Commentary: Be Cautious in Deregulation of Healthcare

Jack Bernard

Monday, January 14th, 2019

“Adam Smith believed in altruism and compassion.” -the late Dr. Uwe Reinhardt, Princeton University

I was an acquaintance of Dr. Reinhardt, an internationally recognized expert on health reform. At a luncheon, he once told me that Smith, an influential figure in economic theory, has been taken out of context by modern libertarians and conservatives to justify their ideological policies. He was right.

In this vein, I analyzed Charlie Harper’s recent Athens column “Georgia Assembly aims to remake healthcare delivery model”. Frankly, I do not agree with many of the points he made.

Since Reagan, it has been a conservative philosophical imperative to eliminate government regulations on business. Although this deregulation brought about the Great Recession of 2007-2008, and nearly created the second Great Depression, many conservatives have learned nothing. Their deregulation efforts have only increased with the election of Trump…who has an obvious dislike for anything getting in the way of business deals, no matter the facts, ethics or negative impact on everyday Americans.

Along these lines, every year or two, some Georgia politician or right wing ideologue suggests doing away with Georgia’s Certificate of Need (CON) laws, which regulate where and how health care facilities (hospitals, nursing homes, out-patient centers) operate. Sometimes self-interested people in the health care field make similar suggestions.  Unfortunately, while many of these proposals invoke the sacred Adam Smith principles of the free market, they are still misguided.

I was the first Director of Health Planning for Georgia, drawing up the medical facility plan used to make CON decisions. However, most of my career was spent in the private sector in for-profit healthcare corporations. For four years, I was employed by two major for-profit hospital chains, having the responsibility of obtaining CON permits for new and existing facilities.

I learned early on that corporate executives have a fiduciary (legal) responsibility to put their firms' well-being first, ahead of any societal concerns. There's nothing philosophically wrong with that, since corporate shareholders have a right to see that their particular interests are represented in a capitalistic society. 

However, government regulation has a much broader societal goal. Regulation is intended to protect the consumer and our society rather than the profit driven corporation. Using long term care, here’s just one scenario as to what could easily take place in Georgia without CON regulation. 

Regardless of true patient need, nursing homes (many of which are driven solely by profit motives) would be free to open near other nursing homes, creating an avalanche of new nursing homes. This would lead to several more unintended consequences:

A. Existing and new nursing homes would be forced to compete for new patients, creating artificial demand. Due to aggressive marketing by for-profit national nursing home corporations, many seniors would be enticed to leave their own homes to enter nursing homes -- although most of these seniors actually would be better off with alternatives, such as less costly in-home care.  

B. Since the State of Georgia’s Medicaid program pays for the vast majority of Georgia nursing home residents, the state Medicaid budget would expand dramatically. This expansion would cause major tax increases and/or cuts in other vital programs, such as transportation, infrastructure and education. 

As a proven true fiscal conservative, I dislike government paperwork and bureaucracy as much as the next guy. But our taxes will definitely go up under CON deregulation. 

More importantly, government regulations are put in place for a reason- to protect the public. Although minor adjustments might be made, in the case of Georgia's CON laws the current regulations are working well. 

There are many examples of well-meaning deregulation having negative results. Democratic President Bill Clinton and a conservative Republican Congress teamed up to repeal Glass-Steagall, a supposedly obsolete law that prevented financial institutions from running wild. As a direct result of that repeal, we ended up with the Great Recession, caused by irresponsible for-profit businesses maximizing short-term profits.

Edmund Burke once said: “Those who don't know history are doomed to repeat it.” Let’s not make the same “unintended consequences” mistake in regard to CON deregulation in Georgia.