Federal Judge Says Courts Don’t Have To Buy ‘Nonsensical Explanations’ for Bad Regulations

After finding evidence of rising costs and reduced access, the federal judge of Mississippi is allowing a significant challenge to state’s Certificate of Need health care regulations (CON) to continue.

This is a modest, but significant win in the ongoing fight against CON laws at state level, which are barriers to certain professions.

As a Mississippi resident, ReasonAs previously reported by the author, this issue concerns an artificially imposed and arbitrarily limited number of home health agency licenses. These are businesses that provide housecalls to nurses or other professionals. Since 1981 when the limit was imposed by the state legislature, the CON license hasn’t been issued. The state has not issued a new CON license since 1981, when the legislature imposed the cap. This is a flawed policy which was made more apparent by COVID-19.

“This moratorium or some variation thereof has been in effect for over 40 years. Four decades! In the Order issued this week, Judge Carlton W. Reeves stated that the home health patient population has increased by at most 194 percent since the moratorium was imposed. This will allow the case on its merits to move forward. The only way to enter the market is if an existing operator will sell their CON.

Reeves decided that Charles Slaughter (a physical therapist who wants to establish his own home healthcare service) had shown enough evidence that CON laws in Connecticut were not being followed as intended.

It’s much more than what it seems at first glance. The regular readers Reason are probably well aware of the practical and policy problems created by CON laws—but as a legal matter, it can be difficult to challenge those regulations because of the rational basis test. For those who are not familiar with the rational basis test, it is possible for government lawyers to get judges to dismiss cases by simply explaining why regulations exist. The legal doctrine of this kind is very deferential to state power even when it is not the original intention.

A court won’t even consider hearing a case like this one on merits until plaintiffs convince it. The Mississippi Justice Institute representing Slaughter has done this.

Even the “great deference” due to regulators under the rational basis standard, Reeves wrote, “does not…require courts to accept nonsensical explanations for regulation.”

Slaughter’s suit, filed originally in December 2020, indicates that 16 states do not have any CON laws to regulate home care agencies. Mississippi is the only state with an arbitrarily set limit on how many CON licenses it can issue. This rule is unnecessary when 48 states have it without any problems. The Mississippi Justice Institute attorneys argue that this law is absurd and serves no other purpose than to prevent legitimate competition or create an oligopoly of providers.

Reeves made it clear this week that they did have a point.

Reeves wrote that the plaintiff has made allegations which negate the state’s pretended bases for the laws. The allegations show that CON laws lead to more expensive, less accessible and poorer quality healthcare. What’s more, plaintiff claims that the basis for CON laws and the moratoria is pure economic protectionism—an illegitimate government interest.”

However, this doesn’t automatically mean Mississippi will have to repeal its anti-competitive home healthcare license ban. It does however mean the state must defend these nonsensical anticompetitive rules before the courts, and not just ignore the challenge because regulators are free to do what they want.

Also ThisIt should be entertaining to see.