The Unknown Healthcare Law That Made Lockdowns Inevitable: ‘Certificates of Need.’

Want to build more hospitals? These laws stop that.

“Flatten the curve” was a noble goal for 2020, but that curve only existed because of a half-century-old law. “Certificate of need” laws, in nearly three dozen states, serve to protect healthcare cartels but wreak havoc on society amid a pandemic. Of all the red tape tying up the market for healthcare, the “certificate of need” (CON) laws are some of the most useless. Thirty-four states and the District of Columbia enforce some version of this regulatory mechanism whereby a state board or commission artificially limits the number of hospitals and emergency rooms built or medical devices or services acquired. The problem CON laws seek to solve is, evidently, too much access, competition, and investment in the healthcare industry. The idea goes back to 1964 when New York adopted the first CON law. In 1974, Congress encouraged other states to follow New York’s lead in order to receive federal funding. The National Health Planning and Resources Development Act led to 49 states passing their own CON laws. It was theorized that free-market competition incentivized healthcare providers to overbuild, and, in turn, overcharge patients or overhospitalize them to cover the extra costs. “Price inflation can occur when a hospital cannot fill its beds and fixed costs must be met through higher charges for the beds that are used,” writes the National Conference of State Legislatures. “Larger institutions generally have larger costs, so hospitals and other health facilities may raise prices in order to pay for new, underused medical services or empty beds.” Their solution? “Health resource planning,” according to the National Medical Association. But in 1986, after seeing no financial benefit, Congress eliminated its federal incentive for states to maintain their CON programs. “[E]vidence mounted that CON laws were failing to achieve their stated goals,” writes Matthew D. Mitchell for the Mercatus Center. “Since then, 15 states have done away with their CON regulations” Now 34 years later, it’s time for more states to come to terms with the consequences of CON laws. Sadly, the price paid is more significant than it was more than a generation ago.

WHEN NEEDLESS REGULATION TURNS LETHAL According to the Mercatus Center at George Mason University, nursing homes and long-term care providers must get permission to add more bed space in 34 states. Twenty-eight states require hospitals to also get approval before adding beds. As you can expect, these restrictions are proving lethal in the midst of COVID-19. Thankfully, 22 of the 34 states rolled back their CON laws in response to the pandemic, according to the Pacific Legal Foundation. “In six states, the suspension appears to apply only to hospital beds. In 14 states, it’s anything deemed necessary for responding to COVID-19—including five states that will issue emergency Certificates of Need,” they write.