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Incentivizing Better Quality of Care: The Role of Medicaid and Competition in the Nursing Home Industry

Martin B. Hackmann

NBER Working Paper No. 24133
Issued in December 2017
NBER Program(s):The Program on Aging, The Health Care Program, The Health Economics Program, The Industrial Organization Program, The Public Economics Program

This paper develops a model of the nursing home industry to investigate the quality effects of policies that either raise regulated reimbursement rates or increase local competition. Using data from Pennsylvania, I estimate the parameters of the model. The findings indicate that nursing homes increase the quality of care, measured by the number of skilled nurses per resident, by 8.8% following a universal 10% increase in Medicaid reimbursement rates. In contrast, I find that pro-competitive policies lead to only small increases in skilled nurse staffing ratios, suggesting that Medicaid increases are more cost effective in raising the quality of care.

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Document Object Identifier (DOI): 10.3386/w24133

Published: Martin B. Hackmann, 2019. "Incentivizing Better Quality of Care: The Role of Medicaid and Competition in the Nursing Home Industry," American Economic Review, vol 109(5), pages 1684-1716.

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