RALEIGH — Medical providers in North Carolina must receive permission from the state — called a certificate of need (CON) — to add services such as extra hospital beds or a new testing machine. According to new research from the John Locke Foundation, these regulations restrict competition and harm consumers.
Dr. Roy Cordato, vice president for research at the Raleigh-based think tank, noted that North Carolina is one of 35 states retaining CON laws. Originally, the rules were developed to satisfy the provisions of a 1974 federal mandate. When Congress ended the mandate in 1987, some states repealed their CON laws while others kept them in place, thus allowing for useful comparisons across the country about the effects of the regulations.
The CON system was intended to keep health care costs lower by restricting access to costly medical procedures, but Cordato observed that basic economic principle and real-world experience pointed to a different outcome.
“One sure way to raise the cost of something is to give producers power to restrict output and production,” Cordato said. “Politicians understand this when the issue is OPEC and oil, but when the issue is health care, they think the way to protect people from higher costs is to restrict the supply of medical facilities and equipment.”
Cordato said that states that got rid of their CON laws did not see the increases in health care costs that would have occurred if the laws truly worked to keep costs down. Instead, several studies showed that CON laws drove up health care costs while restricting services.
“It’s a hidden tax,” Cordato said. Competition, not government-sponsored health cartels, is the key to driving health care costs down, he added.
“If you were to describe the certificate-of-need process to someone who had never heard of it before,” Cordato said, “he’d probably think you were describing a crazy, Soviet-style system — not a policy at work right now, here in North Carolina.”
Dr. Roy Cordato’s Policy Report, “Certificate-of-Need Laws: It’s Time for Repeal,” is available at the John Locke Foundation’s web site. For more information, contact Cordato at 919-828-3876 or [email protected].