Presenter:

Barbara Caldwell

Authors:

Barbara Caldwell

Chair: Gabriel Picone; Discussant: Edward J. Schumacher Tue June 6, 2006 10:45-12:15 Room 332

In 1974 the United States Congress passed The National Health Planning and Resources Development Act (P.L. 93-641). The primary goals of this legislation were to (1) contain health care costs and (2) increase the accessibility and quality of health services. Certificate of need (CON) regulation is one attempt to constrain health care costs by limiting the supply of certain medical care facilities. In general, a CON program involves the regulation of the building, expansion, and modernization of health care facilities and capital equipment on the part of institutional health care providers, including hospitals, nursing homes, and home health agencies. With respect to the nursing home industry, prospective nursing home owners/operators are required to demonstrate that a “need” exists for more nursing home beds. Some States also imposed a construction moratorium that prevented any expansion of existing facilities or construction of new facilities regardless of whether or not a “need” existed. These CON/moratoria programs impose a supply side constraint that creates a potential barrier to entry and in the presence of excess demand may cause a nursing home bed shortage for those patients covered by Medicaid. In 1986 Congress allowed the Federal CON requirement to lapse due to its perceived anticompetitive and excessively regulatory nature. Today forty-one States and the District of Columbia continue to have a CON, a construction moratorium, or both for nursing home facilities. Yet maintaining these regulations comes at a cost. Since quality remains a controversial subject, access to care for Medicaid-eligible persons remains an issue in many States, and medical care expenses for nursing homes continue to climb, one might question the effectiveness of retaining these regulations. This paper investigates if any differences exist in the quality of nursing home care and the access to care for nursing home residents between those States that have continued with CON and/or construction moratoria and those States that have eliminated such policies. Using data for the years 1991 through 2003 for all Medicaid-certified nursing home facilities in the United States and employing the method of difference-indifferences we find that access to care for Medicaid residents is less in those States that still employ some type of regulation than those States that have eliminated the regulation. With respect to quality of care the results are mixed depending on the measure of quality that is employed. With the risk of becoming a nursing home patient at the age of 65 at 39 percent and at the age of 85 at 49 percent as well as the aging of the current population, the areas of access to care and quality of care remain important policy issues in the nursing home industry.