Unlocking Access to Health Care: A Federalist Approach to Reforming Occupational Licensing

Several features of the existing occupational licensing system impede access to health care without providing appreciable protections for patients. Licensing restrictions prevent health care providers from offering services to the full extent of their competency, obstruct the adoption of telehealth, and deter foreign-trained providers from practicing in the United States. Scholars and policymakers have proposed a number of reforms to this system over the years, but these proposals have had a limited impact for political and institutional reasons. Still, there are grounds for optimism.

In recent years, the federal government has taken a range of initial steps to reform licensing requirements for health care providers, and these steps have the potential to improve access to health care. Together, they illustrate a federalist approach to licensing reform, in which the federal government encourages the states to reform their licensing regimes, while largely preserving states’ control over the system. These steps include: (1) easing federal licensing restrictions for health care providers in certain areas where the federal government possesses regulatory authority; (2) creating incentives for states and professional bodies to experiment with reforms; (3) intensifying the Federal Trade Commission’s focus on licensing boards’ anti-competitive conduct; and (4) generating additional pressure for state-level reforms through expanding health insurance and promoting delivery system reforms under the Affordable Care Act. This article argues that a federalist approach represents the most promising path toward reforming occupational licensing in health care.

Federal intervention in licensing is necessary, due to states’ lack of incentives to experiment with licensing reforms, the externalities of their licensing regimes, and their inability to resolve their own collective action problems. Nevertheless, large-scale federal preemption of state licensing laws is unlikely, due to a combination of interest group politics, Congress’s tendency toward incrementalism, and its reliance on the states to administer federal policies. A federalist approach also has functional advantages over outright federal preemption: it allows for more experimentation in constructing new licensing regimes, and it enables the federal government to take advantage of states’ institutional expertise in regulating occupations. Finally, this approach presents a model for how the federal government can play a constructive role in occupational licensing in other fields besides health care, and in other areas of state regulatory policy.