March 26, 2020
By Christina Sandefur
As concerns over the coronavirus pandemic continue to grow, public preparedness and the ability to address widespread healthcare emergencies are on the mind of every American. One regulation that’s slowed our recovery from this unprecedented crisis are certificate of need (CON) laws, which unfortunately exist in most states.
In the latest episode of the Federalist Society’s Regulatory Transparency Project podcast, I chatted with Josh Windham, an attorney with the Institute for Justice, about these laws, which make it illegal for providers to offer healthcare services to patients without first getting government permission. As we discuss, that permission is often denied—not because of any expected harm to public health, but solely to prevent legitimate economic competition against existing providers.
The theory behind CON laws is that a state agency is best suited to decide what services are “needed” to avoid unnecessary duplication, which can mean higher healthcare costs for consumers. But after decades of experimenting, it’s clear that CON laws actually drive up costs, reduce quality, and limit the availability of needed services. In other words, CON laws are a threat to public health.
As my colleague Naomi Lopez and the Mackinac Center for Public Policy’s Lindsay Killen recently pointed out, this issue is particularly relevant today, as Americans are dealing with the impact of the coronavirus and hospitals are struggling to accommodate sick patients. CON laws impose a lengthy—sometimes insurmountable—bureaucratic approval process that will stall the creation of and access to much-needed treatment facilities, hospital beds, and other medical technologies.
Of course, CON laws have been doing this for decades. So why do 38 states still have CON laws on their books? One reason may be that existing providers can (and frequently do) use these laws to essentially outlaw their competition by barring others from serving patients. So they have a great incentive to invest time and resources in preserving the anti-competitive power that these laws give them.
But as Josh and I discuss on the podcast, there may be hope in the courts. These anti-competitive laws violate a host of constitutional provisions, including state anti-monopoly clauses. After all, barring people from entering a business or offering a service just to protect existing providers against would-be competitors is the very definition of a government-created monopoly. Now, more than ever, courts should enforce state constitutions to stop special interests from blocking the introduction of much-needed healthcare services.
If you like the podcast and want to learn more about how certificate of need laws deny people access to needed healthcare services, check out my colleague Mark Flatten’s investigative report CON Job. And for more on state constitutional challenges to CON laws, be sure to check out the Federalist Society Regulatory Transparency Project’s latest paper, Competitor’s Veto.
Christina Sandefur is the Executive Vice President at the Goldwater Institute.