The Effects of Medicare Payment Changes on Nursing Home Staffing

In light of persistent shortcomings in nursing home care quality and evidence that lower nurse staffing levels could be harmful to residents, we examine whether staffing levels are affected by changes in Medicare reimbursement rates. We exploit a 2006 change in Medicare’s methodology for adjusting provider payments for geographic differences in costs, a change that generated plausibly exogenous variation in nursing facility reimbursement rates. Our method compares facilities with higher and lower shares of Medicare resident days, which were differentially exposed to the payment changes we examine. Using panel data on US nursing homes from 2003 through 2009, we find that higher Medicare payments increased nurse staffing hours per resident day. Additional results suggest that changes in Medicare payments did not affect other measures of quality.