The Certificate of Need 'CON' Job

Regulation increases health care costs 11 percent

Imagine a state law that required supermarkets to get permission from the government to install a new freezer case or build a new store. Before they could proceed, managers would have to go hat-in-hand to a board consisting of political appointees, some of whom may even have ties to the store’s competitors.

No reasonable person would regard this as a recipe for more competition, lower prices and higher quality. Indeed, the very idea sounds crazy. Yet that is the very regulatory regime imposed on all hospital and clinic expansions and technology acquisitions in Michigan.

Welcome to the perverse world of health care "Certificate of Need" laws. If it sounds crazy for food markets, it's no less so for health care, as a growing body of evidence shows. The latest comes from research analyst Jordan Bruneau writing for The Freeman.

Using 2009 data from the Kaiser Family Foundation, Bruneau compares per capita health care expenditures in states imposing the Certificate of Need (CON) mandate and states that do not. The costs are 11 percent higher on average in the CON states, $7,230 per capita compared to $6,526. To the extent Michigan reflects that average, this means every man, woman and child in this state is paying an extra $704 annually thanks to government rationing.

This may be a rather simple methodology, but the result matches what more rigorous studies have also shown: CON costs consumers (and the third-party payers through which most health care spending is funneled).

President Obama’s health care law is justifiably getting blamed for disrupting the lives of millions by wreaking havoc in the insurance marketplace, but state policymakers deserve plenty of blame themselves for dysfunctions in the status quo system.

CON is just one of many ways states including Michigan have artificially jacked up health care costs. Before legislators here make more noise about Obamacare disruptions, they should start cleaning up the mess this state has made with health care regulations that serve special interests at the expense of consumers.