How the Covid Crisis Exposed the Absurdity of “Certificates of Need”
In August 2020, the Institute for Justice published a report entitled “Conning the Competition: A Nationwide Survey of Certificate of Need Laws.” Certificate of Need (CON) laws are a particular problem in a health crisis like we are experiencing now. However, the problem with CON laws is nothing new to readers of the Mises Institute. In 2017, Alice Salles wrote about how the government ruined US healthcare, pointing to the requirement of a certificate of need as one reason for rising healthcare costs. In the Accad and Koka Report by the Mises Institute two doctors shared their firsthand experience with CON laws. The current covid pandemic exposes some of the absurdities of CON laws in a time when politicians tout their concern for ordinary citizens. While eliminating CON laws will not solve the current pandemic, eliminating them will be a first step in reforming healthcare. The facts in this article are from the Institute of Justice report.
In a rare admission of policy failure, Congress in 1986 repealed a federal act, eliminating federal incentives for states to maintain CON programs. CONs are government permission slips that are required to enter certain industries, in this case, anything healthcare related. Basic economic theory predicts that supply is inversely correlated with cost: as you increase supply, prices should fall and vice versa. CON laws are an attempt to contradict this basic economic principle with the idea that if you restrict supply, in this case healthcare facilities and services, cost can be controlled. The mistaken belief, at this point, was that reducing supply of healthcare would reduce overall healthcare expenditures. The main idea was to eliminate costly duplication of services and increase access to quality care. The argument of wanting to eliminate costly duplication is one that is heard often when government wants to consolidate its power. However, the experiment with CON laws failed, and Congress, to its credit, repealed a law requiring states to enact CON laws. But the damage was done; before the repeal of the requirement every state except Louisiana had CON laws. Since then, states have very slowly dismantled CON laws, with Hew Hampshire being the latest (2016).
Article from Mises Wire