THE EFFECTS OF MARKET CONCENTRATION AND EXCESS-DEMAND ON THE PRICE OF NURSING-HOME CARE

Certificate-of-need laws and construction moratoria are policies designed to control government expenditures by limiting the number of nursing home beds in an area. These policies also represent barriers to entry and can result in excess demand. This study investigates the effect of market concentration and excess demand on private prices for nursing home care. We find evidence that both factors are associated with higher prices. Because higher prices may cause private patients to exhaust their financial resources and become Medicaid patients sooner than they otherwise would, these policies may have had indirect cost-increasing consequences.