Occupational licensing of a credence good: the regulation of midwifery.

• Author: Adams, A. Frank, III

1. Introduction

   Occupational licensing is as old as trade. Estimates are that in the United States alone, at least 800 occupations require some form of "license to practice" (Rottenberg 1980, p. 2). Midwifery is most certainly among the oldest occupations known to Homo sapiens, and, unsurprisingly, it has been the subject of licensing regulations over the 20th century. There has been, however, a marked reemergence of the practice over the past 20 years in the United States. After nearly being driven from existence by physicians in the early part of the 20th century, the percentage of midwife attended births has risen from 0.9% of all births in 1975 to 5.95% of all births in 1995. This latter figure translates into 231,921 midwife-attended births for the year 1995. Of this figure, CNMs attended 94.3%, or 218,613, births. A number of factors account for this resurgence, including women's expression of their right to choose birth practitioners and place of birth, increased political expression of that right, and the escalating costs of traditional childbirth services by obstetricians (OBs) and hospitals (Butter and Kay 1988). In contrast, midwife-attended births account for a full 75% of all births in Europe, with far lower infant and maternal mortality rates reported (Coburn 1997).

   Midwives are classified into two basic categories in this country: lay midwife and certified nurse-midwife (CNM). Lay midwives typically receive no formal educational training but are clinically trained through apprenticeships. On the other hand, a CNM "is a registered nurse with advanced training in midwifery who possesses evidence of certification by the American College of Nurse-Midwives (ACNM)" (Adams 1989, p. 1038). The practice of nurse-midwifery, as defined by the ACNM, is "the independent management of care of essentially normal newborns and women, antepartally (before birth), intrapartally (during birth), postpartally (after birth) and/or gynecologically ... within a health care system which provides for medical consultation, collaborative management, and referral" (Safriet 1992, p. 425).

   The causes and effects of state regulation that determines the extent of professional independence from physicians of advanced practice nurses (APNs) has been analyzed by Dueker et al. (2000) for the same general period we employ. Advanced practice nursing, however, includes nurse practitioners, clinical nurse specialists, and nurse anesthetists as well as CNMs. Dueker et al. (2000) suggest that, for this larger category of nurse specialists, APN earnings are lower and physicians assistants earnings are higher in states where APNs have attained higher levels of professional independence (measured in part by prescriptive authority). (1) Midwifery has been included, along with other heath care professions, in interesting studies of the impact of the composition of public licensing boards on particular occupational requirements (Graddy and Nichol 1989; Graddy 1991), but (to the best of our knowledge) midwifery has not been isolated in any study of effects of regulation(s). (2) The purpose of this paper is thus t o analyze empirically the economic impact of alternative forms of regulation within the state markets for midwife services. Certified nurse-midwives are formally recognized by the American College of Obstetricians and Gynecologists (ACOG) and are now able to practice legally in all 50 states including the District of Columbia, but CNMs practice under significant and significantly different regulations that limit their scope of practice and constrain their use by women (DeVries 1985) within the 50 states. There are suggestions in the literature that the severity of regulations at the state level--a partial product of past pressure by the medical establishment (OBs in particular)--has had deleterious effects in the market for midwives' services. However, there has been (again to the best of our knowledge) no empirical support for such propositions or an analysis of the particular impact of alternative regulations. (3)

   We believe that the market for midwives is particularly interesting from an economic perspective. (4) Midwifery is, to a large extent, a credence good, as much certainly as many other medical services. Such goods, it is sometimes argued (Leland 1979; Shapiro 1986), "demand" regulation on the basis of quality certification. Consumers, it is often alleged, will tend to drift to the low-price, low-quality alternative in the absence of such regulation. Imposition of some regulation in such markets may, in effect, shift the quality-adjusted demand curve rightward, improving consumer welfare and increasing the quantity supplied of such services. We label the potential quality-improving aspect of regulation the "demand-side effect."

   Alternatively, mandatory occupational licensing, along with restrictive regulations supported by OBs and other medical professionals, may restrict entry, competition, and consumer choice. In short, a "supply-side" effect may be identified with restrictive regulations on CNMs that potentially reduces consumer welfare and redistributes wealth to competitors. The most important expressions of this view may be found in the work of Stigler (1971) and Peltzman (1976). In the case of CNMs, some regulations permitting certain benefits to the occupation, such as access to hospital facilities, granting prescriptive authority, or Medicare reimbursement, would put midwives on parity with OBs. These regulations, which would put midwives on a level competitive status are (generally) opposed by OBs (who wish to suppress a substitute and raise OB price), would shift the supply of CNM services rightward. Alternatively, regulations that limit the scope of midwives' activities would shift the supply curve of such services leftw ard, restricting supply and transferring income from CNMs and consumers to OBs with a deadweight loss.

   Both the demand-side (quality enhancement) and the supply-side hypotheses unambiguously predict higher observed price increases, but the two diverge when predicting the quantity effects of more stringent occupational regulations. We therefore focus on quantity changes and regard our study of state midwifery regulations as one test of whether the dominant effect of regulation is to, on net, increase quantity through quality enhancement or to reduce the quantity consumed through a reduction in the quantity of services. (5) In calculating the effects of both demand and supply shifts in the CNM market, we compare the net effect of average versus minimum state regulations, where minimum regulations would represent parity with OBs.

   The paper opens with a discussion of the institution of midwifery in the United States and a brief accounting of the types of regulations on this "credence good" in the 50 states. Next, a theory and empirical model are established to test for the effects of regulation. Finally, we analyze our results and offer some conclusions concerning the outcome of regulations in the market for a service characterized as a "credence good."

2. The Regulation of Midwifery in the United States

   Midwifery regulation in the United States takes place under a plethora of methods and means. Table 1 summarizes eight of these methods and identifies the states that use them. According to data obtained from the ACNM in Washington, DC, as of 1995 there are a variety of methods for establishing a regulatory board's authority over nurse-midwifery practice. We have constructed our variable, MEDICAL BOARD AUTHORITY OVER CNM'S, by combining the two states that regulate CNM practice using a board of medicine with the five states that use a department of public health/board of health. Further, there are presently 27 states plus the District of Columbia that require CNMs to meet continuing education and recertification requirements as a condition for license renewal, with seven of those states requiring continuing education as a requirement for prescriptive authority only.

   Prescriptive authority, the ability of a CNM to have discretion in the prescribing and dispensing of drugs that are within the scope of practice, is essential for a CNM to function independently of a physician. Twenty-four states plus the District of Columbia grant CNMs full authority to prescribe drugs and medication within their scope of practice as defined by the appropriate regulatory authority. Sixteen states either grant CNMs limited prescriptive authority or require physician control of that authority, while 10 states grant no prescriptive authority to CNMs. (6)

   Both state and federal laws discriminate against and limit the ability of CNMs to practice by failing to mandate that third parties (private insurers) reimburse CNMs for services that are within their scope of practice and for services that are identical to physician provided (and third-party reimbursable) services. (7) In some states, Medicaid reimbursement status for CNMs is at a rate that is substantially less than that for physicians for the same service provided. (8)

   Guaranteed clinical privileges are also potentially important CNM restrictions since states enact laws that regulated whether hospitals may permit or prohibit hospital facilities use. (9) In addition, we provide a variable that measures CNM control, CNM'S SUPERVISED BY MD'S, that would substitute for the part about CNMs being named in the authorizing statutes. (10)

   Table 2 defines and provides sample means for all of the variables used in our tests. All eight regulations described with the state restrictions in Table 1 are included in the test. These variables are largely self-explanatory. We have included the percent of the Hispanic population as an independent variable in order to tract the effects of a social tradition of using midwives in Hispanic cultures.

3. Model Specification

   A brief recitation of existing state rules and regulations reveals a wide diversity in midwifery regulation. And...