Certificate of Need: A Blunt Instrument for a Fiscal Problem

August 25th, 2017 by Leave a Comment

By Kelly McCutchen

In rural Georgia and across the country, the uncertain future and closure of emergency rooms and hospitals are all too common. A primary factor is the long-term impact of a federal law that requires hospital emergency departments to treat and stabilize all patients, regardless of their ability to pay.

This law, the Emergency Medical Treatment and Labor Act (EMTALA), made the nation’s ERs the default health care provider for the uninsured. The federal government doesn’t cover the full cost of providing this care, however, making EMTALA a massive unfunded federal mandate.

Imagine addressing other social problems like this: Eliminate hunger by requiring all restaurants to serve hungry people regardless of their ability to pay the bill. Combat homelessness with an order that every hotel provide a free room to whomever needs it.

Most people would scoff at those suggestions. And yet that’s what happens in health care.

HospitalSome hospitals are able to shift the cost to patients with private insurance. In rural areas, however, where most patients are on Medicaid, on Medicare or uninsured, the financial losses can be insurmountable.

Many states attempt to keep hospitals fiscally solvent with Certificate of Need (CON) regulation. CON gives hospitals a monopoly on certain services to increase their cash flow. Unfortunately, it’s much like the saying, “If all you have is a hammer, everything looks like a nail.” CON is a very blunt instrument to address a specific fiscal problem.

The problem and the solution are funding, not regulation. Special interest groups can debate endlessly on the pros and cons of CON regulation, but the debate becomes moot if the unfunded cost of running trauma centers and ERs is eliminated.

The Georgia Hospital Association estimates Georgia’s hospitals provide over $1 billion of uncompensated indigent care each year, according to the Georgia Hospital Association. That averages out to about $1,800 per low-income, uninsured Georgian.

Both the Affordable Care Act and the Republican proposals include funding for the poor unable to pay their medical bills. Proposed funding is between $3,100 and $6,200 annually – more than enough to cover uncompensated care in a properly-designed program. The problem isn’t addressed, however, because the funding doesn’t always reach its intended target.

Consider “Mary,” a low-income mother with two young children. She and her children are eligible for Medicaid, but for whatever reason she refuses to enroll. She doesn’t see the need, because when she or her kids get sick they just go to their local hospital emergency department for “free” care, costing her nothing.

Mary and her family are consuming health care services, which they can’t afford to pay for, but the federal funding available to them stays in Washington because they have not enrolled in a program. The hospital is required by law to treat them, but is left holding the bag on the expenses.

This makes no sense. The proper role of government will be debated, but the public is unlikely to support a repeal of EMTALA. Nobody denies the need for emergency medical facilities; most of us dread a scenario where we or a family member have a car accident or other medical emergency while traveling through rural Georgia.

Not every county needs a Mayo Clinic. Nevertheless, a well-functioning trauma network and a strong medical safety net are a public good, and tax dollars must adequately support that. When that happens, many other unintended consequences are avoided.

The good news is Georgia can eliminate EMTALA’s unfunded mandate, regardless of whether health care reform passes in Congress. All it takes is action through the State Innovation Waiver, a process originally created by the Affordable Care Act. Yes, ObamaCare.

The total pool of new federal funding for uninsured, low-income Georgians equates to anywhere from $1.8 billion to $3.5 billion, depending on whether it’s a new federal bill or the status quo. That is more than enough to address uncompensated indigent care – the unfunded cost of Georgia’s trauma care network – as well as concerns about eliminating certificate of need regulations. It isn’t rocket science. All it takes is for state leaders to start laying the groundwork for this federal waiver. Immediately.


This commentary by Kelly McCutchen, president and CEO of the Georgia Public Policy Foundation, was published first by Insider Advantage. The Foundation is an independent, nonprofit, state-focused think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (August 25, 2017). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.

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