9/2/2021 3 Ways Government Regulation Is Creating a Hospital Bed Shortage - Foundation for Economic Education

3 Ways Government Regulation Is Creating a

Hospital Bed Shortage
When we allow the government to interfere with the market, as it has in
healthcare for over a 100 years, it always leads to higher costs, less access,
and lower quality.

Tuesday, August 31, 2021

Image Credit: iStock.com/Kiwis

Hannah Cox

Politics COVID-19 Hospitals Health Care

H
ospital beds are again filling up across the country as America copes
with another variant of the COVID-19 virus. Three quarters of
intensive care unit (ICU) beds are occupied at the moment, and 28 percent
of those are by COVID patients.

Furthermore, almost half of all states report their hospitals’ ICU beds have
exceeded 75 percent capacity. And hospitals across the US report 75
percent of their general inpatient beds are also filled, with 13.4 percent of

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9/2/2021 3 Ways Government Regulation Is Creating a Hospital Bed Shortage - Foundation for Economic Education

those being COVID-19 patients.

This is a big problem. Not only does that mean people with the coronavirus
may be unable to access needed and timely care, it also means that
individuals seeking assistance for other pressing medical issues may be
severely delayed.

But, when outlets merely report that hospitals are at or approaching

capacity, it neglects a key part of the equation. 75 percent of beds being
full sounds scary, but people need to ask: 75 percent of what number of
beds in the first place? 75 percent of 200 beds in a given region is a lot of
patients; 75 percent of four beds is a different story.

In reality, it doesn’t take much for most hospitals to reach “capacity,”

because their supply of beds is already severely restricted even before an
emergency takes place. And the reason for that traces right back to
government policies that make healthcare more expensive and harder to
access for all. Let’s examine a few.

Certificate of Need (CON) Laws

Many Americans are unaware of the presence of Certificate of Need (CON)
laws. These laws are appropriately named because they are a total con: an
arrangement between the government and large healthcare providers to
limit competition and keep prices artificially high.

This is a textbook case of cronyism, which John Stossel defines as “the

economic system in which the marketplace is substantially shaped by a
cozy relationship among government, big business, and big labor. Under
crony capitalism, government bestows a variety of privileges that are
simply unattainable in the free market.” Cronyism is not to be confused
with free-market capitalism.

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Implemented in the 1970s, a total of 27 states still have CON laws in

operation, and many of those states—like Alabama, Mississippi, and
Arkansas—are the ones most strapped for hospital beds at the moment.

That’s because these laws arbitrarily restrict the amount of beds in a state,
as well as the number of hospitals and other medical equipment. They do
this by mandating would-be providers go before a board and show
evidence of their need to add additional beds, equipment, services, and
locations. At the same time, their competitors get to come in and argue
against them, and often win out—especially when large hospital
corporations (who are often in cahoots with regulators) are pitted against
independent providers.

All of this means consumers have fewer healthcare options and higher
costs for services.

The US only has 2.6 beds per 1,000 people, which is below the rate we see
in countries like Italy, China, and South Korea. According to reporting by
Reason, “Since March 2020, states that use CON laws to regulate the
supply of hospital beds have seen an average of 14.99 days per month
where ICU capacity has exceeded 70 percent, according to Matthew
Mitchell, a senior research fellow at the Mercatus Center who crunched
Department of Health and Human Services (HHS) data...Meanwhile, states
that do not have CON laws governing the supply of hospital beds have
seen an average of just 8.65 days per month with ICU capacity exceeding
70 percent, according to Mitchell.”

Mitchell and his colleagues also found that states using CON laws to
regulate healthcare have fewer hospitals, dialysis clinics, and surgical
centers. And on top of all of that, even more studies show CON laws lead to
lower quality of care, higher risks of complications after surgery, and even
higher mortality rates for some conditions.

All of this was true and problematic long before COVID, but the pandemic
exacerbated the pre-existing condition.

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Mandatory Vaccinations for Healthcare

Workers
The government’s contribution to the healthcare shortage does not end
with CON laws, though. It has also implemented policies and pushed
practices that have led to a shortage in healthcare workers.

As one nurse in Tennessee, who spoke to me on the condition of

anonymity, put it, “To be honest, the biggest problem we’re having is
nurses to staff the beds. We say we are maxed out, but it’s usually more
that we don’t have the staff to take care of the people rather than the
physical space to put them.”

Why don’t hospitals have the nurses they need? Where to start.

Nurses unquestionably have one of the hardest jobs in the country—

physically and emotionally. They work incredibly long hours, have to move
heavy patients, are often abused by patients in distress, and deal with all of
the grossest aspects of the human body. The pandemic has only added to
that, and many have expressed feelings of despair and burnout for
months.

They do all of this even while their salaries have been stagnating for some
time.

Now, on top of everything else, they are being forced to make a choice
between getting vaccinated or leaving their jobs. And many have decided
enough is enough. Bloomberg reports 1 in 8 nurses say they will not take
the vaccine.

As a result, 150 medical professionals were fired in Houston over refusals to

take the vaccine. Shortly thereafter, Houston suffered a massive nurse
shortage. Similar stories are cropping up across the country. At the
beginning of the pandemic, nurses were touted as the heroes of the
pandemic. Now that they’ve worked to bring us through the worst of it,
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they’re treated as disposable—an attitude that is expediting the exodus of

many nurses. Reportedly 20 to 30 percent of frontline healthcare workers
say they are considering leaving the profession.

It’s important to remember that the hospitals are largely forcing vaccines
on their workers out of fear of liability and governmental pressure. But
while they will insist these mandates are to keep customers safe, the
science doesn’t actually match up. First, nurses have been exposed to
COVID more than any other group, and many have built up natural
immunity as a result. Secondly, data from the CDC shows vaccinated
people can still get and transmit the virus, and that these people carry just
as many particles of the virus in nasal passages and their throat as
unvaccinated people.

Occupational Licenses and Other Provider

Restrictions
Did you think we were done? Hardly. We’ve barely scratched the surface of
all the ways the government has meddled in the healthcare market and
blocked access to affordable care.

Up until the pandemic, states kept a whole hoard of crony regulations on

the book meant to restrict supply, prevent competition, and keep prices
artificially high. While many states have eased the enforcement of these
laws since the pandemic began, their presence in the first place has still
created barriers to care and the inability for the healthcare market to
increase supply to the levels needed to address a crisis.

One of those regulation types is occupational licenses, which litter the

healthcare sector more than virtually any other field. Often implemented
under the mantle of public health and safety, all occupational licenses
really do is ensure people have to pay the state to work. They often include
expensive and time-consuming barriers to entry in a field, high fees, and
the inability to take one’s skill set across state lines. On top of that, many

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arbitrarily exclude large numbers of the population from working in a

certain field, or prevent people from fully offering the services they are
trained in.

For one example, nurse practitioners must complete years of schooling

and training. By all metrics they are more than equipped to handle the
vast majority of issues that come before a general practitioner. But in most
states they are prohibited from seeing patients unless they work under a
doctor. Why? Because this prevents them from competing with doctors
and keeps prices and doctor salaries high. There’s a massive shortage of
general practitioners in the country, which could be quickly eased by
widening the scope of practice for nurse practitioners—which would also
free up the doctors’ time for more pressing matters. But cronyism stands
as a barrier.

Another example of government policies that create supply shortages in

healthcare are “ethical clauses” within occupational licenses. In many
states people with a record are prohibited from obtaining such a license,
permanently blocking them from employment opportunities in numerous
fields. This not only prevents millions of Americans from rising, it also
means important jobs go unfilled. When you consider all of the petty laws
on our books and how easy it is for someone to transgress one of them,
you begin to recognize how silly and unjust these laws are.

Lastly, in another example, doctors in Mississippi who wished to make

house calls during the pandemic were blocked from doing so. Why?
Because state regulators capped the number of licenses for home
healthcare services in 1981 under the argument that no more would ever
be needed.

Occupational licenses are a dirty scam the public keeps falling for. They
aren’t in place to keep you safe (as if the government even could). They are
in place to keep your healthcare prices high. And when a pandemic hits,
that artificial restriction of supply also means you can’t access the care you
need.

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Another corrupt government regulation that blocks supply is telehealth

restrictions. These regulations have impeded care for decades, and the
government has worked hard to ensure existing providers were blocked
from the competition telehealth could provide.

Though some of these restrictions were also eased at the beginning of the
pandemic, the market can’t create the needed infrastructure to provide
these services overnight, and so the industry has been operating from
behind the 8-ball.

In conclusion, COVID is a crisis, and it is one we should all be concerned

about. But we should also be aware that this is a crisis largely of our own
government’s making.

When we allow the government to interfere with the market, as it has in

healthcare for over a 100 years, it always leads to higher costs, less access,
and lower quality: to the harm of the many and to the benefit of a
privileged few. This isn’t capitalism, it’s cronyism—it’s important people
know the difference.

Hannah Cox
Hannah Cox is the Content Manager and
Brand Ambassador for the Foundation for
Economic Education.

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