The Archaic Rule Threatening States' Health Care Readiness

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If you think our health care system is straining under the pressures of the COVID-19 emergency, consider the frightening prospects for our post-pandemic future. Professors at Duke, Harvard, and Johns Hopkins have concluded COVID-19 economic lockdowns are likely to lead to more deaths and shorter life expectancy, with African Americans and women in the most danger.

Why will our health get worse after beating back the coronavirus threat? We face a backlog of pressing needs. Some of us have put off preventive care for fear of catching COVID at the hospital. Others have been denied care by hospitals restricting non-Covid treatment. Others lost health insurance along with their job, making paying for care out of reach.

States need to be ready. They can either make it easier to meet the demand or they’ll face the consequences. A solid first step for 35 states — including my home state of North Carolina — is to repeal draconian and artificial government restrictions on expanding the supply of care.

Certificate of Need (CON) laws require medical providers to obtain approval from a state government commission before expanding current facilities, opening new facilities, or adding new medical equipment and devices. It’s time-consuming and costly. It turns economics on its head. It crushes the competition and keeps costs high.

Most states enacted CON laws in response to a 1974 federal mandate, but Congress repealed that requirement in 1987, and 15 states subsequently repealed their laws. But not North Carolina. In a state known for its highly skilled workforce and world-class medical and research facilities, 23 categories of services are smothered by these rules. Everything from hospitals and nursing home facilities, to MRI machines and organ transplant services are subjected to government control.

This means North Carolina adds to its resume the dubious distinction of the third most restrictive CON laws in the country.

The negative impact is devastating.

Research conducted for the John Locke Foundation, by Dr. James Bailey of Providence College found CON laws are associated with 30 percent fewer hospitals per capita, 13 percent fewer hospital beds, 26 percent fewer hospitals offering MRI and CT scans, and 14 percent longer emergency room wait times. With less care comes higher costs. Bailey found health care prices to be nearly 14 percent higher in CON states.

More specifically, in light of the prolonged COVID-19 lockdowns being linked to a heartbreaking spike in mental health problems and substance abuse, Bailey researched CON laws’ impacts on the vulnerable and the fragile. It’s not good. Certificate-of-need laws are associated with a state having 20 percent fewer psychiatric hospitals. CON laws also reduce the acceptance of private insurance by substance abuse treatment facilities by a statistically significant 1.85 percent, and the acceptance of Medicaid by a statistically significant 3.49 percent.

If we expect to effectively deal with the havoc being wreaked by COVID-19, certificate-of-need laws are low-hanging fruit for state policymakers who look at the evidence. But there will be pushback, and we see it in North Carolina. State health commissions are often stacked with current health care providers, incentivizing them to reject requests from potential competitors. Imagine if Wendy’s had to get permission from a committee stacked with McDonald’s and Burger King CEOs in order to open up a new franchise.

Some states are moving ahead regardless. New Hampshire and Florida recently reformed or repealed their programs. There is federal support as well. Organizations as diverse as the Department of Justice, the Federal Trade Commission, the White House Council of Economic Advisors, and the American Medical Association have called for reform or repeal.

People are moving to North Carolina in droves, seeking our quality of life and commitment to entrepreneurship and opportunity. My state is a leader and a beacon in many ways. Now it’s time we lead in the health care arena and ensure we’re prepared to meet the medical challenges of a post-pandemic world.

It’s time for North Carolina to expand access to quality, affordable care by joining the 15 other states that have already made the move. It’s time, in fact, for every to state to repeal their certificate-of-need laws.

Brian Balfour is senior vice president of research for the John Locke Foundation.



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