Do Certificate-of-Need Laws Limit Spending?

In 35 states and the District of Columbia, certificate-of-need (CON) laws require healthcare provid­ers planning to offer or expand certain services to first prove to a state regulator that their commu­nity “needs” the particular services in question. These laws are controversial. Many experts question their effectiveness and worry that they undermine competition to the detriment of patients.

Still, proponents of these laws believe that they rein in healthcare spending. A new study from the Mercatus Center at George Mason University provides a comprehensive review of the theoretical and empirical research on the relationship between CON laws and spending. After analyzing the theoretical arguments and reviewing 19 academic studies spanning 40 years, a clear lesson emerges: CON laws restrict competition in health care, driving up the cost of obtaining medical services.

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