Diary

Certificate of Need Laws Drive Up Costs and Limit Competition

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Currently, Delaware is one of 35 states that enforce Certificate of Need (CON) laws, which limit health care service expansion and access for patients. The health care market can and should be transformative. Yet, obsolete CON laws do the exact opposite by hindering innovation and access to much-needed health care services.

CON laws adversely affect health care costs. In fact, in Delaware, they have led to increasing costs across the board.  The Mercatus Center at George Mason University recently published a report that estimates costs in the First State would drop by $270 per person if CON laws were repealed.

The state legislature brought this issue up in March 2020. At that time, the state was on the brink of eliminating these antiquated regulations. But, as we all know, then COVID-19 became the pressing matter.

Now, months after the pandemic began, state legislatures will need to address the matters that got left behind in the upcoming legislative session. For Delawareans, now is the time to move in a direction that increases patient freedom by reforming, or eradicating, draconian CON laws.

Throughout the nation, there is growing support for reform of CON laws. As one Delaware state representative, Lyndon Yearick, a Kent County Republican, recently said, “If there’s a health care institution that’s willing to risk their capital and assets, I don’t know of any reasons why there should be any restrictions.” That is the crux of the argument against CON laws.

The appropriate role of government is not to pick winners and losers in the health care sector. Individual consumers are best empowered to do so. A vibrant free market, not out-of-touch and unaccountable bureaucrats, is best at increasing competition and bringing the consumer the best products and services available, at the lowest cost.

Despite what their advocates claim, CON laws undercut the free-market system. CON laws cover a wide range of health care services. For instance, they arbitrarily limit the number of beds allowed in hospitals. They also make it nearly impossible for new players to enter the health care field. They also regulate the types of services and procedures that can be offered, based on completely subjective benchmarks. Obviously, this results in extensive impairment to the health care sector. Furthermore, they are the epitome of crony capitalism.

The Caesar Rodney Institute (CRI) of Delaware also recognizes the need for reform, pointing to increased costs and diminished access to care within the state. CON laws have made it more difficult for new entities to enter the marketplace and CRI argues that Delaware’s Health Resources Board, which is responsible for overseeing and approving certificate of needs, ought to be reformed or disbanded altogether.

Again, as the new legislative session in January approaches, it would be more than prudent for Delaware’s state legislators to reexamine the state’s outdated CON laws.

Simply put, the United States should be the world’s bastion of health care innovation. Yet, CON laws prevent this by creating excessive barriers to entry into the market by up-an-coming innovators. The result is crony capitalism and monopolistic practices. Delaware should reform, and ultimately repeal, these obsolete relics.

Christina Herrin ([email protected]) is the government relations manager of Health Policy at The Heartland Institute, a non-partisan, free-market think tank headquartered in Arlington Heights, Illinois.