Maryland’s Certificate-of-Need Law for Higher Education

Walter Olson

I’ve got a new article in Reason on an unusual regulatory arrangement in Maryland that requires universities to ask permission of the state higher education commission to start new degree programs, and invites rival institutions to file objections on the grounds that they would be harmed by the resulting competition for students.

In short, it replicates for higher education the kind of “certificate of need” rules strongly criticized by libertarian thinkers in the realm of health care. As in health care, I write, the “result can be state‐​enforced cartel arrangements that protect inefficient incumbents, slow innovation, and leave consumers with fewer and less attractive choices.”

The Maryland program is not, for the most part, rationalized as a matter of cost containment and, in fact, is very poorly suited to such a purpose. It does nothing to curb the number of students that can be admitted, only the opportunities they can be given. In practice, the rules often protect incumbent programs with low rates of student completion, which are among the worst offenders in contributing to government spending and burdensome student debt.

The fiercest disputes under the law tend to be over degrees in sought‐​after professional fields like business, engineering, and computer technology. (The Maryland Higher Education Commission guidelines provide that basic liberal arts programs are not normally suitable subjects for objection since colleges have a core interest in offering them.)

Contrary to the picture sometimes painted by “campus life gone wild” accounts, the top fields in which Maryland’s major state system awards degrees are sober and career‐​oriented: business, computers, and health professions. (All the social sciences combined, including economics and political science, come in as fourth.)

After documenting some recent battles under the law, worsened by a racial angle in which the state tries to bend over backwards to assist historically black colleges and universities (HBCUs), I quote a Baltimore Sun editorial: “The insanity of it” is that the conflict has little to do with the well‐​being of the students and “everything to do with protecting the institutional prerogatives and egos of the schools.” The best way to promote students’ interests, I argue, would be to allow competition and choice. You can read the piece here.