At RealClearHealth Andrew Langer remarks on something I’ve been complaining about for decades—certificates of need and other forms of cronyism is health care:
Generally, the goal of cronyism is simple: A large actor in an industry uses its power and influence to craft a public policy that feathers its own nest by either punishing competitors or keeping them out of the marketplace entirely. The public loses in these instances, sometimes with serious impact.
This is especially true in the realm of health care. Certificates of need are one example. New medical businesses must prove to some governmental entity that such a venture is satisfying some public need not currently being met by existing health systems.
But who gets to weigh in on whether a venture is necessary? Existing health businesses! Of course, their impetus is to protect their market share, so they use the certificate system to keep competitors at bay. The public loses as a result.
We’re also seeing cronyism in the prescription drug realm. Name-brand pharmaceutical manufacturers, ably represented in Washington by Pharma, are working overtime to keep generic drug manufacturers from bringing their products to the marketplace.
If there is a clearer example of the old wisecrack about two wolves and a sheep voting on what’s for dinner than certificates of need, I don’t know what it might be. And I wish there were a greater consciousness that patents, a presumably temporary monopoly, are not a law of nature or a right but a benefit conveyed by the government on “inventors” for the public good, not to ensure that big companies’ profits are larger. Combining two drugs both of whose patents have expired and patenting the resulting, obviously derivative product is an obvious perversion of the system. A substantial percentage of all pharmaceutical patents fall into just that classification with minimal if any innovation or therapeutic benefit. “Evergreening” should be banned.
It’s almost like hierarchy restricts liberty.
The way the certificates of need worked in Illinois, was that the health care facility got the certificate if it contracted with certain politically-connected construction companies to perform the work. The construction company would then give a kickback to political insiders.
This is a funny bit from the FBI sting:
“The FBI agents told me they had never eaten better in their lives at the restaurants I was taking them to for surveillance! Unfortunately, sometimes I received some unwanted advances. One man, trying pick me up at one restaurant, asked if I was alone, although there were more than 20 agents in the room at the restaurant who would be listening to every word he said!”
http://www.fraud-magazine.com/article.aspx?id=344
The story on CONs is much more nuanced, reminding us that simple econ 101 rules don’t always work in real life. They were intended to contain prices. Didn’t work. States got rid of them thinking to lower costs. Didn’t work. There just isn’t much evidence that they do very much positive or negative.
W imposed them in PA, then took them away. I was here when we stopped using them and the short term effect was an increase in spending. Many dinky hospitals decided to boost their bottom lines but adding a heart program. We suddenly had a lot of small places doing 30-50 hearts a year. Outcomes were bad and it was costly. Then the government required that the government (evil government, Boo!, Hiss!) required that programs publish their results. Those small programs melted away. Even then it is still complicated. Some of those small places had to improve the quality of their ICUs to manage those heart patients, and some of those places have maintained those improved ICUs.
Steve
I don’t believe that’s true. I believe they were intended to control spending by reducing redundancy. If that were related to prices, it might have worked but it isn’t.
Sorry, mistyped. They were intended to control spending and getting rid of them was also supposed to reduce spending. (Long day.)
Steve
I was sitting in the office of the director of engineering for a major medical equipment manufacturer when Congress enacted the law that got the ball rolling on CONs back during the Nixon administration.