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

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  • Martin B. Hackmann

Abstract

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 8.7 percent following a universal 10 percent 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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  • Martin B. Hackmann, 2019. "Incentivizing Better Quality of Care: The Role of Medicaid and Competition in the Nursing Home Industry," American Economic Review, American Economic Association, vol. 109(5), pages 1684-1716, May.
    • Handle: RePEc:aea:aecrev:v:109:y:2019:i:5:p:1684-1716
    Note: DOI: 10.1257/aer.20151057
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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