Georgia—along with more than 30 other states—requires any entity that wishes to open a new medical facility or expand an existing one to demonstrate that there is a bona fide need for the services to be provided by the facility in its area.
If the government deems it as unnecessary it can deny it an operating license. These laws are called Certificate of Need (CON) laws. In effect, such laws give established medical providers the unique power to challenge investments by would-be competitors simply by alleging there’s no need for additional services. Both the Georgia State Assembly and Senate passed bills loosening restrictions in the state’s Certificate of Need Laws.
While the Governor should sign these changes into law as a step in the right direction, a full repeal of the CON laws would be the best possible outcome. In such a scenario, Georgia would join the twelve states that have already repealed their CON laws or allowed them to expire. Georgia’s existing CON laws epitomize an antiquated economic perspective that effectively suppresses competition and boosts prices by ceding power to the government to determine how the healthcare market should function.
The state legislature is considering the abolishment of these CON laws, and with good reason: Doing so would almost certainly reduce healthcare costs in the state. A recent report published by the Georgia Public Policy Foundation found that hospital costs per person are over twenty percent higher in states with Certificate of Need requirements, and that states that repeal CON requirements see a significant percent decrease in costs per person soon after its abolishment.
Certificate of Need laws deter investment in medical technology and infrastructure, and the resultant scarcity of medical services in certain regions increases prices. CON laws make adding beds or investing in a new MRI machine effectively subject to government approval which causes their adoption to be slowed down by bureaucratic red tape. Certificate of Needs laws also appear to constrain healthcare services: For instance, states that ended their CON rules observed a 30% rise in CT scans, which suggests that a lack of investment had been causing these services to be rationed to some extent.
The healthcare constraints engendered by Certificate of Need laws are invariably borne by the most vulnerable communities–such as the rural and minority groups–and results in them having less access to specific types of care or being forced to travel inordinate distances for basic care. It’s clear that these laws have impacted Georgia residents: Data from the Kaiser Family Foundation puts Georgia near the bottom for primary care needs met, and about one-third of Georgians live in an area with a primary care shortage. The lack of health resources significantly impacts the health of Georgians. For instance, the maternal mortality rate for Black women in Georgia is 66 deaths per 100,000 live births, compared to 43 for white women.
This disparity highlights the urgent need to address this issue on multiple levels– ending restrictions for healthcare investments is one step towards addressing this disparity. Certificate of Need laws effectively provide a shield from competition for existing healthcare providers, which motivates intense lobbying efforts to keep such laws in place. The outdated logic behind these laws can be compared to older policies that granted monopolies to data providers for the sake of “efficiency” but resulted in consumers paying much more for internet access with fewer options.
Just as technology has shown the enormity of the opportunity cost of such monopolistic models, healthcare is ripe for a similar transformation. It is time to retire the Certificate of Need laws in Georgia and elsewhere. The state should cultivate an environment that promotes competition, reduces costs, and improves healthcare access for its citizens, especially for those who need it the most.
Hassan Tyler is an analyst with the Savings and Retirement Foundation