Maine is one of 36 states that have certificate of need (CON) laws. CON laws are intended to slow the growth of health care prices, promote consolidation of health care providers, and limit the duplication of services. Recent studies have shown CON laws fail to achieve many of their stated goals and have instead reduced the availability of health care services.
Maine requires CON commission approval for a wide range of expenditures, including construction and modification of health care facilities, the purchase of major pieces of medical technology, and the offering of new inpatient care beds, services, and medical procedures. Unlike other licensing laws, CON laws generally are not based on quantifiable criteria such as experience or education.
In a 2013 study, Joel Allumbaugh, director of the Center for Health Reform Initiatives at the Maine Heritage Policy Center, said Maine’s CON law has driven up health care costs: “The Maine CON law protects incumbents and inhibits innovation. As a result, Maine’s average individual health insurance premiums are 31 percent higher than the national average.” Allumbaugh also found health care expenditures in Maine grew faster than the national average between 1991 and 2009 (7.4 percent versus 6.5 percent) and were higher per capita in 2009 ($8,521 while national average was $6,815).
Allumbaugh also cited a study by Steven Gerlach that found capital expenditures in Maine between 1998 and 2002 grew at an average annual rate of 8.4 percent, much higher than the average annual rate of 6.6 percent for all of New England. Pennsylvania, which allowed its CON laws to expire in 1996, experienced an average annual increase of only 5.7 percent during the same period.
In a Mercatus Center study, Thomas Stratmann and Christopher Koopman say CON laws reduce the availability of medical equipment and hospital beds. States with CON laws have 99 fewer hospital beds per 100,000 residents and a lower availability of MRI services, CT scanners, and optical and virtual colonoscopies.
CON laws also give inappropriate influence to competitors during vetting processes. When a company applies to enter a new market, competitors often use the CON process to block the potential competition. As a result, CON laws raise the price of medical care by preventing new medical providers from competing with existing hospitals.
Data from the Kaiser Family Foundation show 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 certificates of need on 10 or more services averaged per capita health care costs 8 percent higher than the $6,837 average for states requiring certificates of need for fewer than 10 services.
Maine lawmakers should reform the state’s CON laws to end the burdensome regulations that increase the cost of health care while limiting access and benefitting those with political connections.
The following articles examine certificate of need laws from multiple perspectives.
Crisis to Cure: Government Intrusion vs. Free-Market Innovation, Understanding Maine’s
Certificate of Need Law
Joel Allumbaugh, director of the Center for Health Reform Initiatives at the Maine Heritage Policy Center, argues Maine’s CON law program has restricted access to health care in the state and raised costs to consumers. “CON injects a bureaucratic approval process in the path of health care investment. This distorts provider responses to consumer demand and restricts access to health care services. It also dampens competition, which further exacerbates the rising cost of health care products and services.”
Do Certificate of Need Laws Increase Indigent Care?
Thomas Stratmann and Jacob Russ of the Mercatus Center at George Mason University examine certificate of need laws and their effects on pricing and health care access. “While certificate of need laws significantly reduce available health care services for everyone, they do not lead to an increase in care for the needy.”
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.
Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems.
CON Job: State “Certificate of Necessity” Laws Protect Firms, Not Consumers
Writing in Regulation magazine, Timothy Sandefur of the Pacific Legal Foundation argues certificate of necessity (need) laws are not intended to protect the public but instead are designed to restrict competition and boost the prices existing companies can charge.
You Shouldn’t Have to Ask Your Competitors for Permission to Start a Business
Ilya Shapiro of the Cato Institute argues CON laws make it more difficult and expensive for companies to create new jobs or innovative businesses. Even more troubling, Shapiro argues, is the use of CON laws by existing businesses to bar newcomers from competing against them.
Certified: The Need to Repeal CON: Counter to Their Intent, Certificate of Need Laws Raise Health Care Costs
Jon Sanders of the John Locke Foundation argues CON laws fail to lower health care costs and in many instances actually increase costs. Sanders says state leaders could best honor the intent behind CON – preventing unnecessary increases in health care costs – by repealing those laws.
The Failure of Government Central Planning: Washington’s Medical Certificate of Need Program
John Barnes of the Washington Policy Center describes the history of the certificate of need concept, summarizes how the Washington State CON law works, compares its stated goals with actual performance, and offers practical policy recommendations for improving access to affordable health care for the people of Washington.
Certificate of Need Laws: It’s Time for Repeal
Roy Cordato of the John Locke Foundation (JLF) examines certificate of need regulation in the first of a series of annual research papers from JLF devoted to explaining the principles of free markets and applying them to current controversies in North Carolina.
Certificates Of Need: A Bad Idea Whose Time Has Passed
Writing for the James Madison Institute, Peter Doherty argues federal interventions into the health care market have proven disastrous, and the government’s increased spending on programs has been anything but a boon. He writes, “In the past 20 years, many of us have battled to moderate or eliminate the most egregious of these programs and the artificial controls they place on free markets, but despite our successes, vestiges of the past remain.”
Health Care in the States
Cato Institute Fellow Michael Tanner compares health care reform among the states. There being no universal model available for states to follow, they are undertaking the task of creating their own models of reform. Tanner examines how these various states differ in cost-effectiveness and insurability and cites their successes and failures in providing affordable insurance for all citizens.
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 Health Care News at http://news.heartland.org/health, The Heartland Institute’s website at http://heartland.org, and PolicyBot, Heartland’s free online research database at www.policybot.org.
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