To borrow an overworn metaphor, Minnesota’s moratorium on new radiation therapy facilities is a bad idea on steroids. Like nearly every state, Minnesota has a certificate-of-need law (CON), under which anyone who wishes to open a new hospital, clinic, or nursing home–or even purchase a new CAT scan machine–must secure the blessing of a politically assembled group of people.
The idea behind CON laws is that they restrain “excessive” spending on health care, which as it turns out, is the same rationale used to sell the moratorium. For example, in arguing for an extension of the moratorium a few years ago, Rep. Paul Thiessen (DFL-Minneapolis), said, “This is in a large part about controlling costs.” As one news account put it, ” “Supporters have argued that restricting new radiation therapy facilities could help hold down health care costs, because building more of the facilities could encourage more use of the expensive treatments.”
Yet it’s important to remember that laws that restrict consumer choice are frequently enacted to benefit because they restrict competition, and favor a few.
The National Conference of State Legislatures (NCSL), which has a short history of CON laws, traces their origins to a campaign in the 1960s by the American Hospital Association (AHA). The political/economic activity known as “rent seeking,” in which people seek government protection from their actual and potential competitors, explains AHA’s campaign very neatly. This sort of activity continued into the 1990s and beyond, as existing hospitals sought to limit the growth of physician-owned hospitals, which tend to offer specialized treatment such as cardiac care. Hospitals gained another victory last year, when Congress enacted a provision in ObamaCare that “could be the death knell for many doctor-owned facilities.” The economic justification: doctor-owned physicians threaten the economic viability of traditional hospitals. A cartel of incumbent hospitals, combined with politicians seeking to shore up the fiscal attractive of a new expansion of Medicaid and other government programs, combined to squash the new hospitals.
Even on their own claims, the merits of certificate-of-need laws are questionable. One estimate of CON laws in place nationally in 2002, for example, said they have a net cost of $110 million–not much, certainly, but clearly not a savings. One healthcare analyst adds, that CON laws “find virtually no cost-containment effects . . . If anything,CON programs tended to increase costs.” Maybe that’s why the Federal Trade Commission called for states to reconsider CON laws, concluding that they “pose serious anticompetitive risks that usually outweigh their purported economic benefits.”
Yet a moratorium goes even further than a CON law, which gives the decision of whether to establish a new facility over to some sort of appointed body. A moratorium, by contrast, eliminates the possibility of a new facility being built. In other words, Minnesota has taken a policy whose value is, at best, questionable, and used its most extreme version possible.