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

Abstract

Using data on political spending in state elections, 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, licensing 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). Conversely, increased spending by hospital interest groups increases the probability that a state allows NPs and PAs to practice with more autonomy. Nurse groups, which include groups affiliated with NPs, have a smaller effect on licensing laws. And non-physician groups, which include groups affiliated with PAs, have almost no effect on licensing laws. These results are consistent with the investment theory of political spending.

Keywords: occupational licensing, interest group, political spending, nurse practitioner, physician assistant

JEL Classification: I18, K23