Health-care licensure rules vary in ways that matter for competition and mobility.

(<<Fact 14: Occupational licensing is common and associated with diminished worker mobility.)

As described in fact 14, occupational licensing is a core labor market institution that aims to protect public health and safety by limiting entry into a profession—in other words, by limiting market competition (Kleiner and Krueger 2013; Kleiner et al. 2016). Figure 15 focuses on one large licensed occupation, showing how nurse practitioners are licensed across the states. Though public discussion of the institution often focuses on occupations that have been more recently licensed (e.g., interior designers or tour guides), the economic impacts of licensure are likely to be especially important in the economically large health-care sector, which accounts for more than one-quarter of all licensed workers (authors’ calculations).

Two important dimensions of licensure policy variation in the health-care sector are scope of practice restrictiveness and interstate reciprocity. Research on scope of practice generally finds that allowing non-physician providers (e.g., nurse practitioners, physician assistants, and certified nurse midwives) to perform additional tasks and to perform them in a more autonomous setting can help improve access to health care without reducing quality (Adams and Markowitz 2018).

Lack of reciprocity in licensing is another way that state policy limits competition. Health-care workers in particular are often prevented from remotely serving patients who reside in other states, a promising and increasingly feasible practice referred to as telemedicine. The Nurse Licensure Compact is one means of addressing this problem, working toward interstate reciprocity and harmonization of standards. Twenty-nine states have joined or are in the process of joining the compact (see figure 15). Interstate compacts for physical therapists, physicians, psychologists, pharmacists, dentists, social workers, and other professions are either in place or under construction.