Almost 50 years ago, the federal government passed legislation mandating that every state enact certificate of need (CON) laws. These laws require anyone wishing to open, expand, or alter a healthcare facility to receive permission from their state’s health department. 

However, contrary to a normal license, a certificate of need does not depend on the credentials or competence of the people requesting it. Safety has no bearing on approval. Rather, it depends on the community’s purported need for the new facility, space, or equipment. 

Such a requirement to open a new business is unusual in itself. To open a store, Nike does not need to prove that people in the city will go barefoot without it. 

But CON laws take the oddity even further. They often demand that the proposed new business’s competition help decide whether it should be allowed to open.

As the Mercatus Center puts it, “This is akin to McDonald’s needing permission from Burger King to open a restaurant.”

Unsurprisingly, the answer is often “no.”

Simply put, CON laws function as a tool for established healthcare businesses to ban competition. So, how did they manage to gain such traction?

A Brief History Of A Long CON 

In the early 1960s, New York was struggling with rising healthcare costs, and legislators focused their public blame for the problem on too many hospitals. 

Yes, they were concerned that they had too much available health care. Contrary to the laws of economics, they believed that an increase in supply was increasing costs.

One rationale for this idea centered around “Roemer’s Law,” named after medical doctor, sociologist, and staunch Soviet Union supporter, Milton Roemer. The law states that in an insured society, “a hospital bed built is a hospital bed filled.” 

If you build it—and don’t charge them for it—they will come. 

This idea, of course, has merit. But in line with Roemer’s beliefs, he felt that the solution was not to return health care to the free market, but to continue providing “free” tax-sponsored health care… and to ration it. 

New York embraced this ideology, and in 1964, they enacted the Metcalf-McCloskey Act. This mandated anyone wishing to erect or expand certain healthcare facilities to get the government to agree it was necessary. 

Despite contention and immediate problems with New York’s law, the federal government applied this rule to all 50 states with their National Health Planning and Resources Development Act (NHPRD) of 1974. 

Outcomes

Obviously, the justification and morality behind CON laws have proven controversial. But what about the results? 

Because the federal government deemed its own law a failure by 1987, it repealed its mandate, and 15 states repealed their CON laws. This makes a comparison between CON and non-CON states possible. Here are just a few outcomes found in a 2017 Mercatus analysis:

  • CON states have 30% fewer hospitals per capita. They also have 30% fewer hospitals per capita in rural areas (where the population already suffers from less access). 
  • CON states have about 99 fewer hospital beds per 100,000 residents.
  • CON states have half the number of magnetic resonance imaging (MRI) machines per capita. 
  • CON state residents must travel further to receive care, and they are more likely to travel out of the county.       

Even many initial proponents of CON laws, such as the American Medical Association (AMA), have rescinded their support, yet 35 states still have them in place. This may be because of a lack of awareness in the population, pressure from existing healthcare companies who do not want competition, or a combination of many factors.

But 50 years is far too long to operate under a failed policy resulting in patient deaths and inflated medical bills. Citizens in the 35 holdout states need to tell their legislatures that they will no longer tolerate the CON.