Removing Regulations in Response to COVID-19

The pandemic has forced the states to abandon many of their regulations

July 20, 2020

The emergence of COVID-19 had policymakers scrambling, forcing them to throw out the playbook. In most states, the response was heavy-handed. Orders to shelter in place or limitations on economic activity down to “essential business” were widespread. The FDA invoked emergency rules, which gave them greater authority over private labs developing tests.

But in the end, in many ways, the state and federal response involved turning to the private sector and to deregulation. The public, predictably, benefited.

Much of the focus in healthcare debates surrounds health insurance, who will pay for the healthcare being delivered. Meanwhile, healthcare itself is stymied by regulations and artificial constraints placed on it by the government.

How exactly does the government do this?

States often implement regulations in an attempt to protect quality. Occupational licensing laws seek to protect quality by establishing minimum standards. However, in practice they protect established professionals from their competition, reducing the number of professionals, artificially increasing their wages (thus prices for consumers), and making it more difficult to move and begin working. All without improving quality.

Along with licensing laws, states dictate healthcare professionals’ scope of practice, or what tasks can be performed by whom. These are often set too low, preventing qualified professionals from practicing to the full extent of their training and education.

States further limit the supply of healthcare with “certificate of need” (CON) laws.

In order for a new hospital to be built or an existing one to expand its services, they must go before a board and prove an unmet need exists. Of course, their competitors are there to argue against new competition. It should be no surprise that this limits supply of everything from hospital beds to MRI machines. It should also be no surprise that patients are the ones who suffer.

Telemedicine also faces limits from state regulation. State licensing boards want to retain the power to ensure the quality of providers in their state. To that end, they often force professionals to be licensed in the state that the patient is located. This limits the ability of telemedicine providers, limiting them to only the state of the patient.

The Food and Drug Administration also seeks to ensure quality medication. They do this by having strict rules for those designing and testing new treatments, tests, and pharmaceuticals. These high standards make advancements more time-consuming and costly to bring to patients. This led the FDA to stop private labs from developing tests early and is still causing blocks to at-home testing kits.

Despite all of the pain COVID-19 has and will continue to cause, there has been a bright spot. It forced the government to reassess its regulatory policy and allow greater flexibility in response, unleashing the power of an unregulated market.

Recognizing how licensing limits their ability to respond to a pandemic, many states quickly moved to temporarily reduce or waive these regulations. Various combinations of solutions were implemented state-by-state, waiving requirements, offering immediate reciprocity, allowing retired people to reenter active practice immediately, waiving fees, and continuing education requirements. Reforms like these made it easier for professionals to begin practicing quickly without wasting time checking bureaucratic boxes during an emergency.

In the pandemic, some states temporarily waived scope-of-practice laws or reduced their stringency. This allowed those working in each hospital or clinic to determine what skills each individual had and how to use them.

Likewise, CON laws were waived by many states that still had them in place. This allowed epicenter states to expand Intensive Care Units, allowing hospitals to increase their capacity where it was needed, without the delays of CON applications.

We have seen a surge in telemedicine usage. Patients, now able to access their healthcare providers remotely, are able to avoid infections from in-person visits. Many states eased regulations on telemedicine and the federal government increased the reimbursement rate, both of which have made it easier for people to take advantage of the service. Patients had the flexibility to see a physician on their terms, in a way that could meet their needs.

The FDA turned to the private sector and reduced regulations during the pandemic. After blocking private labs early in the pandemic, the FDA allowed them also to develop COVID-19 tests. Despite the shortage of tests relative to what we need, we have far surpassed the number of tests made for H1N1. Private labs have conducted more tests than the FDA, and they continue to work to develop newer, faster tests.

Policymakers should be inspired by these temporary reforms and should consider them while making policy in the future. Firstly, they should consider making the temporary licensing and scope of practice waivers permanent. If these laws and regulations are harmful to public health and need to be waived, maybe they should not exist at all. Considering that we’re facing a shortage of primary care physicians which is only expected to grow, we need as many healthcare professionals as we can get.

Likewise, we should continue to craft regulation to encourage telemedicine. Many people have used telemedicine for the first time during COVID-19, and are experiencing for themselves how convenient and useful it can be.

Finally, we should streamline the FDA and its approval process. Early in the pandemic, they stood in the way of private labs, slowing our response. The delays in bringing tests and treatments thanks to the slow process of the FDA is a stark reminder about how deadly unnecessary delays can be.

In many ways during the COVID-19 pandemic, the government got out of the way, encouraging or allowing more private involvement to respond to the crisis. Not only did this help improve our response, but we should give strong consideration to whether we need these regulations at all.

Conor Norris is a Catalyst Policy Fellow and a Research Analyst with the Knee Center for the Study of Occupational Regulation (CSOR) at Saint Francis University. His areas of interest include occupational licensing and health care scope of practice laws, monetary policy, and long-run growth. Conor is an alumnus of the Mercatus Center MA Fellowship at George Mason University, where he received his MA in economics in 2018. He interned at the Cato Institute in 2017 in the Center for Monetary and Financial Alternatives. He loves reading good history books and bad puns and is still bitter that the Star Wars expanded universe is no longer cannon. Conor grew up in Williamsport, Pennsylvania and after spending two years in Arlington, Virginia, he now lives in Altoona, PA.
Catalyst articles by Conor Norris