Republished with permission from CATO Institute.
March 11, 2020
In today’s Washington Examiner, Lindsey Killen of the Mackinac Center for Public Policy and Naomi Lopez of the Goldwater Institute draw attention to the archaic Certificate of Need Laws (CON laws) that continue to exist in 38 states. These state laws, promoted by the National Health Planning and Resource Act of 1974, were intended to reduce health care costs by eliminating redundancy in health care delivery systems. They vary from state to state, but essentially require a panel to review any plans by hospitals or other health care organizations to expand, build new hospitals, or in some cases, add equipment. The review panels include incumbent health care organizations. Imagine a CON law for restaurants that empanels existing restaurant owners to review applications by persons wishing to build a new restaurant or expand the capacity or offerings of an existing one. It doesn’t take long to understand how that turns into an incumbent protection law. By the early 1980s it became clear, as in all cases of central planning, that CON laws were doing nothing to reduce health care costs and may have had the opposite effect. The federal law was repealed during the Reagan Administration.
More than 3 decades after repeal of the federal law, CON laws persist in 38 states and attempts to reform or repeal them are often met by fierce resistance from incumbents who try to make the case that they only have the interests of the general public in mind. If the expected surge in COVID-19 cases exceeds the capacity of hospitals and emergency rooms, resulting in avoidable deaths, at least some of the blame belongs to CON laws, an example of central planning reminiscent of the “5‑year plans” of the Soviet politburo.
Killen and Lopez alert readers to a paper released last week by the Goldwater Institute’s Christina Sandefur, entitled “Competitor’s Veto: State Certificate of Need Laws Violate State Prohibitions on Monopolies,” that makes the case that, in addition to the economic and public health consequences of these outdated laws, CON laws violate state constitutions.
A public health crisis such as the one that now confronts us provides an opportunity to review and repeal laws and regulations that impede preparedness. Certificate of Need Laws are low hanging fruit.