Virginia

This One Weird Trick Could Improve Medical Care

Virginia should eliminate Certificates of Public Need.

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Say you want to open a new grocery store. You do the market research, scout a location, develop a business plan, line up investors, get all the local zoning and other permits you need, and figure you have a decent shot. Then the state says you have to jump through one more hoop. You have to prove that the area actually needs a new grocery store. Oh, and one more thing: The other grocery stores nearby will have an opportunity to sound off on the question, too.

Any bets on what they'll say?

This, roughly, is how Virginia controls the amount of medical care available to its citizens. The Certificate of Public Need (COPN) system was created by congressional mandate many years ago. Some states repealed their COPN programs after Congress lifted the mandate. Virginia didn't.

So medical providers have to get the state's permission to spend their own money making a variety of business moves—from building a new hospital wing to buying an MRI machine. Repeated examinations by the Federal Trade Commission and the Justice Department have found that COPN regimes reduce patient choice, drive up costs, and limit competition. The only parties that benefit are market incumbents such as large hospital chains.

In recent years lawmakers in the Virginia General Assembly have tried to eliminate the COPN regime, or at least reform it. Intense lobbying by entrenched incumbents has prevented major changes.

The incumbents insist that repealing COPN might let new market entrants "cherry-pick" profitable services, leaving the unprofitable ones, such as charitable care, to hospitals—which are often required to provide them. Maybe, maybe not: More than a dozen states have repealed COPN rules, and their hospitals seem to be getting by just fine.

In any event, once you strip away the bureaucratese, COPN defenders essentially are saying that because government already has imposed many restrictions on providers, Virginia needs to keep this one, too. Which is a little bit like saying the best way to avoid a hangover is to just keep drinking.

There are other reasons to take a dim view of COPN requirements. One of them turns on that four-letter word, "need." Beneath the COPN system lie several troubling presumptions. The first is that the market should provide people with no more than they need—in contrast to what they might want.

The second troubling presumption is that officials can know, with any degree of certainty, how much medical care a given community will need later on. But can they?

Probably not—at least according to an article in the latest edition of Regulation magazine. "Experts," it reports, "often do little better than laymen in predicting the future."

The article draws on the work of Philip Tetlock, a professor at the Wharton School who has conducted experiments on prediction. He has found that so-called experts often end up being just plain wrong. Moreover, the more expert an expert is—the more narrowly he or she specializes—the less accurate the forecasts. Generalists tend to perform better.

The article (by Stuart Shapiro of Rutgers) asks precisely how off base cost/benefit predictions, for example, have been. Tellingly, "the data on this are limited because there is little mandate for government agencies to retrospectively analyze… their regulations."

Shapiro was able to find a 2005 report by the Office of Management and Budget. It reported that "of 47 analyses studied, 11 were roughly accurate, 22 overestimated the cost-benefit ratio, and 14 underestimated it." That's an accuracy rate of less than 25 percent. If an airline flew planes that crashed three times out of four the Federal Aviation Administration would have something to say about that, don't you think?

There's less evidence about how well Virginia's COPN system predicts the so-called need for medical care. But residents have reason to be skeptical that its predictions rest entirely on objective criteria. Writing in The Washington Post recently, Matthew Mitchell and Steven Monaghan of the Mercatus Center at George Mason University find that COPN approvals correlate with campaign contributions.

"Hospitals' campaign contributions to gubernatorial and state senate candidates are associated with greater likelihood of obtaining a certificate of public need," they write. "Specifically, contributing health-care providers are 32 percentage points more likely to have their COPN application approved, even when one controls for the region, year and application type. For every 1 percent increase in contributions, an applicant's approval chances increase by 3 percentage points."

To some, this will seem like an argument for even more government regulation—of campaign finance. But hospitals and hospital associations would have less incentive to pay off politicians if the politicians could not dictate business choices in the first place. Repealing the COPN system would remove one more reason for health care providers to lean on legislators. It also would do a world of good for Virginia consumers.

This column originally appeared in the Richmond Times-Dispatch.

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  1. Another “weird trick” would be people paying cash for minor medical stuff and having cheap catastrophic health insurance for major medical stuff, like heart attacks.

    The government would then mostly be out of the health care industry and taxes relating to health care could be rolled back to leave people with more money to pay said medical bills.

    1. You say that like you don’t know what the fuck you’re talking about. Does “cheap catastrophic health insurance” mean the heart attack sufferer doesn’t pay any cash? Or does it mean precisely the opposite, that he pays a shit ton of cash?

      And when he can’t afford it, that means you actually pay the cash when the insurance company raises your premiums.

      1. You sound like you don’t know what insurance is. Here’s a clue. It prevents you from going broke in the event of a catastrophe.

        Mr. Heart Attack can pay for a physical out of pocket. Same goes for his blood thinner pills. For the heart attack itself and related treatment, he can finance that with personal savings, credit cards, or getting on a payment plan with the hospital.

        The amount over the high deductible is covered by insurance. Yes, by golly, having to shell out 5-10 grand to save your life is pricey. Too bad, but it beats shelling out 10 grand for a useless Obamacare bronze plan.

        1. Conflating issues or topics is Tony’s specialty. Health insurance is identical to healthcare to him.

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      2. And when he can’t afford it, that means you actually pay the cash when the insurance company raises your premiums.

        When he can’t afford it the insurance company has no relationship with him and his behavior has no affect on my premiums.

      3. And your precious ObamaCare fixes that problem how?

        If you want to help the poor, then help the poor and stop pretending that your bureaucratized and corporatized solutions are doing anything but jacking up prices. A problem that could have been solved with vouchers and stamps has ballooned into an out of control crisis. I used to play $5.95 a month for a catastrophic plan, but now I get fined by the IRS for not having a $700 a month cadillac plan that includes birth control. The Republicans didn’t ram this plan through, it was you hand wringy progressives.

      4. Yes insurance is precisely for things you can’t afford that are unlikely to happen.

        When you insure things that are guaranteed to happen you are just unnecessarily giving insurance companies a cut of the economics. So now you go to the dentist to get your annual cleaning you’d get anyway, and you pay twice as much since the guys at the dental insurance company who do your paperwork get salaries out of it too. Same effect for socializing it, where the govt or their contractor draws a parasitic salary out of you.

        When you insure things you can afford but are unlikely to happen, you are just paying an insurer for reducing a risk you don’t need reduced. Rather than pay a few hundred bucks once or twice in your life, if ever, for some minor disease, you pay an extra ten bucks or something every year of your life. Of course the actuaries work the numbers out carefully so that on average, they draw salaries and profit, ergo you pay more.

        Of course we all know the real game to this argument is how to use govt to set limits and rules on this collective products in such a way that someone else takes on a bad deal in your favor. That is where the real cost of obamacare came in, meticulously micromanaged into those thousands of pages. while Obama went around disingenuously claiming it was the same as the old republican catastrophic plan idea from the 90’s.

    2. I don’t think limiting the choices in insurance is a good solution for anything. If people want insurance, they should be able to buy it.

      1. Agreed, but insurance that covers everything (including routine preventive care) shouldn’t be mandated either.

        1. No. nothing should be mandated.

    3. That’s just crazy enough to work! Wait, it did, back in the day before healthcare regulation.

      The reason us old farts keep hearkening back to the ‘good old days’ isn’t because they were so good, but because gov has worked to hard to jack up the ‘now-a-days’.

      1. My family doctor lived the next street over. He had an office downtown, which his wife as a nurse and a bookkeeper who came in twice a week. He made house calls. He was a qualified surgeon, and performed at the local.

        General practitioners are all but gone. That hospital closed down over silly district politics, and now the closest one is half an hour away by ambulance, and it’s one of the mega corporate things with twenty administrators for every physician.

    4. Another huge problem is standard of care. Much of it is based on a desire to rake in more money, rather than on a particular test or procedure being required. Also, I always wondered why the cost of getting an MRI does not go down. My doctor friend tells me it is because they keep rolling out more accurate machines, which cost more. Ok, then, can I go get an MRI with one of the old machines, and pay less? Nope.

      1. And new technology makes everything else cheaper. Why do medical care and college always get more expensive?

        1. Because the patient isn’t the customer. But you knew that already…

    5. What happens when that heart attack is because of a hereditary disease that you’ve had since childhood? Is insurance allowed to deny you as a preexisting condition? Did you have the heart attack because insurance denied your preexisting condition when you became an adult and got off your parent’s insurance? Did that heart condition dictate that you weren’t able to work enough to become rich enough to afford to pay for healthcare out of pocket or for insurance to cover your preexisting condition?

      1. most likely , without government mandates, the insurance company would either charge you a higher premium or put a clause to exclude coverage for heart attacks.

        With something multi-factorial like heart disease , we are still talking about risk and not certainty. This is still insurable.

        The challenges for health insurance are when a person’s risks become very high. This happens with advanced age , and with pre-existing conditions that have high complication or recurrence rates ( such as a personal history of cancer ).

  2. The government declared that health insurance didn’t count as wages for taxes purposes. You won’t believe what happened next!

    1. Spoiler alert: everybody’s shit got all fucked up.

    2. Does my doctor want me to know about it?

      1. It depends on your doctor’s economic and historical literacy and tolerance for paperwork.

  3. Um, yeah this might help but let us not pretend that the trajectory is in the opposite direction I.E. more centralized control of the health systems.

    1. Perhaps. So would actually following the commerce clause and letting people sell insurance across state lines. But let the market sort out the right number and location of providers rather than the thugs in the capitol.

      Consolidation isn’t necessarily a bad thing, and many well functioning markets have a small number of providers.

  4. The problem is health care is too expensive and not available to some people. Our solution is to make it harder to open a hospital that serves the poor. That is something so stupid only an intellectual could come up with it. And of course, they did just that.

  5. This, roughly, is how Virginia controls the amount of medical care available to its citizens. The Certificate of Public Need (COPN) system was created by congressional mandate many years ago. Some states repealed their COPN programs after Congress lifted the mandate. Virginia didn’t.

    Um, this is pretty much how everywhere controls (read: limits) the amount of medical care. Is there any state that doesn’t have a COPN system?

    1. Damn, when you’re even too lazy to do one simple Google search…

      40 Years of CON

      1. Paul doesn’t know how to use the internet, he’s proud of it, and he refuses to learn.

        1. Paul has to ask Jeeves to Google Reason.com for him every morning.

          1. Spoiler alert: Jeeves is Paul’s grandfather.

      2. So Trump Country doesn’t have certificate of need.

      3. Holy crap, California repealed COPN? Ok.

        1. You answered your own question. Yes, there are.

    2. Is there any state that doesn’t have a COPN system?

      Some states repealed their COPN programs after Congress lifted the mandate. Virginia didn’t.

      You answered your own question. Yes, there are.

  6. Is there any state that doesn’t have a COPN system?

    Some states repealed their COPN programs after Congress lifted the mandate. Virginia didn’t.

    You answered your own question. Yes there are.

  7. “Which is a little bit like saying the best way to avoid a hangover is to just keep drinking.”

    But that IS the best way to avoid a hangover

    1. I wish I could disagree…

    2. It’s how Congress avoids dealing with the national debt.

  8. Another weird trick that would vastly improve health care in America: repeal the ACA and HIPAA, and shut down Medicare. Leave Medicaid for the truly needy. Let the free market supply medical care and cater to customers rather than government agencies and insurance companies.

    1. Replace the ADA with private sector for profit certification agencies. If the government has a role at all, it should be in indemnifying reviewers and review sites so there can be private oversight of the certification agencies and medical service providers.

    2. HIPAA is not the problem. It’s a major pain in the butt, but it’s not the problem. Handing the entire system over to thrid parties is the problem. On the left they’re screaming for the government to be that single third party, an over on the right they’re screaming to keep tinkering with the corporate third party. Oh, and don’t touch the broken VA or Medicare or you won’t get reelected.

  9. RE: This One Weird Trick Could Improve Medical Care

    Here’s a weird trick that could improve medical care.
    Deregulation.

    1. ^ This

      the current system is a non functioning mix of government-directed healthcare and heavily regulated free markets. It cannot go on forever.

      the choices are to deregulate or go for single payer. We know which works better. But the electorate will – of course-
      choose the wrong answer.

  10. Barton, your clickbait headline just isn’t enough. If you want to be in the Most Visited column you need to put something salacious about sex in the headline.

    1. I was thinking it needed a hot chick in a revealing nurse costume.

  11. This is actually a libertarian answer that would help. It would also make the lie that the US doesn’t have the wait to get healthcare universal care countries have more like a reality. If a medical group had policy of a 3 month wait for a new patient the customer would be more likely able to find somewhere else with less of a wait if more competition was allowed.

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