Nursing Home Certificate-Of-Need Laws Should Be Repealed

Imagine if your state had a regulation explicitly limiting the number of hotels in a local area. Rather than letting the market dictate the supply of hotel beds, the number of beds would be set by a regulatory body. One does not need a degree in economics to quickly see that this bed constraint would distort competition. As demand grew in a local market, new hotels could not easily open, resulting in higher hotel occupancy and fewer beds available for consumers. Because existing hotels could get customers regardless of the quality they offer, there would be little incentive to invest in good service or make big capital improvements to the facility. Hotels would also be able to charge higher prices even in the context of lower quality. This type of rule for hotels is unfathomable, yet many states still have such a rule for nursing homes in the form of a “certificate-of-need” law. Certificate of need constrains bed growth by employing a need-based evaluation of all applications for new construction. Some states even go further by implementing a construction moratorium that effectively prevents any market expansion. The policy rationale for these regulations is that lower capacity ultimately results in lower public expenditures, but like the hotel example, it actually benefits providers and harms consumers. This regulation diminishes quality of care and reduces bed availability in nursing homes, while raising prices. It is time for states to repeal this pernicious policy. Ce...
Source: Health Affairs Blog - Category: Health Management Authors: Tags: Featured Medicaid and CHIP Medicare Quality certificate-of-need laws nursing homes roemer's law Source Type: blogs