Why Health Care in Michigan Is Expensive

Imagine a law that gave a government board the power to decide whether or not new grocery stores could be built, and whether existing ones could expand or install new equipment. For example, a law that forced the Meijer’s near your house to go through a complex and lengthy bureaucratic process before it could add some new freezer cases, and prove the new capacity wouldn’t drive up overall grocery prices.

Sound nuts? Welcome to the bizarre world of Michigan’s health care facility “Certificate of Need” law, which, according to the nonpartisan Michigan Citizen’s Research Council, "prohibits identified health facilities/services/equipment from being initiated, upgraded or modernized, expanded, relocated or acquired without a certificate from that state determining (it) is needed…”

Scholarly studies back up the common sense conclusion that we should get rid of it. For example, here’s how a 2004 report from the U.S. Department of Justice and Federal Trade Commission summed it up:

“Many have criticized CON programs for creating barriers to entry in the health care market. As noted previously, CON regimes prevent new health care entrants from competing without a state-issued certificate of need, which is often difficult to obtain. This process has the effect of shielding incumbent health care providers from new entrants. As a result, CON programs may actually increase health care costs, as supply is depressed below competitive levels.”

Using a cautious formulation typical of academics, here is one scholarly report’s conclusion about Michigan’s CON law:

“There is little evidence that Michigan’s CON results in a reduction of costs, and some evidence to suggest the opposite.” (C.J. Connover and F.A. Sloan, citation in the CRC report above.)

Federal laws are responsible for many of the dysfunctions in America's health care system, but state legislatures, including Michigan's, have also contributed mightily. Ours is one of 35 states whose legislators have fallen for the CON.

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