New York State Nurses Association Strike
Union demands, licensing, soft budget constraints, and the mixed-economic mess of American healthcare.
My parents, both of whom are surgeons in New York City, apprised me yesterday of nursing strikes occurring at hospitals throughout the region. They were curious what my opinion was on the matter, as a student of economics, a libertarian, and their son. Before I provide you with my two cents, I refer the reader to this informative piece on the subject by NBC.
I imagine that hospital administrators, other health professionals, and patients are frustrated with the NYSNA’s threatened strike. After all, nurses help provide care for which consumers have a relatively to extremely inelastic demand. However, this inelasticity gives neither patients nor hospital systems a right to the services rendered by nurses. If the nurses wish to form a voluntary union and compete for more expensive benefits, they are well within their rights to do so, regardless of the detrimental consequences to others. Given the record inflation brought on by COVID-era fiscal and monetary policy, the nurses demand for 18% wage raises over the next three years does not seem absurd. Whether hospitals can afford such a raise is another matter entirely, as some private hospitals are $200M in the green, like NY-Presbyterian, while others that receive most of their reimbursement through Medicare and Medicaid are $200M in the red, like Montefiore. The pecuniary demands are even greater because the nurses want to be paid more and have more nurses on staff. The latter is typically achieved by doing the opposite of the former.
I imagine that nurses feel like they can make such demands because the American healthcare system, though nominally private, receives most of its dollars from the federal government through Medicare and Medicaid. When these reimbursements are insufficient to keep hospitals afloat, politicians are pressured to bail them out, as was the case during the COVID-19 pandemic. These factors contribute to the healthcare system suffering from soft budget constraints1, resulting in productive inefficiency, i.e., no need to provide service at the lowest possible cost because there’s no serious threat of going out of business. Certificate-of-need laws and licensing requirements are yet another way in which the government distorts the supply, location, and size of hospitals and restrict the number of healthcare professionals available to render service. NY Mayor Eric Adams’ executive order to forcibly hospitalize psychiatric patients is putting further strain on NY hospitals and their health care professionals, specifically. Without this constellation of factors of government intervention, perhaps the NYSNA’s strike would have less of an impetus (and bargaining power) to occur.
KORNAI*, J. (1986), The Soft Budget Constraint. Kyklos, 39: 3-30. https://doi.org/10.1111/j.1467-6435.1986.tb01252.x