Certificate of Need Laws:
A Racket That Protects Monopolies and Strangles Innovation
Certificate of Need (CON) laws represent one of the most egregious examples of government intervention distorting market forces and restricting individual freedom in our economy. These regulations, which persist in 33 states, demonstrate the harmful consequences that inevitably follow when bureaucrats, rather than consumers, determine the allocation of healthcare resources.
The economic facts are straightforward and undeniable: When the government creates artificial barriers to entry in any market—whether healthcare or hamburgers—the results are entirely predictable: reduced supply, higher prices, and the protection of entrenched interests at the expense of consumers and innovators.
Let me state this principle unequivocally: No individual should need permission from government bureaucrats—much less from their competitors—to offer a service that consumers might freely choose to purchase. Such restrictions violate the fundamental principles of economic liberty, upon which prosperity depends.
The Empirical Evidence Against CON Laws
The data confirm what economic theory predicts: artificially restricting supply while demand remains constant or grows inevitably drives prices up and reduces access to care.
• The Mercatus Center found that CON laws increase healthcare spending by 11% in states where they exist.
• A 2017 study showed that CON states have 30% fewer hospitals per capita than non-CON states, reducing access and consumer welfare.
• A National Bureau of Economic Research (NBER) report concluded that CON laws limit the number of rural hospitals and restrict critical services such as MRIs, CT scans, and outpatient surgeries, benefiting large hospital systems at the expense of patients.
Proponents of CON laws conveniently overlook that competition is the most effective regulator of quality and price ever devised. When providers must compete for consumer dollars, they have strong incentives to improve efficiency, innovate, and respond to patient needs. The bureaucratic alternative substitutes political calculation for consumer sovereignty, with predictably inferior results.
CON Laws: Designed to Protect Monopolies, Not Patients
The apparent paradox of CON laws—supposedly designed to control costs yet demonstrably increase them—is no paradox when viewed through the lens of public choice economics. These laws primarily serve politically powerful hospital systems that benefit from reduced competition.
• In New York, North Carolina, and Virginia, independent physicians face years of delays or outright denials for CON approvals, while large hospital systems easily sail through the process.
• In South Carolina, after the repeal of CON laws in 2023, independent surgery centers and new medical facilities rapidly emerged, demonstrating that the barriers had been political, not economic.
• The Texas, Arizona, and California healthcare markets—where no CON laws exist—flourish with strong independent healthcare sectors, more significant innovation, and lower prices.
This is not about preventing “unnecessary duplication.” It is economic protectionism, plain and simple.
The Market vs. Bureaucratic Control
Proponents of CON laws often claim that healthcare is different and requires special regulation. This argument misunderstands both economics and human action. While healthcare decisions have unique considerations, the laws of supply and demand, entrepreneurial discovery, and competitive discipline apply just as much here as in any other sector.
The actual market failure isn’t excess competition—it’s regulatory capture. Hospital associations lobby for these laws because they insulate them from competition, allowing them to inflate prices and limit patient options.
The Real Costs: Higher Premiums, Lower Wages, Less Access
CON laws impose a hidden tax on every citizen, employer, and government program. Their consequences are far-reaching:
• Health insurance premiums in CON states are significantly higher than in non-CON states, as restricted competition forces insurers to pay hospital-inflated prices.
• Employers in CON states struggle with rising healthcare expenses, which reduces wages and job growth.
• The inefficiency created by CON laws diverts resources from productive uses, harming economic growth and placing the most significant burden on low-income patients.
The Solution: Full Repeal, Not Reform
The only solution is complete repeal. We do not need incremental reform or adjustments—we need a free market where physicians and healthcare entrepreneurs can build facilities based on demand, not bureaucratic approval.
Those who fear the consequences of repeal misunderstand how markets work. No rational investor builds facilities where demand does not exist, just as restaurateurs do not open new locations where customers are scarce. The market discovery process is far superior to any central planning committee at allocating resources.
The Choice: Consumer Sovereignty or Government Control
We do not face a choice between regulation and chaos. We face a choice between political control and consumer sovereignty. History has repeatedly demonstrated which approach better serves human needs and fosters innovation.
It is time to abolish Certificate of Need laws and allow freedom to work its creative magic in healthcare—as it does in every other sector of our economy.
-Rojas out