State ‘certificate of need’ laws need to go
Henry Ford said, “Competition is the keen cutting edge of business, always shaving away at costs.” Ford’s statement explains in a few words why health care costs have continued to rise as prices for other services have either held steady or declined — there’s simply no competition. Most of the reasons for this in the health care market are systemic and don’t have quick and easy solutions. That is why it is important to fix those that do, like Certificate of Need (CON) laws.
CON laws require health care providers to obtain permission (usually from an appointed board) before opening a new health care facility, before using new technologies, and in some cases before purchasing new equipment. In addition to hospitals, health care facilities can include nursing homes or other long-term care centers, rehabilitation programs and ambulatory surgery centers. The provider must prove to the board or agency that the community “needs” the new or expanded service, program or equipment. Existing providers are invited to challenge the application, making a large hurdle even taller. It can take years and thousands of dollars to obtain a certificate of need. CON laws have created barriers to entry into the health care market in many states.
The result has been reduced access, higher prices and lower quality care.
These laws were imposed on the states by the federal government in 1974 when President Ford threatened to withhold federal funding from states that did not adopt them to regulate health care facilities. CON laws were touted by policymakers as a way to rein in health care costs and improve access and quality of health care services. 40 years later, evidence shows the real result is limited supply and eliminated competition in the health care market resulting in less access, higher costs and lower quality care.
Currently, 35 states still have CON laws. These laws are not one size fits all, and the facilities, equipment or services they apply to vary from state to state. But whatever their specifics, CON laws have been shown to work to the advantage of large incumbent institutions and smother competition. Opponents of CON reform often attempt to argue that CON requirements keep costs low. When actual data show that to be false, they will argue that the high prices are necessary to provide larger profits enabling providers to subsidize charity care. In 2017, The Mercatus Center at George Mason University completed an analysis of each state with CON requirements and the money they would save by removing them. Their research shows that each of the 35 states would save money and improve access by eliminating CON laws.
At a time when states are facing ever increasing health care costs and citizens are facing higher and higher premiums, repealing CON laws is one step states can take to improve health care for their residents. Health care policy problems are often complex, but their solutions don’t have to be, and eliminating certificate of need laws is one of the easy ones.
Brooklyn Roberts is the director of the health and human services task force at the American Legislative Exchange Council; she previously served as campaign manager for Alabama Attorney General Luther Strange’s successful re-election campaign. She holds a Juris Doctorate from the University of Alabama. Follow her on twitter @BrooklynRoberts