The United States faces no shortage of laws, with the federal code alone consisting of more than 180,000 pages. Civilization obviously requires some rules, but some exist due to a political version of the old lady who swallowed a fly. Laws cause unintended side effects, and legislators design new laws in a purported attempt to counteract the undesirable consequences of the old. 

Over time, the result is not a more finely tuned code, but rather a bloated system that hampers and criminalizes more and more behaviors. The solution is not more laws. Every difficulty of human existence does not have a magical legislative resolution, and the ideal course of action is to find the least intrusive means of eliminating a fly. 

This principle holds true in any industry, but overly zealous restriction in a life-saving field such as health care does particular damage. Creators of the original certificate of need (CON) laws made no secret of the fact they were trying to curb the negative outcomes of other laws, and it’s past time to admit CON has turned into yet another failed attempt. 

A CON From The Beginning

Those who crafted seminal CON legislation did so in order to stem the gushing flow of money they knew burgeoning healthcare laws would unleash. In 1964, President Johnson was preparing to sign Medicare/Medicaid into law. New York beat him to the punch by preemptively enacting the first CON legislation. As the name suggests, this legislation mandated medical providers prove to a board their services were needed before they could operate or expand.

The creators of CON anticipated an increase in the effects of Roemer’s Law, which states demand for hospital beds will rise as their supply does. More broadly, it means patients will use more health care if they can more easily access it. This occurs in any widely insured society—such as one offering Medicare/Medicaid. 

This was of particular concern not just because patients suddenly had endless “free” health care, but because providers were promised reimbursement for it. When Medicare/Medicaid became law, providers were reimbursed on a cost-plus basis, meaning they could perform expensive procedures and be guaranteed taxes would pay for them. This created such an obvious incentive to oversell medical services that Congress made federal Medicare/Medicaid funding dependent on the adoption of state-level CON laws in 1974. Unsurprisingly, 49 of 50 states (all except Louisiana) complied to avoid losing federal funding.

Fortunately, Congress eventually recognized the error of its ways and switched from cost-plus to prospective payment reimbursement, which put a cap on how much providers could expect in tax dollars and resulted in a predictable halt to their “generosity.” This simple restriction of one aspect of the law reined in costs, and, in 1986, Congress reversed the national CON requirement for funding. 

However, the damage was done. Existing medical practices saw financial motivation to lobby their state legislators to keep CON. They already had their certificates, and many were happy to draw the ladder up after them to prevent any new competition. To date, only 15 states have repealed CON legislation, because powerful hospital associations can afford to keep support in the legislature.

The Continuing CON 

When Congress changed the reimbursement model, providers who valued CON’s anti-competition effect had to tout a different reason for their defense of the unpopular law. This has continued for decades, in a whack-the-mole-esque series of justifications. But again, the stated reasons are typically responses to problems with other laws, as exemplified in this collaborative article from advocates.

Hospitals assert they cannot afford to provide the “free” indigent care their tax-exempt status requires if they face competition. But the precise nature of tax exemption’s relationship to charitable care is the result of a law. Providers using this defense are once more speaking as if the status quo is a state of nature, rather than a malleable legal code. Furthermore, states with CON laws boast no more indigent care than those without it, and for-profit doctors routinely donate their services of their own volition. New entrants under a fair, non-CON marketplace would also be required to provide similar levels of charity care, ensuring a level playing field.

Providers also complain the current tax-funded payment reimbursement structure is still problematic and inadequate, and they “have no control” over this. These are the exact words of the president and CEO of Tennessee’s Baptist Memorial Healthcare, and although some truth may exist in them, this issue is the result of another law.

CON enthusiasts also claim the laws ensure quality medical care. Although being granted a certificate might indeed depend on adherence to safety regulations, the safety regulations themselves already exist separately from CON laws. And any future lack of quality standards, real or fabricated, will be a failure of safety laws. 

The CON Of Tomorrow

The steady stream of creative rationale seems unlikely to stop, but it should be apparent by now that beneficiaries of CON are using other legislative shortcomings as a smokescreen. The 15 states that have done away with their CON laws have not seen the apocalyptic scenarios supporters predict, because any difficulties that arise result from other laws that legislators can remedy separately. And that is exactly what needs to happen in the 35 states that are still clinging to their CONs.