Three Reforms to Bring Down Michigan Health Care Costs

Panel explains how special interest protectionism hurts patients and economy

A panel on ideas to achieve more free market health care.

LANSING — The federal government’s involvement in health care policy has grown dramatically over recent decades. But when it comes to how and where health care services are delivered, and who may or may not provide care, state governments still play a major role — one Michigan is performing badly.

That's the message from a panel of experts from Michigan and elsewhere recently assembled in Lansing, who offered some specific reforms that would make care more accessible and affordable in this state.

The panel of four experts assembled for a Mackinac Center event called “Free Market Solutions to Problems in Health Care.” These scholars and practitioners urged Michigan legislators to loosen scope of practice restrictions on nurse practitioners, facilitate more direct primary care doctor practices, and repeal the state’s certificate of need law.

Unshackle nurse practitioners

Constance Creech and Thomas Hemphill, both professors at the University of Michigan-Flint, spoke about nurse practitioners.

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Nurse practitioners are nurses with advanced degrees and training. Creech, the director of graduate nursing programs, said they need less regulation and more freedom to compete in Michigan. She noted that 40 years of research has shown that the medical care provided by nurse practitioners is just as safe and effective as care provided by physicians. Creech is herself a nurse practitioner. 

Michigan imposes the most restrictive form of regulation on nurse practitioners. While 21 states allow “full practice” (where nurse practitioners can independently manage patients and almost fully prescribe medicine), and 17 states have “reduced practice” (where they can prescribe some medications and oversee patients with some limitations), Michigan is one of just 12 states that impose a “restricted” practice regime on these highly trained medical professionals. In these states, nurse practitioners are barred from independent practice, having instead to operate under the supervision of a licensed physician.

“Michigan is one of the regulatory dirty dozen,” said Hemphill, a professor in the university's school of management.

He noted that in Michigan, nurse practitioners cannot prescribe pharmaceuticals or fully practice, even though the evidence shows they can do so safely. In studies comparing “full practice” states and “restricted” states, the evidence shows no health and safety differences for patients and no evidence that insurers see a difference in care provided by a doctor or nurse. And though parts of rural Michigan face a shortage of physicians, special interests are working to prevent changes to protectionist laws that freeze out the nurse practitioners who could fill the gap.

House Bill 5400, sponsored by Rep. Ken Yonker, R-Caledonia, is sitting in the House Health Policy Committee. It would make Michigan a “full practice” state. Medical groups have worked against the bill, and it hasn’t moved.

“Nurse practitioners are a highly competent, cost-effective yet underutilized health care professional,” Hemphill said. “Full practice legislation would go a long way toward solving [many] health problems.”

Expand direct primary care

Dr. Richard Armstrong, a general surgeon who practices in the Upper Peninsula, spoke about another innovation, called direct primary care.

This is an agreement between a patient and a doctor, who for a flat monthly fee delivers a menu of medical services, including easy access to by phone or email. One doctor who operates a direct primary care practice in Brighton was in the audience for the panel, and Armstrong cited the amounts he charges to illustrate the benefits. The charges are extremely reasonable because no insurance company middleman is involved. The “direct” also means the customer pays his or her own bills for routine services.

His or her very low bills, that is: This doctor charges $50 per month for an individual and $135 for a family of four. The fee covers annual exams, up to 25 office visits, and almost anything that can be done in a doctor’s office. Prices for exams and procedures are often as little as 10 percent of the cost through traditional insurance.

Direct primary care sidesteps government policies that have created a nearly impenetrable and extraordinarily expensive system of middlemen and third-party payers, which has also generated perverse incentives for providers and patients alike, further crippling the nation’s health care delivery system.

“There has been an incredible increase in overhead related to bureaucracy for doctors,” Armstrong said. “The average time with a primary care doctor in the United States is down to eight minutes.” But, he added, direct primary care doctors can answer many questions by email and phone and spent much more time in the office with the patients who need it.

On this one, Michigan is actually ahead of the game rather than playing catch-up, thanks in part to a 2014 law that explicitly excludes direct primary care from the comprehensive regulatory regime the state imposes on health insurance.

The sponsor of that law, Sen. Patrick Colbeck, R-Canton, is working to open the door wider with a new bill that would permit a direct primary care option to be included in the state’s medical welfare system (Medicaid). And federal legislation is being considered that would allow it for Medicare services.

Get rid of CON

Finally, the panel addressed certificate of need laws. Thomas Stratmann, a professor of economics at George Mason University and a scholar at the Mercatus Center, has extensively studied the effect of these laws. His conclusion is that they fully live up to their acronym — CON.

Stratmann said CON regulations limit people’s ability to obtain the care and treatments they need, have no public health or safety justification, make the public less safe, result in unnecessary deaths, and limit medical innovation and the provision of cost-effective medical care. Michigan’s CON law rations facilities and technologies such as MRI and CT scanners, surgery centers, hospital beds, and much more.

The law requires would-be providers who want to open or expand a facility or add new diagnostic tools to apply for permission from a board whose members often include competitors. Applicants must also pay a nonrefundable fee of up to $45,000. There is then a public hearing, where incumbent providers who would prefer not to have any new competition have an opportunity to protest. Then there is a fact-finding report by a state agency.

“This would be like if McDonald's had a say in Burger King openings in the state,” Stratmann said.

The main argument in support of state CON laws, which were enacted in the 1960s because of a since-repealed federal law, was that too many medical facilities means excess capacity and waste. But by the 1980s, the feds had changed their minds, finding that such laws were unnecessary and harmful. But only 14 states have eliminated their laws.

Studies show that CON laws reduce medical inputs like beds and MRI machines and the number of hospitals by around 35 percent, which leads to a reduction in the use of medical services.

The laws are designed to limit competition for current medical providers, Stratmann said. “To be very clear, there is no public health or safety reason for CON laws,” he added.

There is also no economic reason for the laws: The Mercatus study Stratmann co-authored found that people in CON states frequently go to non-CON states to get scans and other services, which suggests that Michigan may be missing out on economic activity that could be conducted here. The study also found that the number of MRI, CT and PET scans paid for by federal Medicare coverage is much lower in Michigan than in states without CON laws.

That could mean people are either traveling elsewhere for these potentially lifesaving diagnostic procedures or doing without them.

The panelists all acknowledged that the federal government has increasingly regulated health care. But there are critical medical services that Michigan is overregulating in ways that are harmful, not helpful. Straightforward reforms in these areas could lower costs, increase access, provide better services and even turn Michigan into a medical services destination.

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A video replay of the event:


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