TownHall: Erasing Medical Debt Won’t Fix the Problem — Competition Will
A new rule from the federal Consumer Financial Protection Bureau (CFPB), slated to take effect in March, will remove health care debts from credit reports and bar lenders from considering medical debts in loan decisions. Meanwhile, state and local policymakers nationwide are pushing plans to forgive consumer medical debt. Such measures are intended to relieve the financial burden of rising health care costs.
But these efforts only treat the symptoms rather than the disease. Waiving medical debt, or erasing it from credit scores, amounts to little more than wishing the problem away. To lower health care costs and ease Americans’ financial burden, the best solution is to increase competition, expand the supply of medical services and drive down costs. That begins with ending the artificial barriers to health care competition that many states have erected in the form of “certificate of need,” or CON, laws.
Despite attempts at health care reform in recent decades, one constant has been steadily increasing costs and mounting public spending for health and medical services, straining government budgets and household finances. The CFPB estimates that in 2021, Americans carried $88 billion or more in medical debt. And in 2022, the Kaiser Family Foundation found that “41 percent of adults currently have some debt caused by medical or dental bills.”
Unfortunately, simply erasing medical debts doesn’t address the epidemic of rising costs. A key driver of higher costs in health care is the lack of competition, a dynamic driven by industry consolidation, and the fact that many states actively stifle competition with burdensome CON laws.
While the laws differ from state to state, the basic idea is that CON laws restrict health care services by forcing new providers to jump through costly and time-consuming bureaucratic hoops before opening a new facility, expanding an existing facility, or making new services or technologies available.
For example, a health care entrepreneur seeking to offer new services must first apply to the state to determine if there’s a need for a new provider. In many cases, the “need” is determined by asking the existing service providers to decide if a new provider is warranted. The new application will likely be denied if they object, which they usually do. This “competitor’s veto” tilts the playing field, granting near-monopoly power to existing providers and leaving patients with fewer options.
The examples of how CON laws restrict health care supply are abundant. In Kentucky, an ambulance provider from Ohio was barred from offering services across the border thanks to the Bluegrass State’s CON laws, limiting options for people needing health care transportation. In Iowa, two registered nurses who sought to open a birth center for pregnant women were blocked by state laws restricting alternative birthing centers. Such cases illustrate that CON laws aren’t simply an abstract regulatory issue — they have real impacts, leaving patients with fewer options and higher costs.
Not every state forces new or expanding health care providers to go through the CON application process, making it easy to compare outcomes. Unsurprisingly, states that have repealed CON laws to foster competition in the health care market are curbing costs, as a recent paper by health policy expert Matthew D. Mitchell demonstrates. After surveying decades of academic research, Mitchell found that “charges in states without CON laws are 5.5% lower 5 years after repeal.”
Meanwhile, per capita hospital expenditures are “20.6% higher in states with CON laws,” and residents of those states have “access to 30% to 48% fewer hospitals.”
Despite the evidence, states have been slow to repeal or reduce their CON requirements. Yet it’s worth noting that in 2020, at the height of the COVID-19 emergency, at least 22 states moved quickly to temporarily suspend CON law restrictions on many health care services — a tacit admission that the laws constrain the supply of providers to the detriment of patients.
For a path to reform, consider the case of South Carolina, where state leaders repealed CON laws for all health care providers aside from nursing homes in 2023. Since then, the University of South Carolina has announced plans to build a $350 million hospital, and the state announced plans to build a new residential psychiatric treatment facility for their juvenile justice system. Without the burden of CON laws, the Palmetto State is already taking steps to provide its citizens with greater health care access.
The good news is that other states are getting the message. For example, on January 29, the Mississippi House passed legislation that would repeal CON laws for many facilities and services, such as substance use rehab, in-patient psychiatric facilities, birth centers, and more. The bill now awaits approval in the Mississippi Senate.
Forgiving medical debt or removing it from credit reports might ease some consumers’ pain for a while, but it’s like treating stomach cancer with Pepto Bismol. Meanwhile, people will continue to pile up more debt as costs rise, prompting calls for further forgiveness. While CON laws aren’t the only factor driving health care costs, they represent a key area where policymakers can move swiftly to eliminate new providers’ obstacles, allowing a competitive marketplace to flourish.
This op-ed originally appeared in TownHall on March 8, 2025.
