The Corner

Economy & Business

Florida Is Doing Something about a State-Level Regulation That Makes Health Care Pricier and Harder to Access

Dean Stansel, an economics professor down in Florida, sends an article with some good news: A Florida state-house committee has voted to reduce an especially notorious kind of government licensing, Certificate of Need, or CON, requirements. 

“CON” restrictions are layered on top of state licensing and training requirements for medical professionals. They require that all medical providers wanting to build or expand an existing health-care facility, offer new services, or acquire new medical equipment must gain approval from state regulators just to run their businesses.

Florida is one of the 36 states that have CON laws on the books. And there are many worse offenders, according to the work of my colleagues at the Mercatus Center — CON laws in Florida burden eleven types of providers and services, while the national average is 13 and some states regulate more than 20.

But Florida could probably make it a lot easier to access health care if they rolled some of these rules back. I summarized my colleagues’ research on the impact of CON laws recently: 

As part of a large effort by the Mercatus Center to study CON laws around the country, economists Thomas Stratmann and Jacob W. Russ published a comprehensive empirical study looking at whether CON laws increase indigent care. They found that under the regulatory scheme, the poorest Americans see no increase in the availability of care and that it limits the provision of medical services.

Their study shows that while on average there are 362 hospital beds per 100,000 people in the United States, the presence of a state CON regulation program reduces that number by 99 beds. They also found that for each additional service that a state regulates — such as the acquisition of CT scanners or MRI machines — the number of hospital beds per 100,000 people decreases by 4.7.

Looking at CON laws on a state-by-state basis, my colleague Christopher Koopman found that Vermont is the worst offender, with its CON program currently regulating 30 different services, devices and procedures, which is much more than the national average of 14.

But hospital beds aren’t the only casualties of CON regulations. They also reduce the number of hospitals with MRI technology by one to two hospitals per 500,000 people. Koopman calculated that in North Carolina, the fourth-worst CON state, it could mean 49 fewer hospitals offering MRI services.

Here is what it would mean for Florida:

Throughout the United States there are approximately 362 beds per 100,000 persons. However, in states such as Florida that regulate acute hospital beds through their CON programs, Stratmann and Russ find 131 fewer beds per 100,000 persons. For a county like Miami-Dade, with its population of approximately 2.62 million, this means that there are about 3,428 fewer hospital beds as a result of the state’s CON program.

Moreover, several basic health care services that are used for a variety of purposes are limited because of Florida’s CON program. Across the United States, an average of six hospitals per 500,000 persons offer MRI services. In states such as Florida that regulate the number of hospitals with MRI machines, the number of hospitals that offer MRIs is reduced by between one and two per 500,000 persons.18 As a result, in an area like Miami-Dade County there are approximately five to ten fewer hospitals offering MRI services. Florida’s CON program also affects the availability of CT services. While an average of nine hospitals per 500,000 persons offer CT scans, CON regulations are associated with a 37 percent decrease in these services. For the 2.62 million people living in Miami-Dade, this could mean about 18 fewer hospitals offering CT scans.

So why support such laws in the firat place? Here’s the argument Democrats are making in Florida:

Democrats opposed to the bill said new hospitals would come in to compete for patients with insurance coverage and better financial means and leave uninsured and low-income patients to the larger public and safety net hospitals.

“I feel this is an attack on hospitals serving the uninsured and poor,” said state Rep. Janet Cruz, D-Tampa, who expressed concerns about the impact on Tampa General Hospital.

There’s so much wrong in so few sentences ere. First, health-care providers may not like competition, but it’s good for consumers. As the research shows, CON laws were intended to limit the supply of health-care services and they effectively did. They were also supposed to contain the cost of health care, and clearly they’ve failed at that. It’s also not clear how they’ve done a good job serving the poor.

State policymakers in Florida are right to take a step closer to joining the other 14 states that are CON-law-free. It will slow the growth of health-care costs, would invigorate health-care innovation, open up the health-care market, create more competition, and ultimately offer more options to those in need of health care.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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