‘Certificate of Need’ and occupational licensing laws restrict access to healthcare. States can do better.

Certificate of need (CON) laws and occupational licensing pose unnecessary barriers to life-saving medical care. In a recent law review article, Pacific Legal Foundation attorneys Jaimie Cavanaugh and Anastasia Boden analyzed how these restrictions impose undue burdens on patients and practitioners.

“Restrictions on entrepreneurship and the restrictions on occupational freedom run rampant in healthcare,” the authors wrote in Unleashing Opportunity in Healthcare. “Instead of protecting public health and safety, these restrictive laws and policies protect incumbent providers from competition and prevent trained professionals from serving their communities.”

States can do better: Pacific Legal Foundation is dedicating its efforts at the state and federal levels to ensuring access to equality in the medical profession and ensuring ample opportunity for patients, practitioners, and entrepreneurs alike.

CON laws threaten Constitutional rights

Certificate of need laws are government mandated permission slips required to open a healthcare facility or add a healthcare service. These laws restrict smaller, qualified businesses and physicians from providing services in their respective states.

These burdensome requirements—which often require local hospitals to sign off on new projects—not only prohibit entrepreneurs and medical practitioners from providing life-saving medical care but also undermine several constitutional protections, including the right to Due Process, Equal Protection, Privileges and Immunities, and freedom of interstate commerce.

Rather than promoting equal opportunity, CON laws favor incumbent businesses over start-ups. Eager entrepreneurs are sidelined for no other reason than to protect incumbents from legitimate competition, depriving hard-working individuals from earning a living and providing for their community.

But because of two Supreme Court Cases—The Slaughter-House Cases and United States v. Caroline Products Co.—the Privileges and Immunities and Due Process Clauses have been gutted, meaning courts fail to protect economic freedom. Rather than scrutinizing laws to make sure they do not unduly infringe economic opportunity, courts apply mere rational basis scrutiny—the lowest level of constitutional review.

A separate structural provision in the constitution can provide protection against these laws. A doctrine known as the “dormant commerce clause” limits states from “discriminating against or unduly burdening interstate commerce” Because courts so often fail to protect economic liberty under the Privileges or Immunities and Due Process Clauses, the dormant commerce clause may be “a more likely path to success than the Fourteenth Amendment.

However, pervasive state barriers persist.

CON laws are state barriers to medical access

Louisville, Kentucky, is home to a sizable Nepali-speaking community, many of whom fled to the U.S. as refugees. Dipendra Tiwari and Kishor Sapkota recognized a need for elderly care in this community and created Grace Home Care.

For Grace Home Care to serve patients, it needed to file a CON application with the state of Kentucky—but almost immediately, a large hospital system, Baptist Health, objected to their application and requested a hearing with the Kentucky Cabinet for Health and Family Services. The Cabinet denied Grace’s application, and Grace sued in district court. The case eventually proceeded to the Sixth Circuit Court of Appeals.

While Grace’s claims did not satisfy rational basis, the Court’s opinion, authored by Judge Jeffrey Sutton, said that CON “laws should be the exception, not the rule, and perhaps have outlived their own needs.”

And this is only one of many stories where community members have been restricted from providing needed medical services. Louisiana resident, Ursula Newell-Davis, experienced a similar situation in which she was prohibited from providing care to special needs children.

While CON laws present “needless barriers to entry, protectionism for incumbents, [and] the improbability of lower prices by decreasing supply,” Judge Sutton ruled that weighing these questions “is so beyond judicial capacity.” This is precisely why Pacific Legal Foundation has increased its efforts to engage with state legislators through model policy—PLF proposes five legislative solutions to remove CON law barriers:

• Fully repeal CON laws because they limit opportunities and hurt consumers.
• Partially repeal CON laws.
• Raise the Capital Thresholds that Trigger a CON law.
• End competitors’ vetoes, which allow competitors to prohibit new products or facilities from entering the market, hurting both entrepreneurs and consumers.
• Amend the CON application process and regulations, including lower application fees.

But CON laws are not the only barrier to medical access: Occupational licensing restrictions pose significant threats as well.

Occupational licensures also reduce access to healthcare

State occupational licensing laws present several barriers, including limited reciprocity across state lines, limited access to life-saving maternal care, creating excessive educational requirements, or requiring a provider to pay their competition exorbitant fees to practice.

Occupational licensure runs afoul of the Fourteenth Amendment and its state analogues when its mandates are unrelated to public health and safety. But as discussed, courts do not closely review economic burdens on businesses, which places greater burdens on start-ups and entrepreneurs. Sadly, many states interpret state constitutional protections in “lock step” with the weak interpretation of the federal Constitution.

Rather than relying upon analogous state constitutional protections—which Judge Sutton has extensively written on in his book, Who decides?: States as Laboratories of Constitutional Experimentation—state judges apply the Federal standard for cases involving equality and opportunity.

But that’s now how our republican system was intended. In fact, “the structure of the US Constitution favors putting the state courts on the front lines of rights protection and innovation,” Sutton writes. “Not all constitutional rights lend themselves to blanket enforcement,” as Supreme Court opinions often create.

In addition to state constitutional protections, occupational licensure is subject to antitrust protection, since these licensing regimes essentially impose a government-created monopoly.

A recent case from Georgia demonstrates how state constitutions can be a solution to these protectionist laws.

Mary Jackson had been a lactation consultant for decades when a change of law threatened to end her livelihood. The new law would have required Mary to quit her job, go back to school for two years, and take an expensive exam: all to continue doing the same job she had been doing safely for decades.

Mary challenged this unnecessary barrier under Georgia’s due process clause, and the Georgia Supreme Court rejected the U.S. Supreme Court’s test under the Fourteenth Amendment.

While “not every burden on the ability to pursue a lawful occupation will be unconstitutional,” Justice Boggs wrote, the court concluded that “the Act [in question] violates [Mary Jackson’s] due process rights under the Georgia Constitution to practice the chosen profession of lactation care provider.”

Mary’s case was a major win for economic liberty and state constitutional jurisprudence—and “[w]ith government out of the way, individuals, families, and communities can thrive,” Boden and Cavanaugh said.

As a solution to these protectionist laws, PLF proposes:

• Remove licensing requirements that limit the ability of people to pursue healthcare as a profession without health or safety benefits.
• Allow reciprocity for out-of-state licenses, allowing practitioners to provide care across state lines.
• Allow practitioners to practice within their full competency.
• Increase access to telemedicine.

With these policy solutions in mind, states can do better. The next legislative sessions are on the horizon—and PLF is ready to hit the ground running, continuing their advocacy for medical freedom and opportunity in state legislatures and beyond.