JLF’s John Hood writes today about the need to repeal North Carolina’s anti-competitive state law known as Certificate of Need — commonly known as CON law. It’s a health care/health services regulation that puts the state, not the marketplace, in charge of which services are deemed “necessary” and which are deemed “unnecessary.” Because of its negative impacts, many states have repealed their CON laws. And here’s why.

One recent study looked at the market for acute cardiac care. Vivian Ho of Rice and Meei-Hsiang Ku-Goto of Baylor examined Medicare data to see whether states with CON and states without CON differed in prices and Medicare reimbursement for coronary artery bypass graft (CABG) surgery or percutaneous coronary interventions. They found that deregulated states had lower prices for CABG surgery and less Medicare spending in both categories. Noting that previous studies had found no improvement in service quality in the regulated states, the authors concluded in the April 2013 issue of Medical Care Research and Reviewthat “CON regulations for CABG may not be justified in terms of either improving quality or controlling cost growth.”

Robust competition among hospitals and surgical centers on price and quality is a necessary but insufficient condition for true health care reform, which would empower patients with the information and financial incentives to purchase medical services more efficiently. To the extent consumers face artificial limits on their ability to choose among competing providers, the potential of consumer-driven health care to bring costs under control without sacrificing service quality or medical freedom will also be limited.

If a full repeal isn’t possible, there is a path for lawmakers who want to mitigate the damage.

So lawmakers should at least consider lifting CON restrictions for some markets or procedures, such as outpatient surgeries. Would doing so put additional pressure on some of North Carolina’s incumbent hospitals? Yes. But our current system for delivering medical services is going to have to change way one or the other. We can’t afford it. And the idea that transferring more decisionmaking authority to Washington, as the Affordable Care Act does, will make that delivery system more efficient is an even more fanciful notion than the idea that restricting hospital supply reduces the price of hospital services.