Stop overregulating nursing and let the free labor market work

Twelve years ago, the Affordable Care Act became law. Among the law’s effects, perhaps the greatest was an increase in demand for healthcare services (because the law expanded insurance coverage, primarily by expanding the safety net Medicaid program).  

But the law didn’t provide for an increase in the supply of healthcare services to match this demand. This exacerbated a preexisting shortage of healthcare labor, also driven in large part by our aging population.  

And all of this was before the COVID-19 pandemic, which also surged demand for health care.  

What should we do about this? The main lesson we should be learning about nursing — a critical part of any hospital’s labor supply — is that the market can work both to reward nurses for their heroic work and to keep patients safe. Sadly, there are efforts afoot to overregulate nurse pay and working conditions. This would be a mistake.  

As demand for nurses has increased, so has nurse pay. Average nurse pay (nationwide) increased 4 percent over one year to $81,376 in November of 2021, with greater increases in places with the highest demand. In response, some state legislators want to intervene to cap travel nurse pay, presumably to protect patients and taxpayers from higher healthcare costs.  

These efforts have largely been mischaracterized (there’s no effort to cap nurse pay in Congress, and state legislative efforts have focused on limiting price gouging by staffing agencies). But even state-mandated ceilings on staffing agency charges could have downstream effects on travel nurses, whose pay is a function of the agency rate.  

Nurse pay should not be capped. Economics 101 tells us that a high price signals a shortage and invites more people to enter that industry and increase the supply of nursing labor (to alleviate the shortage).  

One big challenge here is the limited number of spots in nursing schools and a shortage of nursing instructors. The pandemic also limited critical hands-on learning opportunities for nursing students. The right response to this is to expand nursing education opportunities, pay instructors more and safely reintegrate nursing students into clinical settings to learn.  

The wrong response to this would be capping nurse pay, which would discourage people from becoming nurses; nurses would be paid less than they are worth and would work fewer hours, leaving patients with less care than they need.  

Nursing unions would never support a limit on what nurses can earn, but they are asking the government to intervene in a different way to address the nursing shortage: to establish nurse-to-patient ratios. Unions argue that lower ratios are important to patient safety and also to the well-being of nurses. While well-intended, this is an equally bad idea that would similarly exacerbate the shortage of nurses.  

Importantly, the absence of government-enforced staffing ratios doesn’t mean they don’t exist; they are simply decided hospital by hospital, floor by floor (for example, critical care floors typically have lower ratios than standard care floors).  

Hospitals sometimes have to be flexible and violate their own staffing ratios — say, during a global pandemic — but hospitals do not want to harm patients. Among other reasons, it’s bad for business if a hospital gains a reputation for poor patient care.  

As far as the well-being of nurses: yes, nurses would have more manageable jobs if lower staffing ratios were enacted by law but there would be downstream tradeoffs for them too. Hospitals would have to hire more nurses and would have less flexibility in scheduling, which comes with a cost.  

This cost would either be borne by nurses in the form of lower pay or by patients and taxpayers through higher healthcare costs. Capping productivity and capping pay are two sides of the same coin, and both would limit nurses’ value in the marketplace.  

Instead, because nurses today are in the driver’s seat, they should use their high value to negotiate directly with hospitals to set and keep the staffing ratios they both know are best for patients (whenever possible, with the understanding that Black Swan events may stress the system and require extraordinary measures).  

But generally speaking, working conditions are like salary and benefits: They are negotiable. And nurses hold the power right now because hospitals are desperate to hire and retain them.  

There’s no need to take away all flexibility and have the government dictate nurse pay or working conditions. This would be unfair to nurses, hospitals, patients and taxpayers, and it would come with unintended consequences. 

The labor market is trying to send signals about the high value and great demand for nursing care. Let it.  

Hadley Heath Manning is the policy director at Independent Women’s Forum (iwf.org).