State Assisted Living Policy: 1998. Certificate of Need (CoN)


Six states have certificate of need requirements for assisted living: Connecticut, Illinois, Kentucky, Missouri, New Jersey, and New York. Three states (Arkansas, North Carolina, and North Dakota) have a moratorium on licensing new facilities. North Carolina's moratorium has exceptions for counties in which the average occupancy rate is above a specified threshold. New York, which reimburses assisted living as a Medicaid service, limits the number of contracted units to 4,200 and removes 4,200 beds from the nursing home facility bed need estimates. New Jersey retains a CoN requirement but provides an expedited review. Legislation passed in Connecticut repealing the CoN requirement was awaiting action by the Governor at the time this paper was published.

The certificate of need process was designed to allocate scarce health care resources by controlling the supply, and therefore utilization, of hospital and nursing home care. In today's more service rich environment, certificate of need in long-term care limits consumer choices and protects existing providers. State experience suggests that it is impossible to measure the appropriate supply of nursing homes. The supply of nursing homes ranges from 19.2 beds per thousand elderly in Nevada to as high as 72.9 beds per elderly residents in North Dakota. Applying certificate of need measures in an era in which extensive home care and assisted living services are available further weakens an already flawed policy.

A certificate of need requirement for nursing homes assumes that a given service, e.g., nursing homes, is the only appropriate choice for an individual. If we could measure the number of people who needed a particular service, states could regulate supply to meet the measured need. However, many people have needs that can be met in more than one setting. The same individual may qualify for and enter a nursing home, remain at home with home care and home health services, remain at home and attend an adult day care program, move to an adult foster care program, or move to an assisted living residence. With this overlap of services, measuring the need for one service, nursing home or assisted living, fails to acknowledge the availability of other existing and/or potential resources. Not only are certificate of need programs unable to accurately measure this overlap, it would limit the choices available to consumers. The value of certificate of need was its ability to control spending. However, other mechanisms have evolved in the health care arena e.g., managed care, that have taken on this responsibility. While controls are not yet needed in Medicaid spending on assisted living, other approaches should be devised to anticipate growing demand over time.

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