Free Market Fundamentalist Opinion

American Health Care Is Understaffed, Because It Is Overregulated

The pandemic highlighted the need for more doctors and nurses.

New York ambulance
Ambulance in Manhattan, New York, October 4, 2017 (Unsplash/Benjamin Voros)

If coronavirus convinces more people our health-care systems need to be overhauled, it may be one of the few good outcomes of the pandemic.

In the UK, the government-owned National Health Service has long underperformed relative to its rich-country peers. I wrote here in January that the pandemic has underscored the need for reform. If you subscribe to the Financial Times, also read Camilla Cavendish’s story from April about the hundreds of babies who died in English maternity wards between 2000 and 2019 from lack of care. This in the world’s fifth-largest economy!

The Netherlands’ mixed public-private system is superior, but the country still has a shortage of nurses. It’s something I investigated for Wynia’s Week in December. What I found was that nursing associations, trade unions and researchers have been sounding the alarm for years, yet hospitals continue to underpay nurses and few give their workers the autonomy and flexibility they ask for. Probably because nursing was historically a part-time profession of unmarried women, and doctors and hospital administrators were historically older and male. That hierarchical culture (which I imagine exists in other countries as well) is hard to change, but it is slowly starting to. If you read Dutch, you can glean examples from my second story on the topic.

In America, excessive licensing requirements and regulations have kept health care understaffed. Pro-market think tanks like the Cato Institute and Niskanen Center have been trying to draw attention to this. Even Vox, hardly a bastion of libertarianism, acknowledges that American health care is, in some ways, overregulated.


In normal times, a shortage of medical personnel would just lead to higher prices. In a crisis, it can cause people to go without treatment and die.

Vox reports there are two reasons America doesn’t have enough health-care professionals:

  1. You can’t practice medicine with an out-of-state license. States don’t recognize each others’ certificates nor foreign diplomas.
  2. Nurses are seldom allowed to carry out medical procedures without the supervision of a doctor.

Dylan Scott, the author, knows there can be good reasons for such restrictions. Not every medical degree is equivalent. Not every nurse can do everything. Insurance companies often require a doctor to sign off before they reimburse the treatment.

But the regulations also protect the turf and livelihood of doctors. Making it difficult for out-of-state physicians to practice, and requiring the involvement of a doctor in even routine procedures nurses may have performed a hundred times before, allows doctors to make more money.

Nobody is proposing to abolish all rules and let anyone practice anything, but some rules could be relaxed.

The good news is that almost half the states in America have. Since the start of the pandemic, 24 have eased licensing requirements for physicians, 21 have expedited the licensing of retired or inactive doctors, and twenty have temporarily liberalized scope-of-practice regulations for nurse practitioners.

Allocating workers

Not every state needs more health workers. Connecticut, New Jersey and New York have plenty of doctors. States in the Rocky Mountain West have the highest shortages, in particular Arizona, North Dakota and Wyoming.

Scott is sympathetic to a form of central planning to optimize the allocation of doctors and nurses. (It’s still Vox.) That might be justifiable in an emergency, but I would be wary of attempting to move people around. Nobody could be forced to relocate (it’s still America), but as soon as you give an authority the power to “allocate” resources that opens the door to people being pressured to leave or institutions with a surplus of workers losing funding.

It may be unnecessary anyway if states recognized each others’ medical licenses. A doctor from California who is close to retirement may want to practice a few more years part-time in rural Wyoming. A nurse who moved out of state to get a degree may want to move back to his hometown. Regulations don’t make it easy for either of them. If doctors and nurses could move from state to state without having to worry so much about paperwork, probably more would. Then the market, not a planning agency, would improve what economists call the allocation of labor resources.

Evening out wages

Mutual recognition of licenses should also help even out wages. As is the case in the Netherlands, in many parts of the United States nurses are underpaid, even though there is a national shortage. A freer labor market would be a more national labor market. Nurses working in an expensive state like California would still need to earn more, but perhaps not twice as much as nurses in North Dakota and West Virginia.

If some places remain underserved, rather than a national planning board I would introduce a health-care version of the Teacher Loan Forgiveness Program. The federal government pays the student debts of graduates who teach in low-income schools for five years. If America is willing to subsidize the education of teachers, why not doctors and nurses?

Scott understands that high debts incentivize students to pursue specializations that are lucrative, which causes others to be understaffed. The prospect of the entirety of your debt being forgiven in five years should motivate more students to specialize in what they’re interested in, not in what they think will make them the most money.

Congress created the shortage

One thing Scott doesn’t mention is that lawmakers created the shortage of doctors.

Robert Orr of the Niskanen Center points out that America had more physicians per capita than other Western democracies in the 1960s. That convinced policymakers in the 1970s the number ought to be reduced, which led Congress to curtail medical residency slots in 1980.

Residencies are generally funded through Medicare, which generates direct costs to the federal government, and Congress didn’t want to spend the money. America now has relatively fewer doctors than Canada and Europe.

This has been good for doctors, who have seen their salaries rise at twice the rate of inflation. It’s been hard on American consumers, who pay twice as much of their income on health care as they did in the 1980s, and twice as much as European and other wealthy nations do today.