Healthcare Favoritism

Currently in the US, 35 states and the District of Columbia prohibit entry or expansion of healthcare facilities through “certificate-of-need” (CON) programs. These laws, which require government permission before a facility can expand, offer a new service, or purchase certain pieces of equipment, were enacted in the belief that restricting entry would lower health care costs, increase availability of these services to the poor, and improve hospital quality.

These regulations were initially enacted under the theory that unregulated market competition would drive medical providers to overinvest in facilities and equipment, raising the cost of medical care. However, Mercatus research on certificate-of-need laws finds that these regulations do little to increase access to healthcare for the poor, but they do indeed succeed in limiting the supply of healthcare services and are associated with lower hospital quality relative to non-con states.