Commentary: Repeal Vermont’s Certificate of Needs Laws (July, 2015)

By Rob RoperRob Roper

We need to lower the cost of health care in Vermont, and the state, dealing with a structural budget deficit, doesn’t have the capacity to raise more taxes. So, what can we do? One simple, cost-free solution is to repeal Vermont’s Certificate of Need (CON) laws.

What are CON laws? Basically, a way for the government to guarantee a monopoly (and artificially high profits) to a politically favored provider by denying potential competitors permission to provide services. In Vermont, for example, when Vermont Open MRI, wanted to provide imaging technology for one half to one third the price of UVM Medical Center, they had to first convince the Green Mountain Care Board there was a ‘need’ for cheaper, faster, more convenient MRIs. (Duh!)

Why should anybody have to ask such permission, let alone be forced to waste considerable time and money getting it? Why not just let folks hang out a shingle? If there is a need, the customers will come. If there is not a need, the imaging center, or the clinic, or whatever will go out of business. Not good for the investors, but no harm to the taxpayer or the patients.

Other stories of cheaper, more convenient healthcare alternatives breaking into the market include ClearChoiceMD. When this group wanted to open a number of low-cost, convenient urgent care centers around the state, their competition insisted that they get a CON. When it became clear these clinics were not subject to CON laws, legislators, rather than encourage entrepreneurial, creative problem solving, enacted a number of regulations making it more difficult for ClearChoiceMD to operate.

Most recently, Dr. Peter Gunther wrote a piece that appeared in a number of venues about some doctors needing a CON to open a Green Mountain Surgery Center, citing National data that shows “the costs of procedures at such community-based centers are 45-60 percent less than in a hospital setting.” Please! Go for it! Why would anyone object, and why would we keep laws on the books to obstruct such ventures?

Currently, thirty-six states and D.C. have CON laws, regulating, on average, fourteen healthcare services, devices and procedures, but as few as just one (Arizona and Ohio), and as many as thirty – you guessed it – Vermont! Yes, we are the worst.

The ostensible reason for CON laws is that giving a government enforced monopoly to a favored provider allows that provider to over-charge some patients (who would otherwise go elsewhere) so that the unnaturally high profits can be used to subsidize indigent care services. This is bad policy on so many levels.

First, it is a hidden, unjust “tax” on some medical patients. The government has the power to tax, but not a hospital. If the government wants a hospital to provide care for patients who cannot otherwise afford it, the government should pay for it, not the unlucky guy who happens to be in the next bed. This is not fair, nor does it make sense except for the fact that it allows politicians to escape accountability for what is a massive transfer of wealth.

Second, this creates a baffling lack of transparency. It’s a joke to ask how much anything at a hospital costs today. An Advil? An appendectomy? Nobody can tell you because one person is being double or triple charged while another is skipping out on the bill. It is an impossible scenario for regulators to effectively monitor and keep players accountable. Which gets us to the last point….

It doesn’t work. A recent study by the Mercatus Center concluded, “We do not find evidence associating CON programs with an increase of indigent care. The effect of CON programs on indigent care shows no clear pattern using either direct or indirect measures of indigent care.”

What they found CON laws did to is decrease the availability of services for patients, everything from hospital beds, to MRIs to CT scans… whatever service requires a CON, there is less of it in the marketplace. That means longer waiting periods and higher costs for patients.

If you want to lower the cost of anything, the goal should be to increase supply. CON laws are in place for only one reason – to restrict supply. They should be repealed by the legislature, a serious healthcare reform move that would cost taxpayers nothing to implement, and could lower the cost of health care over the long term.

- Rob Roper is president of the Ethan Allen Institute.

{ 2 comments… read them below or add one }

Doug Richmond, Underhill August 3, 2015 at 12:42 pm

Certificate of Need.
While having my eyes done, cataracts and new lenses, in a private clinic, I talked to Dr Juli Larsen about her “CON job”. It was excruciating to hear what she had to go thru, time and money galore. Her biggest opponent, of course was Burlington’s “We own health care” Hospital. They even threatened to not treat her patients, if needed. She can do twice as many operations, for half as much money, as the hospital blob on the hill. Many Doctors will no longer do Cataracts now because of the impossibly low Medicare/medicaid payments. She still can, due to her efficient business model. Highly recommend Dr Juli Larsen!!

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Jim Bulmer August 4, 2015 at 5:17 pm

Seems we have a cancer in the legislature since these folks are responsible for creating this one of many, many messes. The cure is simple, through the bums out on election day! Vermonters, the choice is yours to make. I don’t care if you are a Republican, Democrat, Socialist or Libertarian, these guys are NOT concerned about you. All they care about are their buddies.

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