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Nursing home subsidies should be targeted to those who need them most

With nursing home care averaging over $37,000 per year for private payers, most nursing home residents enter with Medicaid support or soon "spend down" to qualify for Medicaid support for this care. Nationally, 29 percent of Medicaid funds go to support nursing home care. If current political efforts succeed to both restrain Federal Medicaid spending and offer States greater flexibility in the design of their Medicaid programs, then States may be able to alter the basic structure of nursing home subsidies, probably restricting them to those most in need.

A new study suggests that nursing home subsidies targeted to people who lack informal care resources and those who have greater levels of disability will be more efficient. The demand for nursing home care appears to be relatively unresponsive to price in these cases. It has been feared that if the cost of institutional long-term care is lowered, families will abandon their caregiving role at expense of taxpayers. The results of this study suggest that many of these fears may be unfounded. Few people perceive nursing homes as a desirable place to live, and thus, most people prefer home- and community-based options over institutional options, explains James D. Reschovsky, Ph.D., of the Center for Studying Health Systems Change, and formerly with the Agency for Health Care Policy and Research.

On the other hand, the financial and time burdens placed on family members to support a highly disabled elder in the community can become considerable and often untenable. When the family member's disability becomes sufficiently severe, the family will seek nursing home care regardless of the price. In contrast, significant numbers of nursing home residents have levels of disability low enough to suggest that home and community settings might be more appropriate and cost effective. Findings from this study are based on data from the 1989 National Long-Term Care Survey, a nationally representative sample of community-based and institutionalized elderly people with disabilities. The survey data were merged with State- and county-level data on Medicaid policy and local market conditions.

For more details, see "The roles of Medicaid and economic factors in the demand for nursing home care," by Dr. Reschovsky, in the October 1998 Health Services Research 33(4), pp. 787-813.

Reprints (AHCPR Publication No. 99-R005) are available from the AHCPR Publications Clearinghouse.

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