The Case Against Re-Regulation

The government cut back on bureaucratic red tape to help get through COVID-19. Here’s why it should make that move permanent.

When COVID-19 swept through America, a number of states rushed to change regulations that would help businesses and individuals respond to the epidemic. Minnesota Governor Tim Walz used emergency powers to allow health care workers licensed in other states to practice in Minnesota for the duration of the emergency period. Among other things, he also allowed restaurants and bars to temporarily sell alcohol to go, with some restrictions, during the shutdown.

Such suspension of rules did not lead to faster spread of the coronavirus, which showed the state can do with fewer regulations. Therefore, Minnesota should not backtrack on this progress by re-instituting rules that constrain hospitals, health care workers and businesses from functioning efficiently. In addition, the legislature should repeal or adjust other unnecessary regulations that would hamper Minnesota’s recovery from COVID-19. Those listed below are a good starting point.

1. Minnesota should join the Nurse Licensure Compact

When COVID-19 cases peaked in May, hospitals faced a shortage of nurses to staff existing and newly activated ICU beds. Governor Tim Walz rightly decided on April 25 to permit out-of-state health care workers, including nurses, to work in Minnesota without requiring extra licensing. Why did it take an executive order to allow nurses with out-ofstate licenses to work in Minnesota during a time of shortage? Regulation.

Historically, states required nurses to get a new state license in addition to their existing license in order to practice locally. This changed in 2000 when the National Council of State Boards of Nursing established the Nurse Licensure Compact (NLC), which “allows a nurse (RN and LPN/VN) to have one compact license in the nurse’s primary state of residence with authority to practice in person or via telehealth in other compact states (remote states). The nurse must follow the nurse practice act of each state.” Since Minnesota has not joined the 34 states that belong to the NLC, it barred out-of-state nurses from helping combat the coronavirus. Hospitals had to wait for an executive order before they could bring nurses in from other states.

There is no good reason that the state of Minnesota should not be part of the NLC after COVID-19 is over. The Minnesota Nurses Association (MNA), a labor union, claims that allowing outside nurses to work in Minnesota would threaten safety and quality of care delivered in the state’s facilities. But NLC’s internal system strictly upholds safety and quality of care. Allowing outside nurses to practice in Minnesota without the burden of obtaining an extraneous license will better position the state to handle any future staff shortages. Additionally, Minnesota nurses will also enjoy increased mobility among NLC member states.

2. Minnesota should loosen regulation on telemedicine/telehealth

The coronavirus epidemic has called for an unprecedented use of remote services. Social distancing protocols paired with fear of infection have led to a demand for alternative ways to “visit” a doctor or hospital. To meet this new demand, states have relaxed rules and waived certain requirements so patients can access health care services remotely. Minnesota, for instance, suspended rules requiring out-of-state mental health care providers to obtain a Minnesota license before they could administer remote mental health care services to the state’s residents.

On April 6, Governor Walz declared in an emergency order that “allowing out-of-state mental health care providers to provide telehealth services in Minnesota will ensure that the mental health needs of Minnesotans are met during the stress and uncertainty of this pandemic.”

There is little worry when these laws are suspended because qualified doctors possess the necessary skills to treat patients regardless of whether they are licensed by the state of Minnesota or elsewhere. If mental health providers can effectively provide telehealth services during this emergency period, they should be able to do so once the pandemic is over. Which leaves the question: Why do qualification laws exist in the first place?

The COVID pandemic has proven the viability of telehealth services. Telehealth greatly improves efficiency in the health care system, in part because it reduces the need for most in-person visits. Regulation should not prevent health care providers from continuing to use such services when the pandemic is over. The state should repeal obstacles to telehealth, such as state licensing laws, not only for mental health care providers but for all other services that can be performed remotely.

3. Minnesota should get rid of the hospital moratorium

A majority of states maintain Certificate of Need (CON) laws that require providers to show a need before establishing or expanding facilities, taking on large capital expenditures, offering new services, or purchasing new equipment.

While Minnesota does not officially have a CON law, its “hospital construction moratorium law” does require hospitals to get permission from the Minnesota Department of Health as well as the Minnesota Legislature before they expand capacity. CON law proponents argue that these laws prevent hospitals from over-investing in excess capacity, which keeps prices low. Research, however, shows that CON laws do not lead to lower prices but instead limit access to care and contribute to higher costs of health care services.

Minnesota’s hospital construction moratorium is no different. By restricting the expansion of hospital beds, the moratorium creates a shortage and decreases the available bed space. Minnesota’s providers experienced this when hospitals in Minnesota were trying to prepare for an uptick in coronavirus cases. In anticipation of a need for greater ICU capacity, hospitals had to expand, but the moratorium had already limited available capacity. This would not have been the case if hospitals were allowed the flexibility to expand bed capacity any time they anticipated an increase in demand for hospital beds. The U.S. Census Bureau projects that the United States will soon face a growing aged population, which will lead to higher demand for hospital services in the near future. Doing away with the hospital moratorium is one way Minnesota can prepare for changing demographics.

Further, the hospital moratorium is founded on the illogical premise that hospitals can or would invest perpetually to build unneeded capacity. Hospital executives, like any other business managers, operate on profit and loss guidelines. Hospitals would not increase capacity without foreseeing increased demand. When they are allowed the flexibility to expand, they reduce or increase their capacity based on changing market demands. The hospital moratorium, however, restricts any flexibility in hospital capacity. This incentivizes hospitals, especially big hospital systems in metro areas, to bank bed licenses that they can use in the future to expand capacity without going through a review process. However, when hospitals hoard bed licenses without providing additional space, it gives the impression that the hospital system has adequate capacity when in actuality the number of available beds is lower and may not be adequate to accommodate patients’ needs. This is especially disadvantageous to small hospitals in rural areas, as they cannot bank licenses or easily obtain a license to expand when circumstances require them to.

4. Minnesota should loosen liquor laws

When COVID-19 hit, restaurants and bars were among the first establishments to close and the last to open—which cost them customers and revenue. Minnesota’s burdensome liquor laws treated craft breweries and distilleries even more harshly.

The state’s liquor laws stringently restrict self-distribution and bottle sales. Craft breweries can’t sell directly to customers unless they produce fewer than 20,000 barrels of beer a year, and even then they are limited to taprooms and off-site sales of 750 ml bottles known as growlers. Once they hit the 20,000 mark, craft breweries have to stop selling beer off-site. Minnesota also dictates that microdistilleries only produce 40,000 gallons a year. When distilleries reach the cap, they either have to close their taprooms (resulting in lost revenue) or move their production. Additionally, microdistilleries can only sell one 375 ml bottle to a person per day.

These laws hurt craft breweries and microdistilleries and became even more onerous when establishments had to shut down their taprooms during the onset of COVID. In addition, customers were preferring to buy a 12-pack of 64-ounce containers that only liquor stores are allowed to sell, forcing craft breweries and microdistilleries to rely on deliveries or pick-up orders of growlers and miniature bottles for revenue.

Businesses need to respond to changes in consumer preferences, which Minnesota’s liquor licensing rules prevented producers from doing, thus hurting their survivability. The Minnesota Licensed Beverage Association argues that these liquor rules are in place to keep producers from getting a special competitive advantage over small liquor stores. But this is not a good reason for regulation. By restricting craft breweries and microdistilleries from selling directly to customers, these rules stifle competition, reduce customer choice and also raise prices. On top of that, craft breweries and microdistilleries are hesitant to expand their operations and grow, for fear that they will exceed their production limits and have to shut off their taprooms or stop selling offsite. There is no good reason why these laws exist.

5. Minnesota should loosen occupational licensing laws

States all around the country typically license certain occupations to ensure public safety and quality. In reality, however, occupational licensing only manages to restrict production, raise prices, limit economic physical mobility and contribute to inequality. High barriers to entry into certain occupations create costs that are mostly borne by low-income individuals who are denied affordable prices and job opportunities.

Minnesota licenses occupations that are rarely licensed in other states and licenses them more onerously, which increases its licensure burdens. According to a study by the Mercatus Center at George Mason University, Minnesota had the 12th fastest growing breadth and burden of licensure in the country between 2012 and 2017. Legislators could help Minnesota’s post-COVID recovery by repealing its growing code of occupational licensing laws.

Research shows occupational licensing laws provide no significant benefit at high costs. These laws rarely improve quality of service, and they do not contribute to safety. But they do manage to keep people out of jobs, especially low-income individuals who cannot afford the cost of licensing. Since Minnesota, like most states, requires all individuals moving to Minnesota to acquire a Minnesota license in order to work in-state, skilled individuals without the required license cannot contribute to Minnesota’s economy. Given that Minnesota’s unemployment is high and many low-income individuals have been affected by the state’s shutdown, loosening occupational licensing laws would expand job opportunities for the most adversely impacted groups while also making it easier for the economy to recover.

6. Minnesota should loosen regulation on childcare

The coronavirus has exacerbated a long simmering crisis in Minnesota’s childcare industry. Particularly in rural areas, Minnesota parents face an acute shortage of providers. And the providers that do exist are among the most expensive in the nation. This shortage of high quality, affordable childcare will greatly hinder Minnesota’s path to economic recovery.

Policymakers can ensure the viability of existing childcare providers and encourage new ones to enter the market by loosening the state’s rigid childcare laws. Minnesota’s low student-to-teacher ratios and its rigorous training standards have been cited as two contributing factors to high childcare costs. And Minnesota’s stringent staffing ratios make it hard for providers to find qualified teachers, which can lead to a shortage of available capacity.

Additionally, operators of Family Child Care (FCC) providers, which comprise a majority of capacity in rural areas, have cited regulation as a principal reason why they exit the market. In the last several years, the state of Minnesota has tightened regulation and increased training and paperwork requirements, and FCC homes are having trouble navigating the expanding, as well as changing, regulatory environment. Legislators must assess Minnesota’s regulatory code and remove all rules that rarely contribute to safety and quality in childcare but make it harder and more expensive for providers to operate.