Bacon’s Rebellion: Blame COPN for Looming Bed Shortages

Link to source.

I’m optimistic that coronavirus won’t be as bad as we may fear. Still, I hope it inspires us to rethink healthcare economics — especially Virginia’s Certificate of Public Need (COPN) program.

COPN is a regulatory process in which anyone wishing to build or expand a hospital must get approval from a state commission. Two things should be obvious, however: 1) Anyone planning to build or expand a hospital is probably capable of figuring out the investment risk without government help, and 2) oversupply or too much capacity is a self-correcting problem (prices will fall, or non-performing hospitals will go out of business, etc.).

The alternative problem of too few hospitals is easy to solve, too. State and local governments can solicit for the investment and provide incentives as needed to secure them.

If we don’t need it, why does COPN exist? It appears to be an outgrowth of the federal government’s impulse for central planning of the economy.

The story has many threads, going back all the way to the Great Depression and with significant ties to WWII. There were several key events:

  • In the 1930s private health insurance began to become widely available based on the success of Blue Cross and Blue Shield.
  • In 1942 Congress passed the Stabilization Act to combat inflation that appeared to threaten the U.S. economy as America entered WWII. The Act prohibited businesses from raising wages to attract workers otherwise made scarce by the war effort. In response, employers began offering health plan benefits as non-wage compensation. Unions strongly supported this approach.
  • In 1943, the IRS created a tax exemption for employer-sponsored health insurance. This caused the market for private health insurance to take off. By 1950, more than half of Americans had some form of health insurance for this reason.
  • In 1946 Congress passed the Federal Hospital Survey and Construction Act requiring states to develop hospital facility plans. The Act made federal grants and loan guarantees available to states that met requirements for improving the national hospital system. Amendments and an additional National Health Planning and Resource Development Act followed in 1972 and 1974, respectively.
  • In 1973, Virginia codified its first COPN law “to promote comprehensive health planning in order to help meet the health needs of the public; to assist in promoting the highest quality of health care at the lowest possible cost; to avoid unnecessary duplication by insuring that only those medical care facilities which are needed will be constructed; and to provide an orderly administrative procedure for resolving questions concerning the necessity of construction or modification of medical care facilities.”

The role of private health insurance in this story cannot be emphasized enough. What began in the late stages of the Great Depression as a middle class approach to financial security became during WWII a handmaiden to government central planning. FDR had considered including nationalized healthcare as part of his Social Security plan in 1935, but judged that both initiatives might fail if pursued together. The reasons were political. Unions, the Chamber of Commerce and doctors’s groups all supported employer-based, private models for healthcare financing.

But the impulse to plan out the nation’s healthcare system from Washington never waned. Hence, tax-break subsidies and other federal interventions in the private economy emerged. Which — we may now learn — has brought us to a point where we aren’t prepared for an epidemic like coronavirus.

Don’t forget: health insurance is socialized medicine.

Sources

The Real Reason the U.S. Has Employer-Sponsored Health Insurance
https://www.nytimes.com/2017/09/05/upshot/the-real-reason-the-us-has-employer-sponsored-health-insurance.html

How We Got to Now: A Brief History of Employer-Sponsored Healthcare
https://www.griffinbenefits.com/employeebenefitsblog/history-of-employer-sponsored-healthcare

Legislative History of Virginia’s Certificate of Public Need Law
http://hac.virginia.gov/subcommittee/JT_HHR_Oversight_Sub/11-26-18

12 thoughts on “Bacon’s Rebellion: Blame COPN for Looming Bed Shortages

  1. Our healthcare industry, not really a system, leaves a lot to be desired. Employer owned insurance is one of them. Policies should be portable.

    And there are many other issues.

    Which is why Democrats try every once in a while to make changes.

    The cooperation and input from conservatives is legendary in its total absence. Except to obfuscate, water down, confuse and generally muck things up.

    Liked by 2 people

    1. RE: “The cooperation and input from conservatives is legendary in its total absence. Except to obfuscate, water down, confuse and generally muck things up.”

      I don’t buy the assumption that politicians need to fix anything with respect to the healthcare industry. They’ve been at it for more then 100 years, and here we are with a shortage of hospital beds during an epidemic.

      Time for new thinking.

      Like

      1. I don’t disagree. But we need both parties to at least come up with workable ideas.

        I see no value in scrapping everything and started over. We have structures, beds, knowledge, organizations, etc that can be altered.

        See Don’s plan at his site. There are a lot of good ideas. I don’t agree with some or more accurately, I think portions are a bit optimistic.

        Liked by 1 person

        1. RE: “See Don’s plan at his site.”

          I have. I support it for its emphasis on health savings accounts and for reducing the role of insurance as a vehicle for financing healthcare needs.

          More generally, I don’t buy the assumption that our political parties are more important than good ideas, as if some sort of dialectical magic will ensure the best solutions to real-world problems will arise through negotiation and compromise. To my mind, good ideas are more important. When they exist, our political parties will align themselves with them.

          The main thing to grasp, is that the public can select good ideas on its own. We don’t need politicians to be our masters, but our servants.

          Like

    1. @Tabor
      Smarter than the marketplace on healthcare?

      I may not be but the people and the governments of just about every other advanced countries are. The evidence is clear and compelling except for the willfully blind.

      Liked by 1 person

        1. @Tabor

          In unregulated markets tend to meet the demand. Successful for-profit companies do not build a lot of excess capacity. They drive weaker companies out of the market. If competition were wide open – without Certificates of Need – there is no reason to believe we would have a lot more ICU beds available. Or do you envision savvy investors licking their chops over all the money to be made in a pandemic and building massive almost always idle capacity on speculation?

          One thing is certain. When this is all over, the USA will fare no better and probably worse by all measures than most countries with Single Payer systems and National solutions. We are already way behind many in the crucial area of testing.

          Liked by 1 person

  2. COPN has been discussed here a few times. I agree the idea needs to go away. It’s not often I agree with a lot of what Don says, but in this instance, like Len, there is more good than bad in his ideas.

    It does appear as if the conservatives in the commonwealth are in cahoots with private insurers to control the market. The sides should come together to fix the issue.

    Like

  3. COPN?

    The pandemic is going to cost more lives and do more damage than it should have so let’s look for something to blame besides the obvious. What might that obvious be?

    A President who disbands the nation’s pandemic monitor, response and coordination team over the protests of scientists and leading politicians such as Sherrod Brown. We are now in the position of a military having to fight a war without staff officers or plans. The delays will be deadly.

    A President who ignored and contradicted the scientists on the danger for at least six weeks and referred to the looming crisis as “fake news” and part of a Democratic party “hoax.” The damage done by those lies is yet to be undone. Those lies will cost thousands of lives before this is over.

    https://www.washingtonpost.com/opinions/2020/03/17/trumps-damage-is-already-done/?utm_campaign=wp_for_you&utm_medium=email&utm_source=newsletter&wpisrc=nl_personalizedforyou

    Liked by 1 person

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