After three years of pandemic, overloaded hospitals and worsening health outcomes, it can be difficult to feel optimistic about our health care system, but last week, the S.C. Senate approved legislation that could go a long way toward providing the access to affordable, high-quality care that South Carolinians need.
The measure would repeal most of the state’s certificate-of-need program, which requires health care providers, no matter how qualified, to obtain approval from a board of state regulators before expanding services or building new facilities in 18 medical areas, including obstetric services, radiation therapy, psychiatric care and ambulatory surgical centers.
While certificate-of-need regulations were originally intended to prevent the duplication of medical services and limit unnecessary spending, research overwhelmingly shows that these laws not only fail to achieve these things but actually harm patients and taxpayers.
In the 1970s, Congress began pressuring states to establish certificate-of-need programs by threatening to withhold federal funds if they didn’t. South Carolina adopted its first regulations in 1980. But in 1986 — with mounting evidence that the laws were backfiring — federal incentives to maintain the programs were eliminated. In the decades since, 15 states, representing about 40% of the U.S. population, have scrapped their regulations, and many have narrowed their scope.
And for good reason. Navigating the certificate-of-need process can take years, at a cost of tens or even hundreds of thousands of dollars in consultant fees and legal expenses. This inherently favors large corporations with the financial resources to sustain a prolonged regulatory battle. Moreover, existing providers — eager to discourage potential competitors — can cause delays by raising frivolous objections or filing baseless appeals.
So by stifling competition and preventing the health care sector from responding to the needs of patients, South Carolina’s program limits access to services, drives up prices and jeopardizes care.
Antitrust officials at the Federal Trade Commission and the U.S. Department of Justice have long argued that such rules are counterproductive. The vast majority of scholarly research supports these conclusions. States without certificate-of-need programs were also much less likely to run out of hospital beds during the COVID-19 pandemic. A review of more than 90 academic papers concluded that “the expected costs of CON exceed its benefits.”
About 2 million South Carolinians live in areas designated as having too few primary care providers, mental health specialists or dentists. According to a recent analysis by our Mercatus Center colleague Matthew Mitchell, without the certificate-of-need requirement, South Carolina could see 34 additional hospitals enter the market, including nine in rural regions. This expansion is badly needed.
The study also predicted that as more health care facilities become available, travel times would shrink, annual per-person health care spending would drop by about $200 and mortality rates from conditions such as heart attacks and pneumonia would decline.
The evidence on these policies speaks for itself.
Vitor Melo is a doctoral candidate at Clemson University and a postdoctoral fellow with the Open Health Project at the Mercatus Center at George Mason University. Liam Sigaud is a research assistant with the Mercatus Open Health Project.