Medical Industry Deregulation Spurred by COVID-19 Should be Made Permanent

In response to the coronavirus pandemic, the federal government — along with many state governments — has moved to loosen regulations on medical licensing, telehealth, reimbursement, and FDA approvals. These measures have helped accelerate pharmaceutical innovation, expanded access to critical care, and empowered medical workers to focus more on patients than on red tape. These temporary actions are proving that many medical restrictions should be done away with permanently.

Out of a concern that their existing health care workforce might be overwhelmed by coronavirus cases, many states have relaxed occupational licensing standards for nurses and other front-line workers. Early in the pandemic, Washington state activated a law that allows medical volunteers to practice immediately without needing to obtain a Washington license as long as they are in good standing in the state in which they are licensed. Massachusetts has implemented a similar policy, as have other states. These actions are an admission that the interstate barriers created by our patchwork of state regulations are largely disconnected from the public’s safety — if state-specific standards were so important, why would so many governors be eager to attract out-of-state nurses?

But states should go further. Many occupational licensing rules have long been known to reduce economic efficiency and impede geographic mobility without delivering significant benefits to the public. To mitigate these harmful effects, in 2019 Arizona became the first state to grant reciprocity to out-of-state licensees in all occupations, including medical workers. Pennsylvania and Montana have since followed Arizona’s example. Many other states have moved in the right direction by joining the Nurse Licensure Compact, which allows nurses licensed in one state to practice with patients in other states. Permanently expanding such reciprocity agreements to all occupations would help both workers and the public.

The current crisis has also shone a spotlight on the FDA’s regulatory malpractice, which delayed the production of tests and supplies in the critical early days of the pandemic. For example, Congress had to intervene to lift a restriction that prevented companies from selling construction masks to hospitals, even though they were virtually identical to those approved for medical use. In another incident, researchers in Seattle scrambling to develop coronavirus tests faced weeks of delays because the FDA refused to accept emailed documents, demanding instead that applications be submitted on paper. Purging such archaic and obstructionist regulations would deliver benefits far beyond our fight against the coronavirus.

These failures point to a broader flaw in the FDA’s approach. The agency’s rules allow it to approve medical treatments and devices only once they are deemed “safe and effective.” While no one wants products marketed that are unsafe or ineffective, this mandate has caused bureaucrats to be far too cautious in evaluating new technologies, especially in times of crisis. Releasing a drug with an unknown side effect can cause serious harm but delaying approval of a safe treatment can be just as damaging. It’s been estimated that tens of millions of people have died waiting for the FDA to approve medicines for heart disease, cancer, and other illnesses.

The pandemic has also spurred a sharp increase in demand for telehealth services, to which policymakers have responded by relaxing rules on reimbursement and coverage. In March, the Centers for Medicare and Medicaid Services announced that while the national public health emergency lasts, Medicare would pay physicians for telehealth services — including audio-only telephone consultations — at the same rate as in-office visits. Rules that restricted telehealth practice across state lines have been suspended as well.

It is unfortunate that a crisis of this magnitude was necessary to persuade government officials of the value of broadening access to telehealth. For more than a decade, evidence has accumulated showing that telehealth can improve health outcomes (particularly for rural residents), reduce costs, and make better use of our health care workforce. When this crisis passes and emergency orders expire, policymakers should take a hard look at these restrictions before reinstating them.

In many cases, they will find that the health care system works better — for patients, for providers, and for taxpayers — without the tangled web of regulations that restrict entry into medical professions, undermine competition in the pharmaceutical industry, and stifle flexibility and innovation.