by Dr. Roy Cordato
Senior Economist, Emeritas
Imagine if Bernie Sanders proposed regulations that would essentially have the federal government make all of the important decisions with regard to the production, sale, and distribution of computers. A committee appointed by President Sanders would decide everything from where computers could be produced, who could produce them, how resource within the individual companies would have to be allocated, and how many computers could be manufactured and sold—including laptops, desktops, tablets, etc.—to how much memory and other features people need to solve all of the individual problems they may face. At the retail level, it would be decided who could enter the market, where and how they could sell computers, and whether or not new retail stores that sell computers are “needed” in any particular locality. If the planning board decided that the retailer was not needed its ability to open shop would be denied.
This would take the socialist principles that Sanders professes to believe in and push them to an extreme that probably even Sanders himself wouldn’t accept, or at least would not outwardly admit to accepting. Such a proposal, even from a self professed socialist like Bernie Sanders, is almost impossible to imagine. Even Bernie would likely recognize that this would end all innovation in the computer industry, would bring almost all growth in the industry to a halt, and would totally cartelize and monopolize the industry with a few politically powerful industry players in charge of everything. And yet, in North Carolina, just such a central planning scheme is in place for the most important aspects of the health care industry, and it is and has been supported for decades by Democrats and Republicans alike. It is known as Certificate of Need.
If one thinks I exaggerate, here is a summary provided by the North Carolina Division of Health Service Regulation
The North Carolina Certificate of Need Law prohibits healthcare providers from acquiring, replacing, or adding to their facilities and equipment, except in specified circumstances, without the prior approval of the Department of Health and Human Services…The law…limits unnecessary health services and facilities based on geographic, demographic and economic considerations… All new hospitals, psychiatric facilities, chemical dependency treatment facilities, nursing home facilities, adult care homes, kidney disease treatment centers, intermediate care facilities for mentally retarded, rehabilitation facilities, home health agencies, hospices, diagnostic centers, oncology treatment centers, and ambulatory surgical facilities must first obtain a CON before initiating development. In addition, a CON is required before any upgrading or expansion of existing health service facilities or services.
If you are a health care provider and you want to do anything from adding a new wing or extra beds to a hospital, to opening an office that offers MRI, X-ray or other services, you need a “Certificate of Need” (CON) from the state. The process of obtaining this certificate is onerous and expensive (money that would otherwise be going to providing patient services) and at the end of the day the request is probably just as likely to be denied as approved.
All of this comes with its own socialist style central planning board called the state Health Planning Development (HPD) agency. The purpose of the HPD is to
…develop policy, criteria, and standards for health service facilities planning; … conduct statewide registration and inventories of and make determinations of need for health service facilities, health services as specified [in the statute] and equipments [sic] as specific [in the statute], which shall include consideration of adequate geographic location of equipment or services; and develop a State Medical Facilities Plan.
The Agency also has
…the authority to review all records in any recording medium of any person or health service facility subject to agency review under these articles which pertain to construction and acquisition activities, staffing or costs and charges for patient care, including but not limited to, construction contracts, architectural contracts, consultant contracts, purchase orders, cancelled checks, accounting and financial records, debt instruments, loan and security agreements, staffing records, utilization statistics and any other records the Department deems to be reasonably necessary to determine compliance…
When it comes to the provision and distribution of health care services, North Carolina’s Certificate of Need laws are a more extreme form of government central planning than anything currently in place at the federal level, including Obamacare itself, and more extreme than any policy for any industry being proposed by any of the presidential candidates, including Bernie Sanders.
There are plenty of reasons why this law should be repealed including the fact that it creates monopolistic cartels throughout the health care industry and that it stifles innovation and increases healthcare costs across the board. These have been outlined and discussed in several places by my colleague Katherine Restrepo. But there is a broader and more philosophical reason for doing away with this straightjacket placed by the state of North Carolina on our healthcare industry. As with all such central planning schemes, it is an affront to individual liberty and specifically in this case the health care freedom of all doctors and patients. In controlling the supply of hospital beds, MRI machines, outpatient surgical facilities, psychiatric facilities and much more, CON laws drastically limit health patient freedom and choice. Furthermore, these laws stifle the entrepreneurial activity and even spirit of those who might otherwise be discovering and providing new and innovative ways of improving health outcomes—in other words, finding better and more effective ways to alleviate pain and suffering.
Ultimately CON laws are completely inconsistent with our free market system. They represent a level of government control that is outside the bounds of that which has been proposed by even the most pro-government and anti market of this year’s presidential candidates. For this reason alone, one would think that, among conservative Republican legislators, there would be strong support for abandoning these regulations, and among a few there is. But in spite of a wealth of empirical evidence that CON laws are harming patients and are pulling apart the fabric of our free enterprise system when it comes to the provision of health care, repeal continues to be an uphill battle.