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Removing State-Based Obstacles to Affordable Healthcare

March 19, 2015 in Economics

By Jeffrey A. Singer

Jeffrey A. Singer

As Americans continue to experience the painful consequences of Obamacare, look for mounting political pressure to replace it with reforms that make health care truly more affordable, enhance patient choice, and restore the patient-doctor relationship.  But not all the action has to take place in Washington; much needs to happen in the states.

And there is no reason why it can’t start now. States can begin by repealing “Certificate of Need” (CON) laws. These are outdated and counterproductive laws which encourage cronyism, increase costs, and detract from the quality of health care.

Certificate-of-need laws require anyone wanting to open or expand a healthcare facility to prove to a regulator that the community “needs” it. Once they prove such a need, the state grants them a certificate which lets them operate. In some states the micromanaging can extend down to the level of expanding offices or adding new equipment. In North Carolina, for example, the state Department of Health and Human Services must approve the addition of basic necessities such as hospital beds.

We don’t have to wait for our representatives in Washington to fix our health care mess.”

My state of Arizona repealed its CON laws years ago, but these regulations are still present in 35 states and the District of Columbia. Legislators once thought they would tamp down health care costs by preventing unnecessary and duplicative expenditures. But instead, the certificate-granting process effectively grants monopoly privileges to existing hospitals and facilities—increasing costs in the process.

When a new provider petitions for a certificate, established providers are usually invited to testify against their would-be competitors. This means that some health care practices can openly challenge the right to exist of any practice that might hurt their bottom line. Indeed, hospital administrators openly admit that protection against competition thanks to CON laws has become an integral part of their business model.

Large hospitals and other medical incumbents have another advantage: They can afford the lengthy and expensive process while smaller, newer health care providers cannot. Getting state approval for a certificate of need can take years or even over a decade, including appeals and re-appeals. In a place like Washington state, the application fee alone can cost  tens of thousands of dollars. All of this discourages new entrants who lack the legal and financial resources to run the certificate-of-need obstacle course.

Always beware when the fox is pleased …read more

Source: OP-EDS

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