Business & Economics

Taming the Occupational Licensing Boards and Creating Jobs

Mississippi’s reforms are a model for other states, but even spurred by the pandemic, progress is hard

Patient being interviewed by his doctor in a virtual meeting. Image Credit: Johnrob/Getty Images

Last March as the pandemic spread, the executive director of the Mississippi State Board of Medical Licensure issued a proclamation to speed up COVID-19 treatment and prevention by temporarily waiving some state regulations. He allowed residents to use telehealth to “visit” out-of-state doctors and to get a prescription without first getting an in-person consultation.

Nine days later, however, the board amended the proclamation, rolling back some of the original order’s reforms. The board decided to prohibit out-of-state doctors from consulting virtually with new patients from Mississippi but allowed in-state doctors to consult with any patient—old or new—over the internet. This “two steps forward, one step back” approach reduced the availability of healthcare for the state’s residents and may have contributed modestly to the state’s high toll from the pandemic: Mississippi ranks fourth in the country in COVID deaths per million in population. The board’s action appeared aimed at protecting in-state doctors from out-of-state competition, in essence putting doctors’ paychecks ahead of patients’ welfare.

This episode demonstrates just how hard it is to cut back on unnecessary and often harmful regulations around the country. Mississippi has 116,000 regulatory restrictions on its books. Some 10,000 come from state boards, commissions and examiners, according to the Mercatus Center’s RegData project. Each regulation benefits its own constituency, and these constituencies lobby hard to keep their state-granted privileges. For example, occupational licensing laws often raise prices, which means higher pay for people holding a license, without necessarily improving the quality of service. In other words, such laws benefit industry insiders but not always consumers.

But a crisis can change the equation. In the early days of the pandemic, states realized that healthcare restrictions could slow their response and nearly all pushed through at least some reforms. Many states, such as Colorado, Idaho, Iowa, Missouri and Utah, moved quickly to reform aspects of their occupational licensing regimes. This cleared the way for some healthcare practitioners licensed elsewhere to practice in their states, thus giving their residents more access to care. In 2019, Arizona was the first state to enact such a reform and continues to lead in licensing and telehealth reforms.

A key problem with licensing boards is that the members usually work in the industry and naturally are averse to letting in more competitors, an obvious conflict of interest. In fact, 85% of the 1,790 occupational licensing boards in the U.S. are subject to laws requiring most of their members to be licensed professionals active in the field that the board regulates. These boards are supposed to protect the quality of the services that their industry provides, partly by ensuring a minimal level of competency for the people they license, but instead they too often limit competition and erode quality by erecting barriers against people trying to enter the field. These industry gatekeepers write rules that help themselves and other incumbents at the expense of new entrants and the public.

Fortunately, policymakers in the Magnolia State are aware of the problem and have worked to overcome these challenges. In 2017, the Mississippi Legislature created the Occupational Licensing Review Commission to examine proposed regulations by the state’s 29 licensing boards. This follows similar actions in other states, such as Alabama, Indiana and Louisiana, which created or empowered review bodies to champion license reform and increase competition.

These review efforts are making some headway. For example, Mississippi’s commission has worked to relax rules on out-of-state dentists and dental hygienists who want to practice in the state, eliminate some compliance costs falling on accountants and update continuing-education requirements for architects. The benefits of reforms such as these can be major and ultimately lead to more choices for consumers, as when a 2005 reform deregulated the Mississippi hair braiding industry, and in the years that followed, the number of registered hair braiders in the state more than doubled.

Now is the time to address the senseless roadblocks to greater employment put up by licensing boards. The actions taken by the Mississippi Legislature in recent years, as well as those by the commission, are good first steps toward fixing an anti-competitive occupational licensing landscape. Most promising is the commission’s sweeping new powers to order the removal of regulations as needed. Creating a fast-track process to get around special interest opposition is just common sense. Policymakers in other states would do well to follow this example.

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