Agenda - Council Work Session - 01/25/2022

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Why do we have this system? No doubt, many Minnesotans would ask why their state government would want to limit the expansion of hospital beds. As with CON laws more generally, policymakers justify Minnesota's moratorium by claiming that, without it, medical providers would over -invest in capacity which would drive up prices, raise health care costs, and restrict access to these services for the poor. This is a bizarre argument. The reason we don't have a McDonald's on every block isn't because state government prevents it but because it makes no economic sense for McDonald's to expand ca- pacity with no regard to the demand for it. It makes no economic sense for anyone to do that, health- care providers included. Research has found that CON laws - or anal- ogous laws like Minnesota's moratorium - fail to achieve these goals. A study by economists Thom- as Stratmann and Jacob W. Russ found: Conclusions None of this is to suggest that without the moratorium Minnesota would have 6,000 ICU beds idling at all times in readiness for a pan- demic. The costs of doing so would be vast and absorb resources which could be better used elsewhere. But we can be fairly confident that the number of ICU beds would be somewhat greater and our straits over the course of the COVID-19 pandemic ...no evidence that CON regulations increase indigent care, but they do find evidence that the regulations limit the provision of medical services. Consequently, the price of medical care is likely higher under CON regulations, while the poorest Americans see no increase in the availability of care. There is, in addition, evidence that states which have removed these rules have more hospitals and more ambulatory surgery centers per capita, more hospital beds, dialysis clinics, and hospice care facilities. Patients in non -CON states are more likely to utilize medical imaging technolo- gies and less likely to leave their communities in search of care. Though CON advocates some- times claim that the rules protect rural facilities, states without CON laws have more rural hospi- tals and more rural ambulatory surgery centers than states with CON laws. would have been somewhat less dire. In the longer term, with a population growing - albeit slowly - and aging more quickly, it makes no sense at all to block the expansion of hospital bed capacity. The moratorium achieves none of its goals at too high a cost. It should go. John Phelan is an economist at the Center of the American Experiment. 4 • POLICY BRIEFING #004 l MINNESOTA MUST LIFT ITS HOSPITAL MORATORIUM