Kentucky CONned itself out of a billion dollars of health care investment | Opinion
A new Americans for Prosperity Foundation (AFPF) report finds that Kentucky has denied itself and its citizens over a billion dollars worth of health care investment. The reason for this unfortunate economic decision: the state’s own certificate of need (CON) law.
A CON is a government-mandated permission slip that providers are required to secure before establishing health care facilities and caring for patients. Currently, 35 states have CON laws, but many are moving to reform and repeal their programs. In recent years, Georgia, Tennessee, and Florida have significantly reformed their CON programs to foster health care innovation in their states. In 2023, South Carolina went so far as to repeal its CON law entirely.
In 1972, Kentucky legislators passed their CON law at the behest of the federal government who threatened to withhold federal funds from noncompliant states. The theory behind this directive was that rising health care costs could be controlled by preventing providers from offering redundant services in the same proximate areas. The results didn’t pan out and realizing their CON experiment failed the federal government reversed their mandate in 1987 and every presidential administration since — both Democratic and Republican — has called for states to repeal their CON laws.
The federal government’s guidance has been ignored and Kentucky’s CON law now regulates more health care services, facilities, and equipment than 45 states. And Kentuckians are feeling the weight of this regulatory burden. It is estimated that residents would save an average of $216 a year in health care spending if there were no CON regulations. CON laws overly restrict the health care market, leaving demand for services much higher than the available supply of care. Researchers have projected that Kentuckians would have access to 49 more hospitals if the market wasn’t constrained by CON laws and could actively respond to the need of patients.
Like every state that has a CON program, Kentucky heavily favors health care providers that are already established in the market. These established businesses have an incredible advantage over providers who are trying to enter the market through their so-called “competitor’s veto.” This veto power allows incumbent businesses to challenge their opposition’s CON applications through costly litigation until they are denied by the state board or inevitably withdrawal from the process.
The “competitor’s veto” is antithetical to the principles of a free market. Imagine if a local coffee shop was required to get permission from Starbucks to open a storefront and serve customers. No reasonable person would accept this sort of protectionism in any other market and health care should be no exception.
Through the decades-long CON regulatory regime, more than a billion dollars of proposed health care investment has been rejected in Kentucky — denying patients greater choice and access to care, and health care entrepreneurs a livelihood independent of large health corporations. One can assume that the true cost of the state’s CON law is even greater than this staggering number as many entrepreneurs are discouraged from ever applying for this permission slip due to the high barrier to entry and high likelihood that they will be denied.
Kentucky residents pay for CON laws through longer wait times, higher health costs, and lower quality of care. Despite the negative effects on patient care, incumbent businesses continue to lobby for CON laws to protect their entrenched economic interests. CON laws effectively ration health care for the economic benefit of these providers.
For the health of Kentucky’s residents and the prosperity of the state’s economy, the CON regime must be upended. CON laws have no place in a free market.
Heather LeMire is the state director of Americans for Prosperity-Kentucky and Sofia Hamilton is a policy analyst for Americans for Prosperity.