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CONned again: Raising NH health care prices

April 06. 2013 10:27PM

Back in 1979, when the belief that government could and should beneficially control the prices of goods and services was popular, New Hampshire passed a Certificate of Need (CON) law. It forbade hospitals and other health care providers from buying expensive new equipment, or offering certain new services, without prior state approval.

The law "promotes rational allocation of health care resources in the state," it stated. Rational allocation. By the state. Let that sink in.

The next year, Jimmy Carter was defeated in a landslide, and in the years that have followed the public and policymakers have learned a great deal about economics and price controls. Here is what some of the official U.S. government studies have found.

A 1988 Federal Trade Commission study "finds that hospital costs are not lower in states that subject a larger proportion of proposed hospital expenditures to CON review. The study thus finds no evidence that CON programs have led to the resource savings they were designed to promote but rather indicates that reliance on CON review may raise hospital costs."

In 2004, the FTC and the U.S. Department of Justice revisited the CON issue. "The Agencies believe that, on balance, CON programs are not successful in containing health care costs, and that they pose serious anti-competitive risks that usually outweigh their purported economic benefits," the report concluded. "Market incumbents can too easily use CON procedures to forestall competitors from entering an incumbent's market."

(The 2004 study and several others are summarized nicely in a report issued last year by the Josiah Bartlett Center.)

Educated by such research, New Hampshire legislators voted in the last session to repeal the state's CON law. Incredibly, the state House of Representatives voted on Wednesday to reinstate the law before the positive effects of its repeal could be felt.

Why would New Hampshire, having just abolished a law that restricts the supply and increases the cost of health care services, bring it back? There are only two possible reasons. One, large hospitals, which benefit from the higher prices and reduced competition CON laws generate, have pressured politicians to revive the law. Or two, politicians don't want to give up the power CON laws give the state.

The CON law revival was part of the House budget. The Senate should strike that part and make clear that it will not find its way into any committee of conference report.

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