The CON of Certificate of Need Laws
I once heard Dr. Roy Cordato of the John Locke Foundation in North Carolina describe an unusual metaphor. Imagine that you wanted to open an Italian restaurant. In the town where you want to open it, you need to apply to the municipal authorities for a Certificate of Need. That is, before you put any of your capital or reputation into actually opening and operating the restaurant, you have to prove to bureaucrats and politicians that the town “needs” it. So, even though no taxpayers’ dollars are invested in your business, you are not allowed to take this risk before writing applications and participating in hearings to prove the unprovable: That potential customers “need” your Italian restaurant.
Who else is monitoring your application and participating in hearings? Owners of Italian restaurants that already exist. They have reams of data that prove that they fully satisfy the demand for Italian cuisine in the town. You have none. They have effective veto power over the entry of new competitors. You do not need a PhD in economics to predict that such a town would have a shortage of Italian restaurants with very high prices.
Yet, this unacceptable situation exists for hospitals or other healthcare facilities in 36 states and the District of Columbia. Thomas Stratmann and Jake Russ of the Mercatus Center have used a newly compiled database of these laws to examine their consequences. Their key findings are:
- Certificate-of-need programs prevent new medical providers from competing with existing hospitals. As a result, the price of medical care is likely higher than it would be without these laws.
- States with certificate-of-need laws have far fewer hospital beds and less medical equipment than states without them.
– On average, certificate-of-need states have 99 fewer hospital beds per 100,000 residents.
– CON laws also decrease the availability of MRI services and CT scanners, and the provision of optical and virtual colonoscopies.
- There is no evidence that CON programs improve access to healthcare for the needy, though the authors have examined multiple measures. So while these regulations are extremely costly, they have no clear benefit.
I am so tired of government regulations! This shows how they do nothing good. They do not save the taxpayer any money, and yet the still manage to lower competition, thereby sacrificing quality and prices.
On the other hand, government spending never gets the same level of scrutiny, even though that involves spending OUR money is ways a bunch of bureaucrats see fit to spend it.
I propose we start a new country that is founded on free market principles and not founded on government bureaucracy. Goods and services will be allocated as the market sees fit. Healthcare can be paid in cash without the need for reimbursements. There are no suffocating regulations.
I’m a dreamer…
http://www.theblaze.com/stories/2013/01/28/would-you-pay-300000-to-become-a-citizen-of-this-proposed-free-market-utopia-in-detroit/
Although this would not be a completely new country as it would benefit from the security of the US.
Although if you’re looking for little to no government interference at all I would look into Somalia.
“Certificate-of-need programs prevent new medical providers from competing with existing hospitals. As a result, the price of medical care is likely higher than it would be without these laws.”
Yes, this is clearly true. Big government bureaucracy is simply exacerbating an existing problem through its increased regulations. No entity is as good at suppressing supply that is our government.
I had not heard much about CONs before, but they evidently have a terrible effect. And what is their point anyway? Why should I have to prove that my PRIVATELY-funded business is in “need” anyway?
Perhaps your business will take up too much precious real estate that the local government will need. It seems everyone is in cahoots with everyone and there is no room for more players.
To take your metaphor a little farther, suppose the owners of the sit-down Italian restaurants oppose your idea for a Fast Italian Drive-Through. Maybe what you really want to open is a Italian Food Truck that specializes in linguini on Mondays, fettuccini on Tuesdays and is parked in a different location (both lunchtime and dinner time) every night of the week.
The owners of the legacy sit-down restaurants would probably argue… “we have to provide a roof and booth space for everyone who needs to eat inside. You cannot cream skim all those hungry eaters who don’t want to help pay for our expensive overhead.”
The legacy restaurants may also complain… “You don’t accept food stamps, you don’t accept credit cards, you won’t sell on credit, you only want cash. You want to charge every dinner the same price; we cut deals for poor, hungry diners.”
The more you consider this metaphor, the more ridiculous Certificate of Need sounds.
Certificate of Need is extremely ridiculous and only discourages lower prices and competition. They need to include on the certificate of need that consumers NEED competition in order to have access to receive their service at an affordable price.
“States with certificate-of-need laws have far fewer hospital beds and less medical equipment than states without them.”
Essentially there is less access to care in these places. Wouldn’t that be grounds as a need in that city or neighborhood?
Well when hospitals have someone in the government’s back pocket, that need suddenly becomes filled.
There was an effort in Seattle to open a hospital aimed at Pacific Rim countries. It would have brought in foreign patients with foreign money. It was denied because Seattle had enough beds to serve Seattle’s population.