Published January 13, 2021

Alaska is one of 35 states that enforce Certificate of Need (CON) laws, which deter health care expansion and access. Reforming or eliminating Alaska’s CON laws would improve health care quality and access across the state, especially for rural Alaskans.

Since their inception in the mid-twentieth century, CON laws have hindered growth and stifled competition in the medical marketplace. If Alaska did not have CON laws on the books, the state would have at least 10 additional health care facilities, three additional ambulatory surgical centers, and seven rural hospitals, according to a Mercatus profile on Alaska’s CON laws.

Making matters worse, Alaska has some of the highest health care costs in the country. Spending on hospitals and on physician and clinical services are 50 to 80 percent higher than national averages according to a recent report by the Alaska Policy Forum. Medicaid expenditures are 56 percent higher than the national average as well.

According to the Kaiser Family Foundation, health care costs are 11 percent higher in states operating with CON laws than those without. Moreover, the negative impact of CON laws extends beyond higher prices. CON laws are directly linked to reduced quality of care in hospitals and less health care access for rural communities. Further, states operating with CON laws have rates of mortality about 5.5 percent higher than states operating without CON laws, according to a report by the Mercatus Center.

CON laws protect established industry leaders from competition by limiting entry into the marketplace, which in turn hurts the consumer because this results in fewer health care choices and higher costs. Not only that, robust competition, which CON laws deter, incubates innovation in the medical marketplace.

On the other hand, CON laws protect the interests of existing providers, creating government-induced monopolies that result in fewer medical facilities and less technological advancements. As a result, CON laws raise the price of medical care by preventing new medical providers from competing with existing health care providers.

CON laws are the definition of central planning gone awry. Repeal or even reform of outdated and capricious CON laws would be a step in the right direction to bring more affordable and accessible health care to all Alaskans. In fact, experts at the Federal Trade Commission and the Department of Justice’s Antitrust Division have made recommendations that Alaska repeal its CON laws.

Alaska temporarily suspended CON laws in response to the COVID-19 pandemic. This suspension allowed hospitals to provide necessary service to patients, including providing more beds and necessary equipment. Alaska should repeal its draconian CON laws to increase accessibility, improve quality of care, and lower health care prices.

The following documents provide additional information about certificate-of-need laws.

Certificate of Need Laws: Alaska State Profile
This state profile from the Mercatus Center examines Alaska’s CON laws and compares health care outcomes and costs in other states. The studies attempt to give some insight into what is likely to happen in Alaska if the state were to eliminate its CON laws.

Controlling Health Care Costs in Alaska
The report from the Alaska Policy Forum analyzes the health care spending and cost drivers in the state of Alaska. The report also offers recommendations of policy reform that should be adopted by the state.

Entry Regulation and Rural Health Care: Certificate-of-Need Laws, Ambulatory Surgical Centers, and Community Hospitals
Thomas Stratmann and Christopher Koopman of the Mercatus Center at George Mason University evaluate the impact of CON regulations related to ambulatory surgical centers (ASCs) on the availability of rural health care. Their research shows despite the expressed goal of ensuring that rural populations have improved access to health care, CON states have fewer hospitals and ASCs on average—and fewer in rural areas—than states without CON regulations.

Certificate-of-Need Laws Lower Quality of Care, Study Finds
Shelby Livingston of Modern Healthcare examines a new study from the Mercatus Center that argues certificate of need laws that govern the construction and development of health care facilities do not raise the quality of care at hospitals and may even lead to higher readmission rates.

The Great Healthcare CON
Jordan Bruneau of the Foundation for Economic Education finds CON laws raise health care prices and reduce availability. He advises, “Rather than pinning our hopes on grand plans to overhaul the system, we should first look at where we can make changes on the margin that would move us in the right direction. Abolishing CON laws – a barrier to entry that drives up price, restricts access, and is maintained by cronyism – would be a great place to start.”

Certificate of Need: State Health Laws and Programs
The National Conference of State Legislatures outlines the various state CON laws and the positions of CON law proponents and critics.

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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