Few issues concern United States residents more than health care, and rightly so. Healthcare expenditures total $4.5 trillion annually, and the people paying astronomical costs want assurance they are spending their money efficiently. 

In a supposed effort to achieve this end, most states employ certificate of need (CON) laws. Among other goals, these laws purportedly counter soft corruption in the healthcare industry. Because medical technology and training involve enormous costs, some government planners reason that practitioners face the temptation to suggest unnecessary, expensive procedures to cover overhead. A solution, they assert, is to limit the money providers are allowed to invest in their businesses. Hence, CON laws require providers to prove to the government that their new machinery, space, or services are needed before they can operate. 

This itself raises ethical questions about the government’s power to pick winners and losers in the market. But a more concerning feature of the legislation is that in most states, current providers have a say in the decision. Unsurprisingly, they often veto their competition, even when the community is begging for it. At best, such a system is obviously not going to prevent soft corruption. At worst, it encourages more blatant pay-to-play schemes, as the following examples illustrate.

Illinois: Blagojevich’s CON 

Perhaps the most famous example of this danger came to light in 2009 when Illinois Gov. Rod Blagojevich’s notorious pay-to-play scandals resulted in his impeachment and removal (and eventual conviction on 17 counts of corruption). The news focused primarily on his attempt to sell Barack Obama’s Senate seat, but his lesser-known crimes included various ways of selling certificates of need. Ultimately, he and his cronies operated like the Mafia in controlling which businesses would succeed, and this included the healthcare sector. 

Pamela Meyer Davis, a hospital administrator who helped the FBI investigate Blagojevich, testified that “temptation for corruption is huge” at hospitals operating under the “broken” CON system. It’s important to note that, as a successful hospital administrator, Davis could easily have benefited from this very system. Blagojevich’s healthcare scam was revealed and halted despite CON laws, not because of them. 

No healthcare or economics expert can measure the damage this incident caused to patients and practitioners, but refusing to allow doctors to practice is a deadly game. Despite all the humor surrounding the spectacle of a flamboyant Blagojevich, restricting health care kills people. Even when practiced legally, CON legislation is associated with significantly higher mortality rates. When deliberately abused, the results are anything but amusing.

Louisiana: The Success Story That Failed The Hardest

In 1974, the federal government began denying healthcare funding to states refusing to implement CON laws, and all states except Louisiana complied. Since then, the federal government has reversed its position and opposed CON, and Louisiana’s government could have been seen as courageous and wise for refusing to give in at the time. 

But despite not officially operating a typical CON program until 1991, Louisiana did have its own version of certificates of need by 1985, and Gov. Edwin Edwards was accused of taking advantage of it. Edwards allegedly sold certificates for a total of $10 million (roughly $29 million in 2024 money). Although his trial jury deadlocked, leaving Edwards free, he eventually went to prison for other corruption crimes in 2002. 

Like Blagojevich, Edwards enjoyed an image of a folksy, loveable rogue. He joked about his numerous scandals, and his approval ratings remained high. But again, this belies the serious nature of these charges. Health care is a matter of life and death. Manipulating the system is not a harmless scam. 

Alabama: Another Governor, Another CON

In 2007, a judge sentenced former Alabama Gov. Don Siegelman and former HealthSouth CEO Richard Scrushy to roughly seven years in prison and 500 hours of community service each, for a pay-to-play healthcare scheme. Siegelman was accused of appointing Scrushy to a healthcare regulatory board in exchange for a $500,000 “donation.” 

Once again, the laws designed to enhance oversight of the healthcare industry helped to facilitate fraud. And once again, although the judge did impose a fairly severe sentence, the potentially devastating consequences of this behavior did not get the attention they deserved. The judge even stated that “the good far exceeds the bad” in Siegelman’s political history. Although listeners could interpret these as words of fairness and compassion, they need to appreciate the deadly implications of this type of misconduct.

“Corruption Tax”

One judge (fittingly, from Illinois) referred to CON legislation as “nothing more than an additional corruption tax added to the cost of healthcare.” Even as intended, it functions this way. Providers have to pay more to jump through regulatory hoops placed there by their competitors, and patients pay more for less available care.

But as the three listed incidents show, the laws in action do even more harm than a quick glance would indicate. Powerful business owners join with government bureaucracies to squeeze out competition, under the guise of regulating a necessary commodity. And with the staggering amount of money at stake, corruption is inevitable. CON laws are bad enough at their best, and the financial incentives guarantee they will more often be at their worst.