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Here's one way to cut health care costs, improve quality

COMPASS: Other points of view

Health care: Do we have too much government or too little? Should we have regulated markets or open markets?

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Those are the perennial questions.

And that's what makes the state's proposal to repeal the current Certificate of Need (CON) program so contentious. Yes, there are solid arguments on both sides. But after much consideration, we believe that the program has not accomplished what it set out ultimately to do more than 30 years ago -- lower costs for the consumer. It is time to end Alaska's program in its present form. Doing so will not only reduce the cost of health care, it will also improve the access to health care, allow more competition and improve quality of care for patients.

Certificate of Need programs were required in all states in the mid-1970s by federal mandate. The goal was to make sure that health care facilities matched community need and provided access and quality care, which in turn would help reduce health-care costs. The federal mandate was repealed in 1987 -- 20 years ago! -- along with its federal funding.

The basic assumption in those days was that excess capacity, in the form of overbuilding, directly results in health-care price inflation. However, after more than 30 years of such programs, the National Conference of State Legislatures has found that there is no solid proof that the state-sponsored CON programs have actually controlled health-care costs. In fact, in 2004 the Federal Trade Commission and the Department of Justice both asserted that these programs actually contribute to rising prices because they inhibit competitive markets.

Many opponents of CON programs have argued that health-care facility development should be left to the economics of each institution, in light of its own market analysis, rather than being subject to political influence.

My administration agrees.

I included repeal of Alaska's current program in my proposed Alaska Health Care Transparency Act (SB 245 and HB 337). The legislation will help Alaskans access affordable health care, and ensure our health-care system is responsive to changing demographics and market conditions. By getting information about health-care options to Alaskans, they can make better choices based on the health-care market.

The Certificate of Need is being used by lobbyists and health-care organizations to limit competition -- through appeal of other's certificate awards or by filing suit against the state for those awards. As one member of a citizen committee studying CON in 2007 put it: "the only voices heard (testifying for continuing CON even more stringently) were from the financially vested physicians and hospitals." Currently, there are seven active Certificate of Need lawsuits involving the state and private sector health-care providers

As I said recently in my State of the State Address to the Legislature, "Under our present Certificate of Need process, costs and needs don't drive health-care choices -- bureaucracy does. Our system is broken and expensive." Eliminating the CON program, with certain exceptions, will allow free-market competition and reduce onerous government regulation.


Sarah Palin is governor of Alaska.

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