“More than four decades ago, Congress passed and President Ford signed the National Health Planning and Resources Development Act of 1974. The act withheld federal funds from states that failed to adopt certificate-of-need (CON) laws regulating healthcare facilities. CON laws require healthcare providers wishing to open or expand a healthcare facility to first prove to a regulatory body that the community needs the planned services.”
“In 1986—as evidence mounted that CON laws were failing to achieve their stated goals—Congress repealed the federal act, eliminating federal incentives for states to maintain their CON programs. Since then, 15 states have done away with their CON regulations. A majority of states still maintain CON programs, however, and vestiges of the National Health Planning and Resources Development Act can be seen in the justifications that state legislatures offer in support of these regulations. Policymakers claim CON regulation is intended to:
ensure an adequate supply of healthcare resources,
ensure access to health care for rural communities,
promote high-quality health care,
ensure charity care for those unable to pay or for otherwise underserved communities,
encourage appropriate levels of hospital substitutes and healthcare alternatives, and
restrain the cost of healthcare services.
Research, however, shows that CON laws fail to achieve these laudable goals. In fact, by limiting supply and undermining competition, CON laws may undercut each of these aims.”
“CON programs limit the introduction and expansion of a wide variety of medical services and equipment, such as rehabilitation centers, nursing home beds, and medical imaging technologies. The process for obtaining a CON can take years and tens or even hundreds of thousands of dollars. By definition, CON programs restrict supply, making them unlikely to ensure an adequate supply of healthcare resources. Research on the supply of dialysis clinics and hospice care facilities finds that CON programs do, indeed, restrict the supply of both.”
“Unlike other regulatory regimes, such as occupational licensure and scope-of-practice rules, CON regulations do not specifically aim to improve quality. That is, CON regulators typically do not attempt to assess whether providers are qualified to do their jobs, focusing instead on whether there is an economic “need” for their services. Nevertheless, CON advocates sometimes claim that because CON regulations reduce the number of institutions providing care, they will cause more procedures to be performed by the institutions that do obtain permission. Thus, the argument goes, practitioners in CON states will tend to see more patients with the same conditions and therefore might become more specialized and proficient. This theory must be weighed against competing theories that suggest that competition tends to increase quality, especially when regulations prevent price competition.”
“As economists Jon Ford and David Kaserman put it, “To the extent that CON regulation is effective in reducing net investment in the industry, the economic effect is to shift the supply curve of the affected service back to the left. . . . The effect of such supply shifts is to raise . . . [the] equilibrium price.” The empirical evidence on how CON regulation affects cost has been consistent with economic theory, showing that CON regulation tends to increase the cost of healthcare services.” Certificate-of-Need Laws, Mercatus Center, 04/17/2017
Link to the entire essay appears below:
https://www.mercatus.org/publications/certificate-of-need-laws-goals
“The goal of health care reform is to provide better health care to everyone at a lower cost, year after year. The solution is not to provide a better third-party-payer system — e.g., health insurance or government-provided health insurance — but instead to allow technological development and entrepreneurship to improve the current business model through groundbreaking innovations that empower consumers, improve quality and cut prices. We have seen it happen in many industries, such as transportation, room and board, and tech.
Of course, special interests benefiting from the old model do not appreciate being challenged. As a result, rather than make it easier for new models to thrive by ensuring that rules and regulations do not stifle innovation, politicians often choose to protect established industry players at the expense of consumers.”
“Some services strive to do something even more impactful by making health care more affordable and accessible, yet they are held back by outdated rules and hostile competing industries. Take, for example, telemedicine — the use of modern communications technology, such as videoconferencing and using smartphones, to facilitate patient care. It has the potential to help millions of Americans struggling to pay the skyrocketing costs of health care. But instead, some politicians are siding with their campaign contributors in the health care industry and not the constituents they supposedly are in office to serve.”
“The California State Board of Optometry used taxpayer dollars to engage in a public relations campaign against one telemedicine startup. Indiana enacted a law last year to prevent the use of online eye exams. Georgia and South Carolina have also enacted bans, and the Virginia Legislature just sent a bill to the governor's desk that would do the same.
All of this is done not to safeguard patients but to protect older and more expensive business models. This is highly unfortunate. Telemedicine not only can help reduce health care costs but also has the potential to greatly expand access to care — something politicians claim to care about. Yet many states nevertheless prevent doctors licensed in other states from offering telemedicine services to their residents. This makes it more difficult for poorer citizens living in medically underserved areas to achieve the same access to care that their wealthier neighbors can discover by traveling out of state.” - Cronyism Thwarts Telemedicine and Other Innovations, mercatus.org, 02/23/2017
Link to the entire article appears below:
https://www.mercatus.org/commentary/cronyism-thwarts-telemedicine-and-other-innovations
‘For over a century, we've regarded health care as qualitatively different from other goods and services – an economic Oz, where the normal rules of nature don't apply. In doing so, we waste resources, keep prices artificially high and delay life-saving and life-improving technologies. But this will soon pass.’
‘In December, Dr. Naoki Ikegami told The New York Times: "[T]he U.S. health care system … defies the laws of economics, and of gravity. Once the price is high, it just stays there."’
‘Prices don't fall because we spend resources (via regulations, subsidies, cartels) to combat downward pressure.’
‘And yet, following the 1910 Flexner Report when health care was not much better than a coin toss, America feverishly paralyzed nascent medical markets. Medical school curriculum became rigidly standardized and for-profit schools were banished until 2007. Medical licensing emerged as medieval guild, giving doctors exclusive domain over work formerly performed by nurses and others. Laws forbade doctors from working for nondoctors. Blue Cross reinvented health insurance to serve hospitals more than patients. The Food and Drug Administration and other agencies relentlessly broadened control over products and services. Given medicine's primitive state during this period, the strictures laid down were more faith and ideology than science and economics.’
‘Over a half-century later, Arrow's "Uncertainty and the Welfare Economics of Health Care" became the proof text of "health care is different." Arrow enumerated the differences: domination by nonprofits, insurers as intermediaries, consumer ignorance and so forth. His essay was brilliant and correctly described the artificial world constructed over the previous several generations.
Thus, health care markets were hamstrung before useful medicine appeared, and the hamstringing continues today. As David Goldhill, author of " Catastrophic Care: Why Everything We Think We Know About Health Care Is Wrong," has put it: "[H]ealth care is indeed different ... but primarily because we insist on treating it as different."‘ - Defying Gravity, Robert F. Graboyes, US News and World Report, 06/12/2015
Link to the entire article appears below:
http://www.usnews.com/opinion/blogs/policy-dose/2015/06/12/why-us-health-care-is-so-expensive
“Thirty-six states and the District of Columbia currently limit entry or expansion of health care facilities through certificate-of-need (CON) programs.1 These programs prohibit health care providers from entering new markets or making changes to their existing capacity without first gaining the approval of state regulators. Since 1973, Florida has been among the states that restrict the supply of health care in this way, with 11 devices and services—ranging from acute hospital beds to organ transplants to psychiatric services—requiring a certificate of need from the state before the device may be purchased or the service may be offered.2
CON restrictions are in addition to the standard licensing and training requirements for medical professionals, but are neither designed nor intended to ensure public health or ensure that medical professionals have the necessary qualifications to do their jobs. Instead, CON laws are specifically designed to limit the supply of health care, and are traditionally justified with the claim that they reduce and control health care costs.3 The theory is that by restricting market entry and expansion, states might reduce overinvestment in facilities and equipment. In addition, many states—including Florida—justify CON programs as a way to cross-subsidize health care for the poor. Under these “charity care” requirements providers that receive a certificate of need are typically required to increase the amount of care they provide to the poor. In effect, these programs intend to create quid pro quo arrangements: state governments restrict competition, increasing the cost of health care for some, and in return medical providers use these contrived profits to increase the care they provide to the poor.4 “
- Certificate-of-Need Laws: Implications for Florida, Koopman and Stratmann, 03/03/2015
Link to the paper appears below:
http://mercatus.org/publication/certificate-need-laws-implications-florida?utm_source=Email&utm_medium=TWAM&utm_campaign=Newsletter
