Under the state’s certificate-of-need laws, providers must get state approval for expansion projects or new construction. The FTC says that limits competition and doesn’t benefit consumers.
The Federal Trade Commission weighed in last week on a healthcare policy change being considered by the Alaska legislature, testifying in favor of repealing the state’s certificate-of-need (CON) laws.
The federal government’s vocal opposition to state-level CON laws brings the debate full circle. It was the federal government, after all, that pushed states to enact such policies more than four decades ago, in an effort to keep healthcare costs under control. Now the feds argue the laws don’t work.
Daniel Gilman, attorney advisor for the FTC Office of Policy Planning, told members of the Alaska Senate Committee on Labor & Commerce that the laws were enacted with the laudable goals of reducing healthcare spending and improving access to care.
“However, after considerable experience, it has become apparent that CON laws do not provide the benefits they originally promised. Worse, in operation, CON laws can undermine some of the very policy goals they were originally intended to advance,” Gilman told lawmakers Tuesday via teleconference.
Alaska’s CON laws require a formal review process before certain healthcare facility projects can move forward. The process evaluates whether the plan fits a community’s needs, and it includes an opportunity for public comment.
Gilman said such laws create three big problems: (1) They impose barriers to entry and expansion, which can limit healthcare options in a market and drive costs; (2) they can enable existing organizations to block or delay competition from newcomers; and (3) they can withhold from consumers certain legal remedies following an anticompetitive merger.
Others testified in favor of keeping the laws, arguing that Alaska’s rural populations and unique geography necessitate protections the free market does not provide.
A brief history
In 1964, New York enacted the first CON law program in the nation, according to a report by Matthew D. Mitchell, a senior research fellow and director of the Project for the Study of American Capitalism at the Mercatus Center at George Mason University. A number of other states then followed suit.
In 1974, President Gerald Ford signed the National Health Planning and Resources Development Act, which withheld funding from any state that failed to enact CON laws to regulate healthcare facilities, Mitchell noted. Within the decade, every state except Louisiana had established a CON program in one form or another.
In 1986, however, Congress repealed the federal law, lifting the requirement it had imposed on states. Since then, only 15 states have repealed their laws.
Steven Porter is editor at HealthLeaders.