After an Iowa government board blocked a mental health facility from opening in the City of Bettendorf, Gov. Terry Branstad (R) publicly questioned the need for certificate of need (CON) laws, which reform supporters say prevent competition from driving down health care costs and offering patients greater choice.
Iowa’s Health Facilities Council (HFC) voted 2–2 in February to prevent the construction of a 72-bed psychiatric hospital in the Quad Cities. The tie vote denied the CON applicant, Strategic Behavioral Health, the necessary certificate providing permission to build.
Iowa is one of 36 states requiring health care providers to obtain a CON from a state board before building new facilities, acquiring expensive equipment, or expanding the services they offer.
After HCF’s CON denial, Branstad publicly questioned the effectiveness of Iowa’s CON law.
“The certificate of need idea was created to prevent duplication and control the costs of health care. … it has become a way for certain [organizations] to keep out competition,” Branstad said, according to a report by the Quad City Times.
Two competitors, Genesis Health System and UnityPoint Health-Trinity, opposed Strategic Behavioral Health’s application.
Branstad says he would ask legislators to begin the process of taking CON laws off the books because they may not be needed.
“[W]e need to look at [if] we really need to have a certificate of need at all,” Branstad said, according to the Quad City Times.
Competition Lowers Cost
Repealing barriers that keep new businesses from entering the health care market is good for consumers, says John Hendrickson, a research analyst at the Public Interest Institute.
“I think Gov. Branstad is correct when he argues that [certificate of need laws] interfere with competition,” Hendrickson said. “From the free-market standpoint, it is widely argued that the best way to lower costs in regard to health care is to free up the health care market and make it more competitive. This will drive down prices and produce a better quality of health care, just as school choice has done for education.”
Although CON proponents say the review process prevents duplication of services and directs investment to its most productive uses, Hendrickson says consumers alone can best determine market capacity.
“In regard to duplication, the market will serve as a check on this, just as it would do with any other service or product in the economy,” Hendrickson said. “More competition will benefit the consumer and stabilize costs.”
Hendrickson says laws protecting established health care providers from competition make health care prices higher than necessary.
“Federal, state, and local governments are being shackled with the albatross of exploding health care costs, and it is in the best interests of all to make our health care system more competitive,” Hendrickson said.
Ben Johnson ([email protected]) writes from Stockport, Ohio.
Matthew Glans, “Iowa Should Consider Certificate of Need Reform,” Research & Commentary, The Heartland Institute, March 10, 2016: https://heartland.org/policy-documents/research-commentary-iowa-should-consider-certificate-need-reform