I gave oral testimony to the Alaska Senate Labor and Commerce Committee today regarding legislation it is considering that would repeal the state’s Certificate of Need (CON) laws. These laws require health care facilities to obtain permission in order to open, expand, or add new equipment to health care facilities within the state. CON laws were originally encouraged by federal legislation passed during the Nixon administration, providing grants to states to set up CON commissions, under the misguided belief that restricting the growth of new or existing health care facilities would reduce health care expenditures.
Incumbents use the CON commissions to restrict competition from new entrants, negatively impacting access and choice for health care consumers. CON law advocates had hoped that any increase in health care prices that might result from a decrease in health care supply would cause a decrease in utilization by health care consumers. But the third‐party payer system largely insulates consumers from price effects.
A working paper from the Mercatus Center at George Mason University reviewing 20 academic studies concluded:
There is no evidence that CON regulations limit healthcare price inflation and little evidence that they reduce healthcare spending. In fact, the balance of evidence suggests that CON laws are associated with higher per unit costs and higher total healthcare spending.
Conversely, another study by Mercatus found that states that repeal their CON laws reduce overall health care spending by 0.8 percent per year, leveling off at a decrease of 4 percent five years after repeal.
By the mid‐1980s it became evident to Washington, DC policymakers that the idea was backfiring. Congress ended the federal support of CON laws in 1986. Nevertheless, cronyism is difficult to uproot once the seeds have been planted. CON laws still exist to varying degrees in 38 states.
With the advent of the COVID-19 pandemic, many states realized their CON laws left them unprepared for a sudden surge in demand for critical care and other health care services and straightjacketed by bureaucratic red tape. Therefore, 20 states, including Alaska, suspended their CON laws and 4 other states issued emergency certificates of need (thus bypassing the usually months‐long certificate application process). This was a tacit admission that Certificate of Need laws are an impediment to the rapid response of the health care system to changes in society. When the current public health crisis ends, the CON laws in those states and in the states where they were not suspended should be formally repealed by state legislators.
In 1990 Arizona, the state in which I practice medicine, repealed all of its CON laws except for ambulance services. By that same year, California, Colorado, Idaho, Kansas, Minnesota, New Mexico, South Dakota, Texas, Utah, Wisconsin and Wyoming repealed all of their CON laws. Hopefully, the state of Alaska will soon join their ranks.My Oral Testimony to the Alaska Senate Labor and Commerce Committee
The Committee originally scheduled a hearing on this issue for April 14 but rescheduled it to April 21. I was requested to submit my written testimony, which you can read here, by April 14.