Testimony on Alaska Bill SB 26 – To Repeal the State’s Certificate of Need Law

By ROGER STARK  | 
May 14, 2021
POLICY NOTES

Key Findings

1. In the 1960s and 70s states and the federal government imposed Certificate of Need (CON) laws to limit the number of hospital beds.

2. The purpose of the restrictive laws was to try to use central planning to make health care more affordable.

3. By the early 1980s it was clear the idea didn’t work, and the federal government and many states repealed their CON laws.

4. In 2020 the onset of the COVID health crisis led states, including Alaska, to suspend their CON laws to make sure enough hospital beds were available to patients.

5. In 2021 Alaska Senate Bill 26 was introduced to make the suspension of the state’s CON law permanent.

6. WPC Senior Fellow Dr. Roger Stark was invited to provide expert testimony.

7. His research showed that CON laws restrict patient access to health care services and do not make care more affordable, as its advocates claim

 

On April 23, Dr. Roger Stark was invited to give expert testimony before the Senate Labor and Commerce Committee of the Alaska state legislature on SB 26. The statement he provided is below.

Introduction

Brief history of Certificate of Need laws New York state passed the first Certificate of Need law in 1966. Businesses, insurers, consumers and providers came together to study the need for providing additional hospital beds. The group determined there was a surplus of beds and recommended that state officials restrict further hospital expansion with special legislation. The law made it illegal for health care planners to add beds to an existing hospital or to treat patients in a new facility without first gaining permission from state officials.

The federal government became involved in 1972 when Congress amended the Social Security Act to require all states to review new health care construction projects that exceeded $100,000 in value. Failure to comply with this rule would result in the federal government withholding Medicare and Medicaid money from the offending state.

In 1974, because of exploding costs in health care, Congress passed the National Health Planning and Resource Development Act (NHPRDA). This law established a comprehensive federal health care CON regulation, with the penalty for a state’s non-compliance being forfeiture of federal Medicare and Medicaid dollars. 

The policy goals of NHPRDA were two-fold – to limit the number of health care facilities available to patients in a specific geographic area and, because of more volume and higher payments directed to existing facilities, provide more charity care at those hospitals and clinics allowed to operate in an exclusive area.

States were encouraged to establish their own CON programs and officials in all 50 states complied.

By 1982, however, the federal government realized the national CON law was not saving money, but it was restricting care and limiting available health services for patients. No increase in charity care occurred. Recognizing this failure, Congress repealed the federal law in 1987 and subsequently, 12 states repealed their individual CON laws
 

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