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State Legislatures Expand Competition in Health Care Markets

Several state legislatures are considering health care reforms that lower government barriers to competition and ease patients’ access to drugs and treatments.

With federal action unlikely anytime soon, state legislatures are advancing bills to repeal Certificate of Need (CON) laws, remove hurdles for direct primary care, and work around federal health agencies’ regulatory hurdles that can block life-saving treatments.

CON laws were put into place nearly 50 years ago to restrict competition in health care markets in the belief they would contain costs and promote excellence, but have stifled innovation, reduced supply, and increased costs.

The Heartland Institute, which co-publishes Health Care News, has long advocated the repeal of CON laws and other regulations which limit patients’ medical choices.

South Carolina ‘Opening the Doors’

After years of trying, lawmakers in South Carolina have passed a bill that almost entirely repeals the state’s CON regulations.

The South Carolina House of Representatives unanimously passed a CON repeal bill the state Senate previously approved. The bill would phase out CON completely for new hospitals starting January 2027. Long-term care facilities would still require approval from the state’s Department of Health and Environmental Control.

Gov. Henry McMaster signed the legislation into law on May 17.

The bill includes a provision that bans hospitals from “economic credentialing, ” a practice that denies privileges to physicians who have economic ties with a possible hospital competitor.

Marcelo Hochman, M.D., the president of Independent Doctors of South Carolina, has championed a variety of health reforms including limits on “no compete” clauses in physician contracts and limited tax deductions for charitable care. Hochman says the state’s new CON law will be a game changer.

“The South Carolina legislature unanimously passed a bill that sweeps away decades of protectionism, opening the doors for true innovation and disruption of health care delivery,” said Hochman. “This is very good news and a huge step toward providing patients more options for higher quality, competitively priced care. We are intent on continuing to pursue measures that put control back in patients’ and doctors’ hands.”

‘Turf Wars’ in North Carolina

The North Carolina General Assembly is taking a more circuitous route to banning CON as part of a budget deal to fund  Medicaid expansion, after passing authorizing legislation in March.

The reforms will end CON for ambulatory surgery centers (ASCs) and MRI and other types of imaging centers in counties with fewer than 125,000 people, drug treatment and behavioral health centers, and other diagnostic facilities. Some restrictions would remain, such as requiring approval for hospital imaging equipment costing more than $3,000,000, and ASCs would be required to devote 4 percent of their incomes to charity care.

The deal-making is no surprise, says Matt Dean, senior fellow for health care policy outreach at The Heartland Institute.

“Turf wars are notoriously difficult to resolve,” said Dean. “Any protection for a group based on licensure or geography will be defended vigorously. Lobbyists on both sides dig in, at times with a perverse incentive to continue the battle for another session (and another contract).”

Democrats control the office of governor while Republicans have super majorities in both chambers of the legislature.

Right to Try, Treat

The Texas Senate unanimously passed a bill that would expand patients’ “right to try” experimental treatments that have not received final Food and Drug Administration approval, on April 30.

The state’s current “right to try” law, in effect since 2015, is limited to the terminally ill. Senate Bill 773 would expand access to patients with chronic diseases. Patients and their doctors would be able to get experimental products directly from manufacturers.

The bill has protections against misuse, says Dean.

“There is always a concern that there could be bad actors who might want to experiment in dangerous ways on vulnerable people,” said Dean. “This will take some vigilance. Investigational treatment should only be used as a last resort when standard proven treatments have failed. What is important is protecting the relationship between the doctor and the patient, without the government interfering.”

The Nevada Assembly passed a similar right to try expansion on April 25. A.B. 188 was read in the state Senate for the first time on April 26.

The bill is expected to pass the Senate, and Gov. Joe Lombardo was expected to sign the legislation into law, as of press time.

Alaska Expanding Direct Primary Care

Alaska is making headway on opening the door for direct primary care (DPC) by recognizing it is a “membership” service and not health insurance, which is subject to costly regulation.

The Alaska Legislature is considering two bills, S.B. 45 and H.B. 47, which would clarify the definition of DPC in a way that encourages physicians to open practices. Without legal specificity, physicians are reluctant to open direct care practices that could face costly and onerous regulation.

DPC charges individual consumers a monthly fee, usually under $100 a month, for unlimited primary care, rather than accepting payment from an insurance company. DPC is already operating in 49 states, with 26 states enacting laws that explicitly state DPC is “not insurance.”

Alaska could benefit from the bills says Adam Habig, president and co-founder of Freedom Healthworks and a policy advisor to The Heartland Institute.

“Alaskans pay more for health care than almost any other state,” said Habig. “One study estimates average care costs $11,000 per patient. Unexpected health care bills have led people into bankruptcy. By allowing DPC to function as a service, and declaring it not insurance, which it is not, patients will have access not just to affordable, but excellent primary care. There will be no surprise bills because patients will know upfront how much their care will cost.”


AnneMarie Schieber (amschieber@heartland.org) is the managing editor of Health Care News.


See related articles on Direct Primary Care.



This article was updated on May 18, 2023.

AnneMarie Schieber
AnneMarie Schieber
AnneMarie Schieber is a research fellow at The Heartland Institute and managing editor of Health Care News, Heartland's monthly newspaper for health care reform.


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