Since the passage of the Sherman Antitrust Act in 1890, the federal U.S. government takes an active role in preventing monopolies. And even among those who do not support such government intervention, monopolies generally do not enjoy popularity. Consumers appreciate the increased options and lower costs typical of a competitive market.
These facts make the continued existence of certificate of need (CON) legislation perplexing. CON laws prevent medical practices from opening or expanding unless government agents—not the customers (patients)—determine they are needed. This sometimes results in a local monopoly on health care, and statistics indicate this causes precisely what laws of economics predict: higher prices, fewer options, and lower standard of care.
These are the problems antitrust laws aim to prevent, yet the federal government essentially ordered all states to adopt CON laws in 1974. It reversed course when the laws had predictable results, and the Department of Justice (DOJ) and Federal Trade Commission (FTC) began strenuously discouraging them. Yet, 35 states retain theirs with no federal punishment except non-binding rebukes. And consumers still vote for legislators who support them.
People fighting against CON would do well to arm themselves with arguments showing how CON violates the spirit (and seemingly the letter) of antitrust laws.
The Sherman Antitrust Act aims to “preserve free and unfettered competition.”
Clearly, a government agency’s refusal to allow a proven safe and licensed healthcare competitor to open a business does not preserve unfettered competition. It halts potential competition before it can even start. As the DOJ and FTC stated jointly in 2008, “By their very nature, CON laws create barriers to entry and expansion to the detriment of health care competition and consumers.”
The Sherman Antitrust Act “outlaws every contract, combination, or conspiracy in restraint of trade.”
Ironically, the “contract” in CON exists between the government and the incumbent healthcare business. The government guarantees that the existing business has no competition. So although the federal government insists it has the duty to prevent such contracts, it at one time mandated them. And now, the federal government at least allows them at the state level. And states such as Ohio, that profess to be anti-monopoly, also maintain CON laws.
Antitrust laws support the ability of consumers to access “more choices.”
In one defense of CON legislation, a hospice association director asserted that more choices might prove harmful to consumers. She posited that open competition could cause “confusion among consumers bombarded with too much information and too many options for end-of-life care.”
Not only do “too much information” and “too many options” seem unlikely to bother consumers, but the ideas clearly go against antitrust goals.
Antitrust laws “prohibit anticompetitive conduct and mergers that deprive American consumers, taxpayers, and workers of the benefits of competition.”
The overarching spirit of the law is clear in the preceding phrase. The premise is that competition is good, and any action standing in the way of that is prohibited. Whether someone approves of the rules or not, they exist, and 35 state governments can surely not be allowed to violate them at the expense of the consumers, taxpayers, and workers who pay for them.