Take a moment to imagine that opening a restaurant required you to demonstrate that your community “needs” another place to eat. Now, imagine in such a situation that, if regulators grant you permission, current restaurants—your future competitors—could challenge and ultimately block you from opening your restaurant.
As crazy as this sounds, this is how the health care industry works in the USA. It’s called a Certificate of Need, and one is required whenever someone wants to build or expand a medical facility. The argument is right out of a socialist playbook: competition is wasteful. By preventing a “duplication of services,” health care providers will feel less pressure to raise prices.
CON programs reduce access to health care services and cause an increase in health care spending.
This is utter nonsense. No consumer purchasing goods and services ever complains about too much competition. But they always complain about too little of it. And so they should! From sophisticated economic modeling to elementary logic—and in industries from restaurants to health care—monopolies cause higher prices while competition causes lower prices.
But the CON was already on. The National Health Planning and Resources Development Act of 1974 required all states to have some form of CON in place. Though Congress repealed this requirement in 1987, two-thirds of all states still have a CON program.
Research confirms CON’s distortionary effects on the marketplace. CON programs reduce access to health care services and cause an increase in health care spending. The potential savings from ending CON programs are massive, ranging from $187 per capita in Georgia to a staggering $459 per capita in D.C.
Excerpt from “3 ways regulation makes health care expensive” by David Youngberg, originally published at the Foundation for Economic Education.