Pay and diem

Like it or not, per diems are indeed part of a good compensation package. You are welcome to consider it separately, in fact the IRS requires that it not be tied to an hourly rate. But in fact that is what happens, you just can't say that in a contract. Taking a portion of the bill rate and making it non-taxable does increase take home pay, isn't that what any traveler wants? Yes, per diems are intended to be duplicated expenses, but as long as certain fundamentals are met, the IRS does not require receipts. Thus a frugal traveler with low expenses at home does well.

Competition keeps agencies from profiting excessively with any pay scheme. Agencies go out of business all the time because it is very competitive and attracting the right nurses is expensive. Paying M&IE is now mandated by the IRS if housing is provided tax free so all agencies are on a level playing field.

The real scandal is not the mechanics of tax advantage, it is that a large percentage of travelers are accepting tax free per diems without a legitimate tax home, and recruiters encourage faking tax homes "just use your parent's address" because otherwise they lose a competitive advantage to other agencies.

If you want to learn more about travelers compensation and taxation, there is a lot of good reading on PanTravelers and Traveltax.

wouldn't it make more sense to take a high hourly rate, no diem, and just write off the gov't max per day at the end of the year?

According to TravelTax, you can deduct the difference on M&IE between what your agency pays and the max GSA rate. Plus of course your travel days to and from home. Housing though must be receipted at more than the stipend provided. But with filing thresholds for most travelers (M&IE are only 50% deductible before other thresholds) it almost without exception works better to take all tax free money offered and even try negotiating for more - technically illegal of course as it is overtly recharacteration of wages. Which is why you cannot put it in a contract.