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In the 1970s, policymakers tried to control healthcare costs by limiting the construction of new health facilities through certificate of need (CON) laws. However, empirical studies of such limits on hospital construction could not find convincing evidence that this type of regulation was effective. Despite this evidence, there is a renewed interest in CON regulation to control Medicaid nursing-home expenditures. Given past history, why does renewed interest in this type of regulation now exist? Have the states now learned how to make CON regulation effective? Did limits on nursing-home capacity cause users to switch to alternatives such as home care and assisted living facilities? Can CON regulation work in the nursing home industry when it failed to work in the hospital industry?

David Grabowski, assistant professor in the Department of Health Care Organization and Policy at the University of Alabama at Birmingham, will report on a new study-on the effects of state CON regulation of nursing homes on state Medicaid expenditures (Inquiry, Summer 2003)-he recently coauthored. The study incorporates data from forty-nine states over eighteen years and evaluates the effect of the repeal of CON laws on Medicaid expenditures for nursing homes and home health care.