Medical Certificate of Need (CON) laws have existed since the mid-1960s. They are a classic example of government intervention and central planning of the health care delivery system. Their stated purpose is to hold down costs and at the same time provide more charity care. They operate by requiring doctors, hospitals, and clinics to receive government permission before providing more health care services in a given region. Thirty-five states, including Wyoming, have some type of CON laws.
New York State passed the first CON law in 1966. Businesses, insurers, consumers and providers came together to study the need for additional hospital beds. The group determined there was a surplus of beds and recommended state officials restrict further hospital expansion with special legislation. The law made it illegal to add beds to an existing hospital or to treat patients in a new facility without first gaining permission from state officials.
The federal government became involved in 1972 when Congress amended the Social Security Act to require all states to review new health care construction projects that exceeded $100,000 in value. Failure to comply with this rule would result in the federal government withholding Medicare and Medicaid money from the offending state.
In 1974, because of exploding costs in health care, Congress passed the National Health Planning and Resource Development Act (NHPRDA). This law established a comprehensive federal health care CON regulation, with the penalty for a state’s non-compliance being forfeiture of federal Medicare and Medicaid dollars.
The policy goals of NHPRDA were two-fold – to limit the number of health care facilities available to patients in a specific geographic area and, because of more volume and higher payments directed to existing facilities, provide more charity care at those hospitals and clinics allowed to operate in an exclusive area.
States were encouraged to establish their own CON programs and all 50 states complied.
By 1982, however, the federal government realized the national CON law was not saving money, but was restricting care and limiting available health services for patients. No increase in charity care occurred. Recognizing this failure, Congress repealed the federal law in 1987 and subsequently 14 states, including Wyoming, repealed most or all of their individual CON laws.
Officials in Wyoming, however, left a nursing home construction CON in place. HB 289 seeks to repeal the CON law related to limiting construction or expansion of nursing homes in the state. The argument in support of the Certificate of Need concept was that the federal government, through Medicare and Medicaid, has paid for health care in the U.S., and this funding, in turn, gave the government the justification to limit the expansion of the health care system through CON laws. The CON limits, however, artificially create monopolies and restrict access to health care for patients, leading to Congress’s repeal of the national CON law in 1987.
The evidence is now clear that CON laws increase the cost of health care. Researchers Stratmann and Russ at George Mason University found that lack of normal competition raised the price of medical care and reduced the availability of hospital beds and medical equipment. An earlier study found almost a 14 percent increase in per-patient health care costs in states with CON laws. The Kaiser Family Foundation reported that health care costs are 11 percent higher overall in states with CON laws compared to states without the restrictive law.
Over the decades, at both the federal and state levels, there has been no evidence that CON laws increase the availability of charity care. With 50 years of real-world experience, the evidence is now clear that neither federal nor state-level CON laws reduce health care costs.
They do, however, reduce competition and patient access to care. Elected officials in Wyoming should give serious consideration to HB 289 and give patients more options and choices in their selection of a nursing home.