Study finds NC health care regulations drive up costs

North Carolina’s health care regulations drive up medical costs by restricting the supply of hospitals and services, according to a research paper issued Thursday by a pair free-market advocates at George Mason University.

Their study says North Carolina’s certificate-of-need, or CON, program is one of the most extensive in the country. The state’s CON program requires regulatory approval for the creation or expansion of 25 devices, services and procedures, including hospital beds, MRIs and psychiatric services.

Only two other states and the District of Columbia regulate more services. Overall, 32 states have less restrictive CON programs, and 14 states have no CON requirements, the study says.

The traditional rationale for CON programs is to prevent health care systems from getting into a competitive arms race and over-building facilities. But GMU professors Christopher Koopman and Thomas Stratmann contend the policy has the opposite effect, inflating health-care costs as much as 5 percent.

The study concludes that North Carolina’s CON program could have resulted in as many as 12,900 fewer hospital beds, as many as 49 fewer hospitals offering MRIs and as many as 67 fewer hospitals offering CAT scans.

The study does not analyze other factors affecting health care costs, such as competition among hospitals, availability of doctors, market dominance by large health insurance carriers, or overall patient health.

Koopman is a scholar at GMU’s Mercatus Center, a free market think thank, and program manager at GMU’s Project for the Study of American Capitalism. Stratmann is a scholar at the Mercatus Center and a professor of economics at GMU.