NCPA - National Center for Policy Analysis


February 12, 2010

Holly Springs, N.C., hoped to get a new hospital.  The mayor was on board.  Investors were ready to build.  But the project was halted because of a law, appropriately called a CON law.  CON actually stands for "certificate of need."  In other words, to build a hospital, you have to convince state regulators that the hospital is needed, says FOX News commentator John Stossel. 

It's one more example of how America does not have a free market in health care.  Established hospitals basically can say no to competition.  The established hospitals are the folks with the best government connections, so when they say "This hospital isn't needed! It will duplicate services and raise costs!" regulators just go along, says Stossel. 

  • President Nixon signed the CON law because he thought America had too many hospitals.
  • He thought decreasing the number would lower health care costs.  

But that was ridiculous economics because limiting the number of suppliers raises costs, explains Stossel: 

  • Fourteen states have repealed their CON laws, but 36 states still have them.
  • And the public rarely complains, because the public seldom even knows about this.
  • The public seldom pays much attention to any health care costs, because we usually don't pay our own bills.
  • When third parties like the government or insurance companies pay, higher costs generally follow. 

According to Nick Gillespie of "There's something sick in a system where we are quicker to change vets than we are to change general practitioners or surgeons but it's partly because when you pay for Fido's care, when you pay for Kitty's care, you're paying directly out of your pocket and as a result you really watch your dollars." 

Good point, says Stossel.  Pet owners shop around, look for better prices, or convenience.  That forces vets to cater to them.  As a result, many animal hospitals are open 24/7 and vets even give their cell phone numbers to clients.  Vets embrace competition because there are no CON laws for animal hospitals.  Vets know a competitor can open right across the street.  That leads vets to work hard at pleasing their clients.  According to Stossel, animal owners have told him that they wished they could get the choices in medical care that their pets get. 

Source: John Stossel, "The 'Con' of American Hospitals," FOX Business, February 9, 2010. 

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