BIPPS @ the Table: CON laws interfere with competition, 'impedes entry of additional providers into markets'

Photo Courtesy of LRC Public Information

A movement is afoot in Kentucky to get rid of the state’s bureaucratic requirements that health care providers get special permission from the government before adding or expanding services or facilities.

While the origin of such policies – known as certificate-of-need laws – which began as a federal policies in the 1970s, were intended to help control healthcare costs, increase quality and improve access to care for low-income families. However, the research doesn’t confirm that certificate-of-need laws have achieved any of those expectations.

Instead, such policies have served primarily to shield existing hospitals, doctors and other medical providers from the competition that new facilities and services would provide Kentuckians.

“The weight of evidence implies that Kentucky would be well-served by the improved access to healthcare that is stimulated by the removal of certificate of need,” Bluegrass Institute Scholar John Garen, Ph.D., recently told the state task force examining Kentucky’s Certificate of Need laws.

“Economic analysis finds the competition is an important force in markets to generate lower prices, better quality, and more efficiency,” Garen, BB&T Professor Emeritus of Economics at the University of Kentucky, told the task force.

“Any interference with the competitive process is presumptive harmful. Certificate-of-need law … impedes entry of additional providers into markets,” he added.

See Dr. Garen’s full presentation here (beginning at 43:00)

Click here for an example of the harmful effects of certificate-of-need laws in denying Kentuckians additional providers and services, provided in a recently released analysis by the Institute for Justice. According to the report, 63 of 80 studies examined show CON policies resulted in a reduction in supply.