Rx for High Health Care Costs: Stop Protecting Inefficient Providers

To cope with the growing cost of Massachusetts’ health reforms, some suggest government should block competition by new producers.  Here’s a poor, unsuccessful letter to the editor of the Boston Globe highlighting the flaw in that approach:

The Public Health Council is wrong to claim that requiring government approval for new outpatient clinics and ambulatory surgical centers will contain the costs of Massachusetts’ health-care reforms [“State toughens rules for building new clinics,” Nov. 14].  According to University of Alabama health economist Michael Morrisey, economic studies of such “certificate-of-need” (CON) requirements “find virtually no cost-containment effects…If anything, CON programs tended to increase costs.”

Morrisey suggests the real reason for such barriers to market entry is protectionism: “A reasonably large body of evidence suggests that CON has been used to the benefit of existing hospitals…Prices and costs were higher in the presence of CON…The continued existence of CON and, indeed, its reintroduction and expansion despite overwhelming evidence of its ineffectiveness as a cost-control device suggest that something other than the public interest is being sought.”

If the Commonwealth wants to reduce health-care costs, it should stop protecting inefficient providers.