That quote comes from JLF’s Joe Coletti, who describes in this Carolina Journal story the fallacy of the state’s Certificate of Need law, which purports to hold down health care costs by limiting supply, but which actually does the opposite.
Theoretically, by allowing fewer providers of expensive services — such as open-heart surgery, organ transplants and air ambulance service — fewer people would use them. This would keep insurance premiums low and reduce the amount of tax dollars spent on Medicaid, Medicare, and uninsured patients.
This premise was false, Coletti said. The hospitals that were allowed to provide the services developed monopolies and were able to charge higher rates for them.
When states have repealed certificate-of-need laws, Coletti said, competition has pushed prices down.
Currently, 82 of 100 North Carolina counties have only one hospital. Insurance companies must pay the price the hospitals charge or they lose an entire county of customers.
“If a hospital were allowed to open up across the street,” he said, “the insurance company could go to the original hospital and say, ‘Guess what, we can’t pay you what you want and we don’t have to worry anymore because you have competition.’”
When insurance companies have negotiating power, they pay lower costs and can in turn charge lower premiums, he said.
Will the new General Assembly address this counterproductive, outdated law when it convenes in January? We’ll see. In the meantime, you can read more about the CON law, as it’s called, in this 2005 piece by JLF’s Roy Cordato.
