New Cato Institute Report Reveals How Certificates of Need Make Your Healthcare More Expensive

As with many other living expenses, healthcare costs in the United States have been growing out of control. In 2025, healthcare costs grew to $5.7 trillion, a nearly 10% spike from 2024. As a percentage of GDP, the United States spent 18% in 2024, well above our global peers.

This increase in health care spending has not corresponded to better health outcomes, with the United States having the second-highest avoidable death rate in the Organization for Economic Co-operation and Development (OECD) and one of the lowest life expectancies in the developed world. Politicians have been debating how to pay for rising healthcare costs without addressing government policies that are driving them up. Addressing these high costs will require an examination of government-imposed constraints on the supply of healthcare, among the most egregious of which are Certificate of Need (CON) laws. CON mandates require medical care providers to obtain permission from the state to expand access to care, whether by building a new facility, expanding an existing one, investing in new equipment, and the like.

A recently released Cato Institute briefing paper identifies how CON mandates, imposed by 15 states, are limiting the supply and increasing the cost of health care.

Obtaining a certificate of need can be a very expensive and arduous process. As the Cato Institute report points out, many state governments use formal written objections and public hearings to determine whether a CON should be issued. This gives incumbent firms an opportunity to block new entrants into the market, preserving their market share and creating local healthcare monopolies. Per the Cato Institute paper, more than 30 states permit this “competitor’s veto”. According to the report, this type of collusion, “…would be a per se violation of the Sherman Antitrust Act if it were not facilitated by the state.”

Artificially constraining healthcare supply through CONs has led to worse health outcomes. A meta-analysis of 448 tests found that 53% of tests demonstrated that CONs lead to negative health outcomes by increasing per-service spending costs and reducing the availability of healthcare services. One notable finding from the Cato Institute report was that no test demonstrated that CONs benefited underserved populations.

This study reveals that the groups that are most harmed by CONs are areas with limited healthcare access. For example, in rural counties, CONs actively suppress the number of available hospitals, with a state like Alabama (a state with a hospital CON requirement) having 3.96 hospitals per 100,000 people, whereas Kansas (a state without a hospital CON requirement) has 32.12 hospitals. Outside of just hospitals, rural communities with CONs also have lower access to intensive care units, home health services and diagnostic imaging. This translates to worse health outcomes in these communities as well as higher costs.

CONs serve as policy-designed obstacles toward more affordable healthcare in order to benefit incumbent firms and destroy independent practices. Luckily, change is happening. For example, in April, Tennessee passed a bill that would no longer require new acute care hospitals to have a CON. This is further progress the state has made in ensuring that healthcare is more accessible. Tennessee is following in the footsteps of states like North Carolina, South Carolina, and Montana, which have rolled back CONs, helping to make healthcare accessible and affordable for those who need it.

Read the full briefing paper here.