Abstract
Aims
Most US states use certificate-of-need (CON) programs in an attempt to slow the growth of health care spending. The objective of this study is to evaluate how CON in fact affects health care spending.
Subjects and methods
With 1980–2009 state-level data on spending from the National Health Expenditure Accounts, this article uses fixed-effects regressions to evaluate how the presence and scope of state CON laws affect these spending outcomes.
Results
This article estimates that CON laws lead to a statistically significant 3.1% increase in total spending and finds that this increase is primarily driven by spending on physicians.
Conclusion
Rather than decreasing health care spending as intended, it appears that CON laws actually increase it. To the extent that policy makers wish to restrain health care spending, they may wish to repeal these laws.
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Notes
See Koopman and Philpot (2016) for more information.
This table does not represent an exhaustive search of the literature; see Mitchell (2016) for a more thorough review of the literature.
Some of these distinctions are difficult to make; in particular, many physicians work inside hospitals. In this case, spending is counted under physician services if the physicians bill independently from the hospital but under hospital spending if not.
For instance, the instruments used by Lanning et al. (1991) are state-level measures of Medicaid expenditures per capita, budget revenues per capita, percent of insurance premiums that are commercial, hospital beds per capita, percentage of beds in for-profit hospitals, ideology, and the party of the state government. These variables could all affect total spending in ways other than by affecting CON laws, violating the exclusion restriction; this is especially clear in the case of Medicaid spending, which adds directly into total spending.
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Acknowledgements
Thanks to Eleanor Lewin, Michael Kotrous, Anna Chorniy, Mohamad Elbarasse, Matt Mitchell, Tom Hamami, Harry David, participants in the Creighton Business Economic Environment and Policy seminar, the Association of Private Enterprise Education and the American Society of Health Economists 2016 meetings and the International Health Economics Association 2017 for helpful comments. Thanks to the Mercatus Center for financial support and helpful comments.
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Bailey, J. Can health spending be reined in through supply restraints? An evaluation of certificate-of-need laws. J Public Health (Berl.) 27, 755–760 (2019). https://doi.org/10.1007/s10389-018-0998-1
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DOI: https://doi.org/10.1007/s10389-018-0998-1