Will states fill the void left by federal deregulation?

Not to bury the lede, the answer is yes. States were doing so before the current federal deregulation, and I believe this trend will pick up pace now. To be clear, there are certain subject areas in health care that the states have historically regulated. For example, state medical and professional licensure boards oversee the delivery of licensed health care services. The authority of these state agencies sometimes overlaps with federal agencies regulating in adjacent areas, but on the whole, the states will continue to regulate care delivery and standard of care. Federal deregulation likely won’t have a huge impact on these subject areas.

There are other subject areas that federal agencies have historically regulated but where we’ve recently seen states play a larger role even before the current federal deregulation efforts. For example, health care privacy was primarily governed by federal law 10 years ago (under HIPAA/HITECH, SUD records, FTC, etc.). But in recent years, several states have enacted health information privacy laws that either add to federal law or fill perceived federal gaps (e.g., Washington My Health My Data).

I see state regulation as a trend that continues and accelerates pace under the Trump administration’s dismantling federal regulation. The interesting question for the future is what other subject areas will states seek to regulate or increase enforcement as the federal government pulls back?

States could play a larger role in regulating use of AI in health care professions. Prior to the Trump administration, the FDA seemed poised to play a lead role in regulating the use of AI in medicine under its authority to regulate medical devices. However, given the Trump administration’s focus on federal deregulation and removing barriers to the advancement of AI, the FDA may play a lesser role. If this happens, states will likely take on a larger role in regulating AI. For example, state professional licensure boards may promulgate rules and guidance on what constitutes unauthorized practice by AI.

States may also step up enforcement of health care fraud and abuse. The Trump administration has indicated its intent to continue enforcement of these laws, but it has simultaneously dismissed key enforcement personnel, which begs the question whether federal agency enforcement will be robust. States may step up where federal enforcement declines. Most states have anti-kickback and self-referral laws that complement the federal laws, though notably these state laws often apply more broadly than their federal counterparts, giving states wide latitude for enforcement. If states take a more active role in enforcement, we may see an environment where state fraud and abuse compliance becomes a more significant concern.

The unintended effect of a move toward federal deregulation is a more complex state regulatory framework for organizations operating across state lines. Despite the complexity, there are certain advantages of this framework, including that organizations can avoid operating in states with adverse laws, which isn’t an option when federal agencies impose mandates.