The Demand for Healthcare Regulation: The Effect of Political Pressure on Occupational Licensing Laws

Abstract

Using data on political spending in state elections and information on occupational licensing laws, this study considers the role of political contributions by healthcare professional interest groups in states’ decisions to enact occupational licensing laws. These laws govern how different professions may operate in healthcare markets, and while they ostensibly exist to protect consumers, these laws can also insulate professionals from competition in healthcare markets. Higher political spending by physician interest groups increases the probability that a state maintains licensing laws restricting the practices of nurse practitioners (NPs) and physician assistants (PAs) — two professions that compete with physicians in healthcare markets. Conversely, increased spending by hospital interest groups increases the probability that a state allows NPs and PAs to practice with more autonomy. Groups directly associated with NPs and PAs have little effect on licensing laws. These results are consistent with the investment theory of political spending.