As we say goodbye to the strange summer of 2020, I’d also like to say good riddance to certificate of need (CON) laws. These laws are regulatory burdens that have hampered the health care market for far too long. Currently, 35 states are bound by CON laws.
Originally, CON laws were intended to slow the rising cost of health care by manipulating/managing supply and demand. In the 1960s, government bureaucrats came up with the idea of using CON laws to ensure that market demand for health care facilities and services was properly managed. Like most government programs with similar intentions, the results have been disastrous.
Today, CON laws cover a host of health care services and facility expansions. Believe it or not, in many states, to open a new health care facility or to expand the number of beds in an existing facility, requires permission from the government. Under CON laws, requests for such additions are either approved or denied by an agency after “community need” is determined or not.
These laws were intended to make health care more accessible. Instead, they have hindered growth and stifled competition in the medical marketplace.
Laws should be based on outcome not intent. As Milton Friedman once said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” That is the problem with CON laws. In general, states with CON laws offer health care services that are 11 percent less expensive than those with the laws. The proof is in the pudding.
As cronyism and anticompetitive practices—which are inherent to CON laws—have ravaged markets in all industries, the health care market is no exception. The negative effects of government overreach are seen in the high costs and outdated hospitals and technologies that consumers are left with. Unleashing the free market would level the playing field within the health care market while providing more choices to patients.
The goal for reform should be full repeal. However, if this isn’t possible, it is crucial that these regulatory measures be applied as sparingly as possible.
What would a free-market health care system look like? Many argue that a health care market operating under the forces of freedom would lower costs and increase access. Unleashing the industry from the diktats of big government bureaucrats would also improve quality due to the element of competition that is all but absent in the health care industry. Unfortunately, this is easier said than done.
Advocates of central planning either fail to understand that CON laws have done nothing to improve the lives of the general public, or they simply don’t care. On the other hand, these people have worked diligently to protect special interest groups and existing providers, either purposefully or inadvertently. Either way, it doesn’t matter. Their actions, especially regarding their infatuation with CON laws, is bad news for consumers.
Once in a blue moon, the federal government does the right thing. Case in point, in 1986, under President Reagan, federal CON laws were repealed.
In the time since then, several states have followed the federal government’s lead on this by also repealing their state-sanctioned CON laws. However, there are 35 states that still enact CON laws.
While federalism is a bedrock of the American experiment, it should not prevent those who believe in it from criticizing states that have bad laws on the books. As a strong believer in federalism, I argue that states absolutely have the right to determine whether or not to enact CON laws. Yet I think it is an unwise and counterproductive policy that harms most residents while rewarding a select few.
Applying free market principles to America’s health care system would be the best way to improve the system, especially for those who are struggling to receive quality care in a timely manner.
By repealing outdated and counterproductive CON laws, millions of Americans will be better off. It is time to liberate the health care market. The field of medicine is rapidly transforming, especially due to the advent of new technologies. CON laws stifle competition, slow innovation, and lead to higher prices and less services available.
Why in the world do CON laws still exist? Maybe they should go the way of the Dodo bird.
Christina Herrin ([email protected]) is the director for Free to Choose Medicine, a project of The Heartland Institute, a non-partisan, free-market think tank headquartered in Arlington Heights, Illinois.