In acknowledging the struggles faced by rural hospitals, Congress recently created the Rural Healthcare Transformation Program. The program aims to increase access to health care in the areas that need it most and create the right incentives to lower the rates of chronic disease. The Rural Healthcare Transformation Program will help struggling rural health care facilities by providing $50 billion in aid over five years.
When the government wants to fix a problem, debate usually centers on one thing: government spending. But government blindly throwing money at a problem fails to create lasting change, especially when anticompetitive health care is the root of many health care troubles.
Fortunately, the Rural Healthcare Transformation Program is doing more than spending money; it is incentivizing growth and competition in the health care market.
Recently, the Centers for Medicare & Medicaid Services provided states with guidance on how it will distribute the $50 billion. Each state must apply for funding and will be scored. While the primary criteria are the size of a state’s rural population and the amount of uncompensated care provided by a state’s hospitals, CMS will also consider whether state continue to impose anticompetitive health care laws.
These anticompetitive laws are still popular around the country. For example, so-called “certificate of need” laws make it difficult or impossible to open new health care facilities. These laws, originally conceived of to decrease health care spending, even prevent existing providers from expanding or adding new services.
That is why every presidential administration since Ronald Reagan’s has called on states to repeal certificate of need laws. Nonetheless, more than 30 states continue to enforce those laws, which, for example, prevent ambulance providers from reaching rural Arizona; led to the death of a newborn by keeping one Virginia hospital from opening a neonatal intensive care unit; and contribute to the national crisis in hospital boarding, whereby patients are stuck in ER beds for weeks or months because there are no beds available in existing substance-use treatment or psychiatric facilities.
Although every state had certificate of need laws at one time, today, about 40 percent of the nation’s population lives in a state where they are limited or there are no such laws. This makes it easy for economists to compare outcomes with the overwhelming majority of studies concluding that certificate of need laws have failed to meet their goals.
Other laws, called “scope of practice” laws, place arbitrary limits on the services advanced practice providers can independently provide to patients. Instead of allowing providers to do everything they are trained to do, they often prevent providers from practicing to their full potential, harming patients.
For example, many advanced practice registered nurses are trained to provide quality primary care services. A 2022 Medicare Payment Advisory Commission report finds that advanced practice registered nurses and physician assistants make up half of the primary care workforce in rural areas and one-third of the primary care workforce overall.
This is promising news for rural residents looking for increased access to care. Yet many states force advanced practice registered nurses to work under the supervision of a physician. At first blush, this doesn’t sound crazy. In practice, physicians do not offer any meaningful oversight, yet advanced practice registered nurses must continue to pay their direct competitors for the privilege of working.
Yet independent practice for advanced practice registered nurses leads to better patient outcomes. A 2023 study finds that rather than increasing malpractice claims, relaxing practice restrictions on advanced practice registered nurses results in a 21 percent to 24 percent reduction in physician malpractice rates, with no increase in advanced practice registered nurse malpractice claims.
Advanced practice registered nurses also offer cost savings. One 2013 study estimates nearly $2 billion in savings if all states allowed advanced practice registered nurses to practice independently.
Still, people tend to associate a lack of access to health care with a lack of adequate funding. They spend little time considering how supply-side restrictions in health care harm patients.
The Rural Healthcare Transformation Program is taking steps to remedy this. States will be judged on whether they have made positive certificate of need reforms and whether advanced practice providers can practice independently. States like Montana and South Carolina will be rewarded for recently repealing certificate of need laws, and the 30 states that allow some form of independent practice for advanced practice registered nurses will also benefit.
It is naïve to think that all health care woes can be solved on the supply side, but it is equally shocking that states have distorted the supply of health care so badly for decades, yet continue to complain about the lack of access. Finally, a government policy that incentivizes states to get out of their own way. Care takers and their patients, not government, are in the best position to decide what care is needed.
Jaimie Cavanaugh is an attorney and state policy counsel and John Sweeney is a state policy analyst at Pacific Legal Foundation, a public interest law firm that defends Americans’ liberty against government overreach and abuse. Â
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