As part of its important efforts to address the opioid crisis, New Jersey had to enact a law last month exempting certain treatment facilities from state regulations restricting their development.
The little noticed law exempted “inpatient special psychiatric beds used solely for services for patients with co-occurring mental health and substance use disorders” from the need for pre-approval by state bureaucrats.
At the start of the year, Gov. Chris Christie and the Department of Health said New Jersey needs 864 more such beds. Atlantic, Cape May and Ocean counties need 343, more than double their existing 163 mental health/addiction beds.
Getting the law written and passed delayed the creation of these beds to serve victims of the opioid epidemic. Maybe there would have been less of a shortage of such beds had they not required advance approval of state health planning agencies.
The law, unanimously passed by the Legislature and signed by the governor, seems like a tacit admission that this important care is best left to the health care marketplace. We wonder if hospitals and health systems should be too.
New Jersey has been requiring those who would provide major new health services and facilities to apply for and get a certificate of need from the state since 1971, according to the National Conference of State Legislatures.
Believe it or not, in the 1960s government officials and even some economists thought that having too many health care facilities would drive up the cost of care — that competition would lead to higher prices. They thought that since people typically didn’t choose where they got care, providers would simply charge them more to cover the cost of excess facilities and equipment.
The federal government in 1974 required states to set up health planning agencies to screen proposals for health capital projects. Soon, 49 states had enacted certificate of need laws, leaving it to state officials to decide where and what kinds of health care should be provided. That got them additional federal funding.
By the 1980s, federal lawmakers realized certificate of need programs weren’t reducing the cost of health care, and in 1986 the federal program was abolished. Subsequently 15 states — including Pennsylvania, California and Texas — ended their programs, allowing the provision of care facilities and services to be determined by popular demand for them and the interest of organizations and institutions in providing that care.
Officials in 35 states have kept the power to prohibit the entry or expansion of care facilities. The American Health Planning Association still says that helps limit health care spending.
But a report last fall by the Mercatus Center of George Mason University said prices for care and overall health care spending are higher in states such as New Jersey that have kept governmental control of the market through certificate of need programs.
Other arguments made in favor of such control also haven’t panned out. The programs were supposed to ensure that rural areas have hospital access, but the coverage is better in states that have abandoned certificate of need. Another Mercatus study found certificate of need regulation is associated with lower-quality care.
One obvious problem with certificate of need is that it opens the door to political influence on what care is available and where people can get it. Another is that government is notoriously bad at operating health systems, as shown by the VA hospitals scandal, so substituting its decision-making for that of providers and patients is dubious at best.
New Jersey already had granted 27 exemptions from certificate of need control (28 now with beds for mental health/substance disorder care), including for example dementia care homes and community-based primary care centers,
State officials should take a close look at the 15 states that have dropped certificate of need and how much they have benefited from doing so, then seriously consider joining them.