SUBSCRIBE NOW Just 99¢ for your first month



An Economist's View: Pandemic exposes problem pair in Minnesota health care

From the column: "Both policies seem, on the face of it, absurd, so why do we have them? In both cases, the answer is the power of vested interests."

Dick Wright / Cagle Cartoons
We are part of The Trust Project.

The COVID-19 pandemic has revealed some state policies in urgent need of reform. In the field of health care, two stand out.

First, Minnesota should join the national Nurse Licensure Compact. When the pandemic hit, Minnesota needed all the qualified medical professionals it could get, but licensing proved to be an obstacle to qualified health care workers from outside the state putting their skills to use here. Gov. Tim Walz eventually signed an order allowing health care workers licensed in other states to work in our state, but a permanent solution would be for our state to join the national Nurse Licensure Compact.

The compact allows a nurse to have one license in their primary state of residence with authority to practice in person or via telehealth in other compact states, with the requirement that they follow the nurse practice act of each state. As the Minnesota Board of Nursing says, the compact “advances public protection and access to care through the mutual recognition of one state-based license that is enforced locally and recognized nationally.” At present, 34 states are members of the compact.

Second, Minnesota should lift its moratorium on hospital construction. This moratorium, which replaced similar “Certificate of Need” laws in 1984, prohibits the building of new hospitals as well as “any erection, building, alteration, reconstruction, modernization, improvement, extension, lease or other acquisition by or on behalf of a hospital that increases bed capacity of a hospital.” Whenever hospitals or provider groups propose an exception to the moratorium, the Minnesota Legislature requires the Department of Health to conduct a “public interest review.”

The moratorium exists, in theory, to prevent medical providers from over-investing in capacity which, it is argued, would drive up prices, raise health care costs, and restrict access to these services for the poor. It has been successful in its explicitly stated proximate aim of restricting the expansion of hospitals. In the 20 years from 1984 through 2004, 16 exceptions have been granted, permitting just 94 additional licensed beds in the state. (Between 1996 and 2016, the number of licensed beds in Minnesota actually fell by 921 while the population increased by 810,000).


But it has failed in its ultimate aim of easing and protecting health care access for the poor. Indeed, a study by economists Thomas Stratmann and Jacob W. Russ found no evidence that Certificate of Need regulations — which function much like our state’s moratorium — increase indigent care. But they do find evidence that the regulations limit the provision of medical services. Consequently, the price of medical care is likely higher under such policies while the poorest Americans see no increase in the availability of care.

There is, in addition, evidence that states which have removed these rules have more hospitals and more ambulatory surgery centers per capita, more hospital beds, dialysis clinics, and hospice care facilities. Patients in these states are more likely to utilize medical imaging technologies and are less likely to leave their communities in search of care.

Though advocates of these policies sometimes claim that the rules protect rural facilities, states without them have more rural hospitals and more rural ambulatory surgery centers than states with them.

Both policies seem, on the face of it, absurd, so why do we have them? In both cases, the answer is the power of vested interests.

In the case of the Nurse Licensure Compact, opposition comes from the Minnesota Nurses Association. The nurses union called the compact “a direct threat to MNA as a professional association and sole collective bargaining agent for nurses in MN.” Yet, when the Minnesota Board of Nursing surveyed all registered nurses and licensed practical nurses in 2017, “more than 80% of respondents to the survey were in favor of Minnesota joining the NLC.”

Support for the moratorium comes from the hospitals which already have licensed beds. With further supply restricted, these become more valuable. Many hospitals have strategically “banked” beds, allowing them to circumvent the review process so that, in 2016, while there were 16,262 licensed beds in Minnesota, only 11,484 were actually available.

As with nurses licenses, Gov. Walz temporarily suspended some aspects of the moratorium during the pandemic. But if this is good policy in bad times, how can it be sound policy in good times?

The health care of ordinary Minnesotans should come before vested interests. As the pandemic has shown, Minnesota should join the Nurse Licensure Compact and abolish its moratorium on hospital construction.


John Phelan of St. Paul is an economist at the Center of the American Experiment (, a conservative public-policy think tank based in Golden Valley, Minnesota. He wrote this for the News Tribune.

John Phelan.jpg
John Phelan

What to read next
CEO says not only is Magellan’s conduct “illegal,” it stifles competition, increases costs to crude oil shippers and markets, and raises the cost of gasoline and other refined products for hardworking people across the country.
The plan should instead follow Xcel and Great River Energy by planning the future around renewables and storage.
Financial systems accrue power to the degree they can work well with others in a stable way.
Every walk with Nova is a new adventure and provides me with not only cardio exercise, but also training in patience and sometimes, resistance work.