CON laws stifle competition and hurt consumers.
Veronique de Rugy | June 11, 2015
http://reason.com/archives/2015/06/11/the-con-of-certificate-of-need-lawsIf I got a dollar each time the federal or state government promised that new regulations of the health care market would reduce the cost of health care—and it subsequently failed to deliver on that promise—I would be a rich woman. The Affordable Care Act is the most recent example of such failed promises, obviously. But certificate of need laws take the cake at the state level.
CON restrictions come in addition to state licensing and training requirements for medical professionals. They require that all medical providers wanting to build or expand an existing health care facility, offer new services, or acquire new medical equipment must first gain approval from state regulators.
Born out of bad economics and fears that the oversupply of hospital capacity would increase costs, New York was the first state to institute a CON program, in 1964. Over the following decade, 23 other states adopted CON programs. In 1974, the federal government joined in the effort and required states to implement CON requirements in exchange for receiving funding through certain federal programs.
In theory, the regulation would cut health costs while increasing the provision of care for lower-income people. By restricting market entry, lawmakers believed, the regulatory winners could be forced to use their government-inflated profits to subsidize indigent care or medical services to the poor. These services are seen as socially desirable but notoriously unprofitable to providers.
Though the theory of cross-subsidization is well-established, in practice CON laws were soon captured by established interests that used them to keep competition out and raise the cost of medical services. In 1987, the federal government repealed its mandate after recognizing the program as a failure. Though a few states have since retired their programs, 36 states and the District of Columbia are still living under this type of law, with negative consequences for their residents.
Whole article here:
http://reason.com/archives/2015/06/11/the-con-of-certificate-of-need-laws
