September 15, 2017 Reading Time: 3 minutes

Academics Lift the Veil on Medical Protectionism

Prices for medical services have greatly outpaced broader inflation for more than a decade. The natural response is for expansion and competitors to enter the market, but many barriers to entry remain in place throughout the United States.

Certificate-of-need (CON) laws, for example, place the burden of proof on new competitors and force them to justify to state officials why they should be able to serve consumers. In 1980, all 50 states had CON laws, and they remain in 35 states and the District of Columbia. Often the entrants even need approval from established providers, who are unlikely to want increased supply and downward pressure on prices.

George Mason University’s Mercatus Center has conducted in-depth research on the impact of CON laws and the justifications for maintaining them. Their main findings indicate that these regulations have failed to achieve the goals of access to and affordable medical care. Rather, they have increased the cost of access for the poor, and have limited the supply and quality improvements of hospitals.

By compiling their research over the years, the Mercatus Center has developed a “single and comprehensive resource to understand the current status of CON laws in the 50 states and the District of Columbia,” made available on August 29. In addition, this platform includes data from “forty-year peer reviewed academic research,” such as studies by the American Health Planning Association (AHPA) in 2011 and the National Conference of State Legislatures (NCSL) in 2016.

CON laws by state.

The users can compare the status of CON programs between the states. The portal also shows how the number of restricted items, in those states with CON laws, has increased over time. In 2011, for instance, a total of 538 items required a CON license, and 37 states were enforcing CON laws. Wisconsin and New Hampshire have retired their CON programs during the last six years, but now the CON list has risen to 589 items.

For Mercatus Center researchers, these findings were disappointing. Politicians justify these laws with several claims, yet the results demonstrate that CON restrictions do not achieve their goals. Instead, they undermine the opportunity to enhance their medical services and promote competition. Non-CON states provide higher-quality services, and the costs of unregulated medical care have not risen dramatically, as claimed by proponents of CON programs.

The Cato Institute’s director of health policy studies, Michael Cannon, agrees with Mercatus Center findings. According to him, “So-called ‘certificate of need’ laws increase costs for consumers by protecting inefficient hospitals and other health care providers from competition. The theory behind such laws is that since the government has completely unleashed demand by insulating consumers from the cost of their health insurance and medical care, the government must contain supply to keep spending from getting out of hand.”

However, Cannon explains that these “incumbent-protection laws allow existing providers to block lower-cost competitors, and therefore keep prices and spending higher than they would be in a market system. The solution is to abolish ‘certificate of need’ laws and to let consumers control their health care dollars.”

Paz Gómez

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