Medicaid and Nursing Home Care:

Cost Increases and the Need for Services Are Creating Problems for the States and the Elderly

IPE-84-1: Published: Oct 21, 1983. Publicly Released: Oct 21, 1983.

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In response to a congressional request, GAO assessed Medicaid's nursing home services nationwide to provide information on the characteristics of nursing home residents, program expenditures, nursing home bed supply, and Medicaid reimbursement policies.

GAO found that most nursing home residents are functionally dependent or mentally impaired and often stay very long in the nursing homes. Residents with long stays are more likely to be unmarried women with mental illness who are supported by Medicaid. There are indications that the at-risk population will grow as well as the care needs for the elderly who enter nursing homes. Medicaid expenditures for nursing home care have increased at a high rate and all states have problems financing this program. However, the amount they spend for this service varies substantially, and federal medical assistance, while increasing spending for nursing home services in some poorer states, does not equalize expenditures across states. States reimburse nursing homes through the Medicaid program in many different ways and, across the states, the range of reimbursement rates for similar services is very wide, making cost comparisons difficult. Because most state reimbursement systems are not designed to pay the total cost of care, there is an economic incentive for nursing homes not to admit patients for whom care costs will be high. States vary widely in their ratio of nursing home beds available to elderly population. However, the rate of increase in bed supplies decreased between 1976 and 1980. There are indications of an inadequate supply of beds in the lowest-bed states and an overuse of nursing home services in the highest-bed states. Recent legislative changes to place Medicare patients in scarce nursing home beds may increase problems in Medicaid patients' access to care.

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