Research & Commentary: Ending CON Laws in Alaska Would Boost Health Care Market

Published January 29, 2019

Alaska is one of 35 states that institute certificate of need (CON) laws, which limit health care providers’ abilities to expand services. Two companion bills have been introduced in the Alaska State Legislature that would repeal the state’s certificate of need program. The bills, HB 17 and SB 1, would end the troublesome restrictions and add amendments incorporating the changes into law with an effective date of July 1, 2020.

Eliminating Alaska’s CON laws would improve health care quality and access. If Alaska did not have CON requirements, the state would have 10 additional health care facilities, three additional ambulatory surgical centers and seven rural hospitals, according to a Mercatus profile on Alaska’s CON laws. Furthermore, states with CON laws have a mortality rate about 5.5 percent higher than the average rate in non-CON states, as reported by Stratmann and David Wille of the Mercatus Center. Even worse, CON laws do not protect access to health care in rural areas.

CON laws have not improved health care access, yet have increased health care costs for consumers by hindering competition and forcing providers to use older facilities and equipment. According to the Alaska CON profile, which relied on existing data from other states, total health care spending could drop by $294 per person if CON laws were to be repealed. In an early study, conducted in 2003 by Christopher Conover and Frank Sloan of Duke University, their research found Michigan’s CON program demonstrated “little evidence that CON results in a reduction in costs and some evidence to suggest the opposite.”

In addition to being linked to poor hospital quality, ample research shows CON laws drive up health care costs. Data from the Kaiser Family Foundation demonstrates health care costs are 11 percent higher in CON states than in non-CON states. The study also found a positive correlation between the number of CON law restrictions and the cost of health care. States requiring CON on 10 or more services averaged per capita health care costs 8 percent higher than the $6,837 average for states requiring CON for fewer than 10 services.

CON laws also give inappropriate influence to competitors during vetting processes. When a health care provider applies to enter a new market, competitors often use the CON process to block potential competition. As a result, CON laws raise the price of medical care by preventing new medical providers from competing with existing health care providers.

In short, CON laws increase the cost of health care while limiting access and benefitting those with political connections. The negative impact of CON laws has led many experts to call for the reform or repeal of these onerous laws. In fact, the Federal Trade Commission and the Department of Justice’s Antitrust Division have even recommended that Alaska repeal its CON laws.

Eliminating CON laws would benefit all residents of the Last Frontier by making health care services more available and affordable.

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.

The Failure of Alaska’s Certificate-of-Need Laws
In this testimony before the Alaska Senate Labor and Commerce Committee, Thomas Stratmann argued Alaska should move to repeal its certificate-of-need laws. “The takeaway from these findings is that CON laws are bad for Alaska because they reduce the quality of medical care in Alaska, they reduce access for Alaskans, and they reduce opportunities to obtain medical services such as MRI and CT scans. Alaska would be better off if the Last Frontier would join the 15 states that do not have CON laws,” Stratmann said.

Alaska Considers CON Law Repeal
In this article from Health Care News, Cory Compton discusses the renewed legislative efforts to repeal Alaska’s CON laws in 2019.

CON Job: Certificate of Need Law Used to Delay, Deny Expansion of Mental Health Options
In this article, Mark Flatten of the Goldwater Institute discusses how certificate of need laws hold back the expansion of needed mental health care facilities.

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.

Are Certificate-of-Need Laws Barriers to Entry? How They Affect Access to MRI, CT, and PET Scans
A study published in January 2016 from the Mercatus Center at George Mason University examines how CON regulations affect the availability of imaging services provided by hospitals and other medical providers. The results show CON regulations adversely impact non-hospital providers; hospitals largely remain unaffected. The study also shows residents of CON states are more likely to travel out of state to obtain imaging services than residents of non-CON states.

Certificate-of-Need Laws and Hospital Quality
Thomas Stratmann and David Wille of the Mercatus Center at George Mason University challenge the claim CON laws improve hospital quality. “Using a broad dataset, the study finds no evidence that CON laws improve hospital quality. In fact, there are more deaths and serious postsurgery complications in hospitals in states with CON laws,” wrote Stratmann and Wille.

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.

Certificate of Need Laws: A Prescription for Higher Costs
In this article published in Antitrust Magazine, Federal Trade Commissioner Maureen Ohlhausen examines CON laws and argues for their repeal. “Regardless of one’s perspective on the proper balance between state and federal power, there are some very good reasons to repeal state CON laws,” wrote Ohlhausen.

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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