Reduce the cost of health, not just the price | Opinion
Too many North Carolinians do not have access to the medical services they need. One possible answer, as we’ve heard over and over again for over a decade, would be to expand Medicaid under the Affordable Health Act, with most of the spending to be borne by the (already heavily indebted) federal government.
This is not the only possible answer, however. By its own regulations, North Carolina restricts the availability of medical services and, therefore, inflates the cost of these services. Rather than looking for ways to redistribute this inflated cost to taxpayers, state policymakers should try to deflate it.
In a recent column on higher education, I emphasized the distinction between price and cost. If we say that the average university education is too expensive, which it most certainly does, you could suggest that we do more to protect students and their families from this cost by increasing state funding to public universities, for example, or by transferring student loan debt from private balance sheets to the (already heavily indebted) federal government.
Such a policy would reduce the price of education, not the cost. In fact, if we keep the price of a good or service artificially low by forcing third parties such as governments to foot more of the bill, its real cost may increase.
The same analysis applies to health care. The financial problem is obviously important. My own preference is to reform the tax treatment of health insurance by converting the current exclusion, however ineffective and unfair, into a set of risk-adjusted tax credits so that even low-income households can buy private plans in a competitive market, as proposed by various reformers and conservative institutions.
But focusing too much on how health care is funded distracts us from how health care is delivered. In North Carolina, we’re making it far too difficult for new suppliers to enter the market. We are crushing competition and innovation. As a result, we are making health care costs unnecessarily high.
Take the case of the Certificate of Necessity (CON) laws. They require hospitals and other providers to obtain state permission to open new facilities or add new services. As a new report from the John Locke Foundation, North Carolina’s CON laws are clearly out of step with current practice and common sense.
Of the 35 states that still have CON, our state’s rules are particularly strict. We are one of eight states to require state authorization slips for the six broad categories: hospital beds, non-hospital beds, emergency medical equipment, facilities, services, and transportation. When the American Planning Association counted CON rules on 26 purchases of different services, facilities, and equipment, only Vermont (all 26) and Hawaii (25) regulated more than North Carolina (23). .
James Bailey, professor at Providence College and visiting scholar at the Federal Reserve Bank of Philadelphia, reviewed empirical research on the effects of CON. Most studies have shown that, unsurprisingly, restricting the supply makes health care more expensive and more difficult to obtain.
In his new Locke report, Bailey wrote that CON laws cut hospital beds by 13%, hospitals per capita by 30%, drug treatment centers by 42%, and neonatal intensive care beds. by 49%. CON states also have longer wait times in emergency rooms. Not surprisingly, prices are also higher in CON states, by around 14% on average, although the effect on overall health care spending is somewhat tempered by the fact that fewer services are provided.
Could North Carolina Get Rid of CON Regulations Completely? Sure. Some did it decades ago. Others, like New Hampshire and Florida, have completely or nearly eliminated their systems in recent years.
But even if we simply made our CON laws more “normal”, reducing their scope and streamlining the regulatory process, it would give North Carolina residents better access to the medical services they need at a lower price – not by passing the cost on to taxpayers, but by using competition and innovation to reduce the real cost of providing services.
John Hood is a columnist for the Carolina Journal and author of the upcoming novel “Mountain Folk”, a historical fantasy set during the American Revolution. (MountainFolkBook.com).