This is the Cato Daily Podcast for Tuesday, January 2nd,

2024.

I'm Caleb Brown and happy new year.

As state lawmakers get back to work front and center in several legislatures is the cartel style arrangement known as certificate of need, most notably in health care.

Cato's Jeff Singer discusses what Khan has done to American health care.

A certificate of need laws really took off in the mid-70s when the Nixon administration

got a law passed that basically incentivized states to set up certificate of need laws and a

certificate of need laws for those who never heard the term before is basically in order for an organization or even an individual to set up a medical practice or

open a medical facility or make additions to their facility. medical state that listens to their proposal and decides whether or not

the population of that state really needs something like that.

Now, the idea behind it was that in the mid-70s already it was becoming an issue of rising health care cost

through the rising health care utilization. So the policy makers came up with this idea that if we restrict the development of health care services,

then we will have less utilization. I guess they didn't take economics 101. So to be clear, this was the

explicit purpose. The purpose was by restricting supply, you can reduce demand.

Making it harder for people to take up make use of medical services.

Correct. That will make it where people will use less medical services because the government

was now using taxpayer dollars to pay for a lot of these medical services and it was starting

to get expensive.

So what ended up happening is, well first of all one of the things they didn't take into account was that most people who were purchasing medical services had insurance of one form or another, whether it was government

on insurance like Medicare or Medicaid, or it was commercial insurance, in which case most of the expense was felt by the third party payer directly,

only indirectly did the health care consumers pay for it. So they were relatively insulated from price. So the reduced supply, which you

would think would raise the price and then reduce demand, really didn't work that way because the consumers didn't really

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