By George Will
Thursday, August 16, 2018
Governments, seemingly eager to supply their critics with
ammunition, constantly validate historian Robert Conquest: The behavior of any
bureaucratic organization can best be understood by assuming that it is
controlled by a secret cabal of its enemies. Consider North Carolina’s
intervention in the medical-devices market.
Born in India, Dr. Gajendra Singh is an American citizen
and a surgeon in Winston-Salem who wants to supply something useful for which
there is a strong demand. North Carolina’s government is, however, an almost
insuperable impediment to his doing so.
Singh runs a medical diagnostic-imaging center where
patients can get X-rays, echo-cardiograms, ultrasounds, and CT (computed
tomography) scans. It cannot, however, be a full-service center without an MRI
(magnetic resonance imaging) machine, and local hospitals offering MRIs are
averse to competition.
Americans with high-deductible insurance plans — which
are increasingly prevalent — especially need low-cost diagnostic services. The
median Winston-Salem household income is about $40,000. The average MRI scan at
a North Carolina hospital costs $2,000. Singh charges $500-$700 for the MRIs he
does using rental machines that the state’s harassing law requires to be moved
once a week. Singh wants to buy an MRI machine. North Carolina, however, has a
“certificate of need” (CON) law, requiring Singh to prove to the Soviet-style
central planners in the state government that Singh’s area needs another
machine.
Such state and local CON laws proliferated in the 1970s
as the federal government began pouring money into health care, and
government-funded hospitals tried to protect their revenue streams. Just for
the privilege of submitting an application to buy an MRI, Singh would have to
pay a nonrefundable $5,000 fee and be prepared to spend $400,000 (lawyers,
consultants, economists) to surmount the opposition of determined competitors.
The only two providers of fixed (not mobile rental) MRIs in Singh’s county are
at two multibillion-dollar hospitals.
Fortunately, Singh has the support of the Institute for
Justice’s litigators, who are wielding on his behalf four provisions of North
Carolina’s constitution: First, “Perpetuities and monopolies are contrary to
the genius of a free state and shall not be allowed.” Second, “No person . . .
is entitled to exclusive or separate emoluments or privileges.” Third, “No
person shall be denied the equal protection of the laws.” Fourth, Singh has a
due-process right to participate in the health-care market without arbitrary,
irrational impediments.
There are states where aspiring entrepreneurs must pay
(application fees, lawyers) just to try to surmount the opposition of
established businesses in order to get a CON entitling them to open a car
dealership, operate a moving company, run a food truck, or enter other areas of
enterprise. And the audacity of economic interests clamoring for government
protection from domestic competition seems to be increasing as the Trump
administration, with tariffs and import quotas, practices crony capitalism to
protect favored industries and companies from foreign competition.
For example, this month a federal court — following the
example of other courts that have swatted aside cases from Boston, Chicago,
Philadelphia, and Georgia — unanimously rejected this preposterous argument
from Miami-Dade County (Florida) taxi owners: The U.S Constitution says private
property shall not be taken for “public use” without just compensation, so they
should be compensated because the government has permitted ride-sharing
services (e.g., Uber and Lyft) that have substantially reduced the value of the
owners’ taxi medallions. Governments sell medallions and keep them scarce in
order to keep prices high for the benefit of the government and past buyers.
Displaying heroic patience in the presence of
meretriciousness, the court explained that the government had not given the
medallion owners an entitlement to protection from competition. As a federal
judge said in a similar case, “A license to operate a coffee shop doesn’t
authorize the licensee to enjoin a tea shop from opening.”
There are three important lessons from North Carolina’s
CON mischief. First, domestic protectionism that burdens consumers for the
benefit of entrenched economic interests (e.g., occupational licensing that
restricts entry to professions for no reason related to public health and
safety) is even more prevalent and costly than are tariffs and import quotas
that interfere with international trade. Second, the sprawling, intrusive,
interventionist, administrative state — a.k.a. modern government — that recognizes
no limits to its competence or jurisdiction is inevitably a defender of the
entrenched, and hence a mechanism for transferring wealth upward. Third, only
courts can arrest the marauding of the political class when, with unseemly
motives, it pretends to know more than markets do about society’s needs.
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