetes.
(22:05):
And so we lookedat diabetic debridement
because it's somethingthat shows
that your diabeteswas not treated properly.
Ideally, your diabetes is takencare of and you need to prevent
debris. Ms..
When they have to scrapelike the dead
and dying skin off of your feet,usually nurse practitioners
don't do that.
It's not only podiatrists, it's
(22:26):
it is one of those thingsthat makes you, as an economist,
very glad that you don't haveto touch people, that you don't
actually know.
But we found thatwhen states changed their laws,
that people in rural countiesgot their diabetes
treated better by not needingdiabetic debridement.
The following year.
The following year.
And it wasn't that
(22:47):
your practitioner
suddenly opening up new clinicsall over the rural areas.
It's that the scope of practicerules where they have to be
supervised by physiciansis actually very time consuming.
And if you think about it,if a nurse practitioner
spends a couple of hourseach week getting permission
to do various treatmentsfrom physicians,
(23:09):
that means the physician'snot seeing a patient
and the nurse practitioneris not seeing a patient.
So we didn't see any anythingin urban areas.
But in rural areas where there'sso few physician providers
just having an extra houra week made a huge difference.
We saw dramatic dropin the number of debris events
that people needed in ruralcounties in the states that did,
(23:31):
and that was
the immediate effect that wasn'ta chance to sort of say, hey,
now that we've done this,
can we attract new nursepractitioners?
Can we get new structuresto open up new clinics?
Can we get more
practitioners, startthinking about
working more hoursthan they already do?
This is just the immediate,quick down and dirty impact.
And it was it'sreally impressive
that people got throughdiabetes, treated better.
(23:54):
Well, that's awesome to hear.
Now let's think overall.
So we've seen that the evidenceshows that these regulations
don't work so well, certainlydon't work as advertised
when it comesto possibly thinking
about deregulatingor eliminating these regulations
here in Alabama.
How much of a benefitmight we possibly
(24:16):
be seeing here?
So, I mean, Macy, you mentioned
that the costs are a little bithigher.
Well, about how much higher,
you know,what are we talking about here?
A little bit or a lotor what are we looking at?
Yeah, so I actuallyMercatus does a lot of work
on certificate of needand they and
(24:36):
if specifically about Alabama
and they estimated thatif Alabama
did a full repealof their cotton program,
the per capita savingswould be about $200 a year,
which is pretty sizable.
And they also admittedthat they would go from
41 rural hospitals up to 58.
(24:58):
So that would be an increaseof 17
rural hospitalsthat they don't have now.
Well, and it's importantto think about that because,
I mean, you know,that's shorter.
You know, there's shorter
trips to the hospitalthat shorter ambulance rides.
And in the time of emergency.
And, you know, so not just likethey are the care there,
(25:19):
but there is also a lotof extra burdens on consumers.
The farther you have togo to get treatment, Right?
Yeah.
And that'sonly half of the story. Right?
This up until this point,we've only been thinking
about the patientor the consumer.
But these laws affect workersas well, right?
They affect
nurse practitioners,they affect doctors,
(25:39):
they affect all of these people.
And and think about the kindof jobs that come with 17
additional hospitals. Right.
You have
you have nurses, you have staff,
you have peopleworking in the cafeteria.
You have tons of roomfor growth.
And I think that's that'salso the other side of the coin
that a lot of peopledon't think about is
by restricting access.
(26:00):
You're also making it harderfor these nurses
to find competitive wagesor doctors to
find competitive wagesacross these different
surgical centers or hospitals.
Yeah, because after all, it iscompetition between different
businesses thatwould be that we believe bids
people's salaries and wagesup to the level that that
(26:20):
that their productivityallows them to be paid.
So that's an importantconsideration.
And then I mean, there'salso the element
from economic developmentin rural areas.
If you're a county, you know,
if your area doesn't
have a hospitalor medical center,
then I mean, that'sjust another strike against you
when it comes to tryingto recruit or retain businesses.
(26:42):
I'm sure it'svery high up on the list of like
how close is the nearest
hospital if you're thinkingabout locating
a business somewhere right?
Yeah, 100%.
And that is kind of wherethese two sort of
laws come hand to hand, right?Scope of practice.
And can
this naturally why they'rein an episode here together
(27:02):
because Collin sort of
is regulation surrounding
how can you establish medicalfacilities and then to Dr.
Mitchell's point,
scope of practicelaws are really speaking
to what are these peoplein these facilities able to do?
And both of thoseneed to be addressed
in order to ensure
we have really good rural accessto health care.
(27:23):
And it's importantto point out here is
this is notwe could achieve these two
forms of of deregulateand without spending
more taxpayer dollars on this,we're usually
when are talkingabout improving health care,
improving anything else.
And you talk aboutthe government doing it,
it's usually like, okay,how big of a tract is that?
Do you have to writefrom the Treasury
(27:44):
to to makethese good things happen?
But this wouldn'tactually cost us
anything off the budget, right?
Yeah, Yeah, 100% similar things.
That's really excitingis, you know, a
big part of every state budgetis the Medicaid part of budgets.
It's just a big chunk.
It's like $7 billion in Alabama.
So nurse practitioners saveyou money in two different ways.
(28:07):
One, they make less money,they actually earn less money,
they get reimbursed at a lowerrate to physicians, too.
So that is pushing prices down.
On shifting the supply curve outis pushing prices down.
So there's that sort ofso shifting supply
curve out with lower crossingsis pushing prices down.
The other thing that's happeningis you're getting things
(28:28):
taken care of quickly earlyon, where it's cheaper.
It's always cheaper to deal withthings early than it is late.
If you have diabetes, it'scheaper
to see a primary care providerand get that taken care of
early than it is late,because late means
you have diabetic blindnessand diabetic necrophilia
and you're getting likeamputations.
It's all terrible.
(28:50):
So there's a range of estimatesabout how much just the prices
would come down, not the savingson getting things done
early as opposed to late,but just pushing prices down.
So if you takethe most conservative estimate,
the most conservative estimate
with the pricescoming down would be is 3%.
You say, well, that doesn'tsound like very much money.
Then you remember that
Alabama spent about 7 billionwell on on Medicaid.
(29:14):
So you say, well, 3% of that,if that price could come down
3%, you know, that's $21million,
21 million here,21 million there to him before,
you know, he's got real moneyin a state budget.
Yeah, well,hope it's okay if you can
save 21 million a year.
If you save 21 million a year,what would you do with it?
(29:34):
Well, first
you could give it back to
the taxpayers,so you could do education.
You could do all kinds of thingslike 21 million a year.
That's a lot.
Well, well, thanks very much,both of you,
for coming onto talk about this.
I appreciate it very much.
And thank you allfor joining us.
Join us again next timefor another E Conversations.
(29:54):
This has been e conversations,
a joint productionof Joy, Torture,
Vision and the Manuel H.
Johnson Center for Political.
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