Medicaid and the Cost of Improving Access to Nursing Home Care

The Medicaid program can improve the access of Medicaid patients in nursing home care by raising the rate of return on Medicaid patients care. However, increases in the return also induce nursing homes to lower quality. To quantify this tradeoff, the author derives expressions for three elasticities: (1) the elasticity of access with respect to Medicaid expenditures, (2) the elasticity of access with respect to quality, and (3) the elasticity of Medicaid expenditures with respect to the rate of return. Using New York State data, he finds that a 10 percent increase in Medicaid expenditures induces a 4.1 percent increase in Medicaid patient care and a reduction in nursing home expenditures on services provided patients by about 3.4 percent. Copyright 1992 by MIT Press.