If you reside in one of the 15 states that have abandoned their certificate of need (CON) laws, you likely enjoy higher quality of care, lower costs for both patients and providers, more healthcare options, and shorter travel times to access them. In CON states, prospective providers must convince a local board—often including their healthcare competition—that they are needed in their community. Predictably, competitors often deny that any new providers are necessary, and they successfully squeeze out providers the community wants and needs.

Considering that the function of CON legislation is to deliberately restrict the healthcare supply (in obvious opposition to economic principles), it is not surprising that 60 years of it prove that non-CON states fare better. However, you shouldn’t be entirely relieved if you live in a CON-free zone. The federal government controls much of the healthcare system, so everyone suffers and pays for CON.

How It Began

Like many cautionary tales, this one began when the federal government successfully swapped federal funding for compliance. New York enacted the original CON legislation in 1964, and the following year, President Johnson signed Medicare and Medicaid into law. In 1974, the federal government blended the two new policies and decreed that states would no longer receive federal funding for Medicaid or Medicare if they did not adopt their own CON laws.

All but Louisiana quickly agreed. Citizens of every state pay federal taxes, and they understandably want to recoup every penny possible in services. In turn, they subject themselves to federal laws that are often written to benefit lobbyists. Such is the case of CON, which is now almost exclusively endorsed by powerful healthcare associations and politicians.

The federal government reversed its position in 1986 and has since repeatedly decried the failed CON experiment. Nevertheless, 35 states retain CON programs. The federal government rendered these laws ubiquitous; lobbyists rendered them seemingly immortal. As Ronald Reagan said, “Government programs, once launched, never disappear. Actually, a government bureau is the nearest thing to eternal life we’ll ever see on this earth.”

How It’s Going

Healthcare spending comprises 29% of the federal budget, totaling $1.9 billion per year. As of 2023, 60 million people were enrolled in Medicare (funded by federal taxes), and 85 million people in reporting states were on Medicaid or CHIP (which use both state and federal taxes). Of those, 12.5 million people were enrolled in both Medicare and Medicaid.

Wherever you live, and whatever your local CON laws (or lack thereof), you are paying for everyone else’s healthcare bills. And they are not cheap.

In addition, people who reside in areas with poor healthcare quality can cross state lines in search of better care. CON states statistically report lower quality, so non-CON state facilities may receive patients from out of state. Depending on staffing shortages, insurance payment structures, and any number of other factors, this may place strain on the receiving hospital.

No decent person would want to deny anyone access to a better hospital, and people have every right to travel freely to reach one. It’s just important to illustrate that CON law consequences leak into non-CON states in unnoticed ways.

What The Federal Government Needs To Do Next

In the CON case, federal intervention would constitute the opposite of federal overreach. The federal government dragged the entire country into this debacle, but despite vocally and repeatedly admitting its change of heart, it has done little materially to remove us from it.  

Federal administrators have numerous options at their disposal, but one stands out as particularly powerful, as they themselves demonstrated in 1974. The CON proliferation came about because bureaucrats threatened loss of funding to any state that failed to comply. It stands to reason that they could simply make the opposite deal to undo their first one. If Congress considers health care its business, and it controls the flow of money based on whether states are complying with its wishes, Congress can simply withdraw federal funding from states with CON laws. 

Yes, the very idea is sure to evoke wailing and gnashing of teeth from healthcare behemoths that have grown accustomed to a mafia-like grip on the entire healthcare industry. But they will simply have to learn to compete on merit, like any legitimate business. 

What You Can Do

Getting attention to CON laws in CON states has proven difficult enough, due to the obscurity of the legislation. Despite its impact on their healthcare system, average residents likely don’t know it exists. Patients don’t know it’s a reason for their cumbersome commutes, wait times, and inflated bills. 
Showing residents who live in non-CON states why they should care will probably require even more effort. Those who are knowledgeable about the issue need to raise the alarm. They need to explain to those who are (rightfully) eager to stay out of the business of other states why, in this case, staying out of it is actually staying mired in it. Citizens need to put pressure on their federal representatives to completely extricate them from this CON game. It’s long past time to take the other foot out of a game they never even wanted to play.