Of the $4.5 trillion that the United States spends on health care each year, the largest share, nearly one-third, goes to hospitals. The cost of hospital services has consistently exceeded the overall rate of inflation for at least 20 years. If Vice President Kamala Harris and former President Donald Trump really want to lower health care costs, as they both say, addressing this trend should be a priority.
Hospitals are highly regulated, maze-like facilities that straddle the public and private sectors. Pricing is often driven by forces beyond your control. But absent (another) major overhaul of the U.S. health care system, simpler changes could still help rein in spending.
Consider personnel costs, a hospital’s largest expense. This accounts for 60% of the expenditure. These costs are often caused by labor shortages. The government estimates that there will be a shortage of approximately 140,000 doctors over the next 15 years. However, shortages are not inevitable. They are often the result of government policy and can and should be corrected.
The obvious starting point is the so-called scope of work law. Most medical professionals require a license granted by state authorities. In addition to establishing standards for education and training, authorities also set rules that dictate what a particular profession can (and often cannot do). Supporters say such laws are necessary to protect patients and that it makes some sense to limit complex cases to trained professionals. (No one wants a nurse to perform heart surgery.) But we know that unnecessarily strict laws limit access to care and increase costs. One study found that relaxing these laws for nurses could save Medicare more than $40 billion a year.
During the pandemic, several states temporarily relaxed scope of practice laws to allow trained nurses and physician assistants to perform certain tasks, such as diagnostic tests and administering vaccines, without direct supervision from a physician. . However, once the crisis subsided, many states reverted to their previous status, despite evidence that such flexibility improved patient outcomes and increased the availability of quality health care. .
The United States has fewer doctors per capita than most wealthy countries, and doctors have the highest salaries in the world. But lawmakers have consistently chosen to limit competition and maintain the status quo. For example, foreign-trained physicians must overcome a wall of state and federal restrictions before they can practice in the United States. They must repeat the program and apply for state licensure, which can take years and cost thousands of dollars. Aspiring doctors in the United States are only marginally better off. Thanks to a 1996 law that capped Medicare funding for residency programs, federal funding for residency positions has not kept up with the number of medical school graduates.
Increasing the supply of highly qualified workers who can perform the required tasks, regardless of degree, is the easiest way to reduce costs. However, while some state legislatures are considering proposals to relax scope of practice laws, many state legislatures are considering “scope creep,” which would increase occupational overlap between workers and higher-skilled professionals. have struggled to overcome the (often self-serving) resistance of medical associations to Complaints like this are generally misplaced. The key is to ensure that nurses and physician assistants perform to the fullest extent of their training, without exceeding the scope of their training.
Lawmakers need to strike a better balance. States such as Florida, Tennessee, and Virginia are expected to grant provisional licenses to qualified foreign-trained physicians. More people should follow their example. U.S. regulators should also grant immigration exemptions to graduates of high-quality overseas medical programs. Meanwhile, Congress should reform its outdated system of funding medical training with the goal of increasing the number of physicians in fields and specialties facing shortages.
Fixing America’s health care system is a monumental task. That’s why we need to make improvements as simple as possible. A good place to start would be to increase the supply of desperately needed workers.
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