required by the Omnibus Budget Reconciliation Act of 1987. Most studies on this topic were published in the mid- to late 1980s and relied on data from the late 1970s and early 1980s. Moreover, several studies focused on data from one or a few states, making it hard to generalize to the nation as a whole. In addition, the measures of quality in most of these studies were quite rudimentary, especially in terms of outcomes. Again, even less is known about reimbursement for nonmedical home care services and its effect on quality of care. The additional research recommended here is important to help policy makers make better-informed decisions about payment for long-term care.

In the meantime, because the quality of long-term care is already problematic, states and the federal government should be cautious in their quest for Medicare and Medicaid savings. Because many of the recommendations proposed in this report will likely mean additional costs for providers, (e.g., for additional staff), the withdrawal of substantial resources from long-term care providers is a matter of concern.

Although research on nursing homes suggests that higher rates are not necessarily used to improve resident care and that many elements of quality care do not require spending more money, direct resident care expenditures are particularly vulnerable to rate reduction initiatives. Lowering Medicaid nursing home reimbursement rates may be especially problematic in states with high levels of excess demand, since nursing homes in these states do not have to compete for consumers on the basis of quality. Reducing excess demand would lower the quality risks of reducing nursing home rates, but probably would result in higher Medicaid expenditures overall.

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