Healthcare

Failed policies inflate healthcare costs in Maine

on

One of Maine’s most pressing public policy challenges is controlling the cost of healthcare. In 2009, the most recent year for which complete data is available, Maine’s per capita healthcare expenditures ranked 5th highest in the country, up from 9th in 2000 and 31st in 1992.

It is no coincidence that the rise in our healthcare expenditures relative to other states occurred as the government sought to tighten its regulatory control over the healthcare sector through Certificate of Need (CON).

CON laws mandate that medical providers seeking to add or expand additional facilities and services must first obtain approval from government regulators rather than hospital administrators or other healthcare professionals.

These policies originated with the concept of Roemer’s Law, the idea popularized by the phrase, “a built bed is a filled bed.” In other words, the claim is that supply drives demand in healthcare, and a medical provider need only expand its capacity in order to attract more patients and generate more revenue.

This notion has been widely discredited. For example, Roemer’s Law predicts that hospital occupancy rates would consistently approach 100 percent. Yet between 1970 and 2000, national hospital occupancy rates dropped from 77 percent to 67 percent.

In 1980, shortly after CON regulations became popular in the United States, a paper was published in the Michigan Law Review in which the authors lay out the historical roots of Certificate of Need. In the 1960s, large hospitals began to worry that suburban hospitals and specialty clinics might attract some of their most lucrative patients. To avoid that unwelcome competition, hospitals pushed for CON regulations, using a cost-saving rationale as a pretext.

Supporters of CON claim that it protects small, rural hospitals from being pushed out of the market by Maine’s largest providers. Yet large hospitals are rarely denied CON applications, and small, entrepreneurial providers are most likely to lack the technical and legal resources to navigate the CON process.

If anything, CON protects large hospitals by keeping new competitors out of the market. In 2007, for example, lnSight Premier Health was denied a CON to operate a CT scanner in Scarborough, despite evidence that it could have offered patients in the area shorter wait times and lower prices.

Why? Largely because Mercy Hospital objected to the project. This is just one example of powerful healthcare entities using the CON process to limit competition and maintain their customer base. These laws prevent current providers from searching for innovative, cost-effective healthcare options.

Additionally, limiting the supply of services does not cut costs. CON laws disrupt the market and cause prices to inflate. Study after study demonstrates that CON regulations allow incumbent healthcare providers to charge higher prices than would be possible under more competitive conditions. As a result, per capita healthcare spending in CON states is 11 percent higher than in non-CON states.

This legislative session, Rep. Deb Sanderson, R-Chelsea, has introduced LD 482, a law that would repeal the Maine Certificate of Need Act of 2002.

Maine should join the growing number of states – including, most recently, New Hampshire – in repealing this unnecessary and harmful program.

Take action today and contact the Health and Human Services Committee in support of LD 482.

About Matthew Gagnon

Matthew Gagnon, of Yarmouth, is the Chief Executive Officer of the Maine Heritage Policy Center. Prior to his tenure at MHPC, Matt spent eight years working in national politics in Washington, D.C., most recently as a senior strategist for the Republican Governors Association. A Hampden native, Matt is a nationally recognized political strategist and communicator.

Recommended for you

Comments