Question

Use the Scanlon model (the dual market model of nursing home behavior) to identify the impact of an increase of the Medicaid reimbursement rate on the private price for nursing home care and the number of private-pay and Medicaid patients. What are the assumptions behind this model? Do you the assumptions are realistic? Why or Why not?

Answer 1

ans....
In the analysis of all U.S. markets, there was a positive relationship between the Medicaid payment rate and nursing home quality. The results from this analysis imply that a 10 percent increase in Medicaid payment was associated with a 1.5 percent decrease in the incidence of risk-adjusted pressure ulcers. However, there was a limited association between Medicaid payment rates and quality in the most restrictive markets. Finally, there was a strong relationship between Medicaid payment and quality in high-Medicaid homes providing strong evidence that the level of Medicaid payment is especially important within resource poor facilities.
Substandard nursing home quality has been a persistent policy issue over the past three decades (e.g., U.S. Senate 1974; U.S. General Accounting Office 1987; Institute of Medicine 2001). The relationship between poor quality and Medicaid payment rates is of particular concern in a system in which two-thirds of all nursing home bed days are covered by Medicaid (Rhoades and Sommers 2001). State Medicaid programs spent $175 billion in fiscal year 1998 with more than $44 billion directed toward nursing home care services (Health Care Financing Agency 2000).
There is currently a great deal of interest in limiting state Medicaid expenditures for nursing home care. States are forecasting record budgetary shortfalls in the current fiscal year due to declining tax revenues related to the economic recession that began in 2001. Simultaneously, more individuals are unemployed and qualifying for Medicaid services. Thus, there is a widening gap between revenues and expenditures with recent data from the National Association of State Budget Officers estimating the net state budget shortfalls at approximately $40 billion (National Association of State Budget Officers 2001). Medicaid accounts for about 20 percent of states' spending and Medicaid spending growth has outpaced national health spending since the late 1980s. Not surprisingly, states have identified nursing home spending cuts as a potential means toward addressing widening state budget shortfalls. A Kaiser Family Foundation survey of state Medicaid directors found that 49 states plan to reduce the rate of growth in Medicaid spending while 19 states plan actual cuts in their Medicaid spending for long-term care in fiscal year 2003 (Smith, Gifford, and Ramesh 2003).
Historically, the two primary approaches to reducing state nursing home expenditures involve reducing Medicaid payment rates and limiting the number of Medicaid recipients in homes via certificate-of-need (CON) laws and construction moratoria. Essentially, the first mechanism constrains the price of care and the second constrains the quantity of available beds. In theory, both of these policy measures may have negative implications toward the provision of quality. Low Medicaid payment rates may not provide nursing homes with adequate resources to provide sufficient quality, and CON laws and moratoria may impede quality competition for Medicaid recipients. Both of these issues may be particularly important for homes that care for a high proportion of Medicaid residents.
In the context of these concerns, this study addresses three primary questions:
1. How are Medicaid payment rates associated with risk-adjusted nursing home quality?
2. Does a restricted bed supply affect the relationship between Medicaid payment and risk-adjusted nursing home quality?
3. Are payment rates and bed constraint policies even more important for homes that care for a high proportion of Medicaid recipients.
Many observers view the increasing ''corporatization" of American health care as the most significant development since the passage of Medicare and Medicaid. While there is general consensus about the trend toward corporatization, there is little agreement about the impact of this development on the cost, quality, and accessibility of American health care. Recently, the for-profit segment in the modern hospital sector has become prominent with the rapid growth of proprietary corporate chains. The nursing home sector has, however, been dominated by proprietary. providers for decades, and publicly held corporations owning and operating nursing homes have been prevalent since the late 1960s.
Until fairly recently, nursing homes have not attracted substantial attention from researchers, except for studies on costs. Relatively few studies have focused on quality., and even fewer have investigated accessibility. Virtually none have focused on nursing home "chains," that is, corporations owning and operating nursing homes in a number of states. There are, however, a few empirical studies that address the impact of the type of ownership on nursing homes. They provide suggestive information about the incentive structure of these ownership forms and about what policymakers can expect if current trends continue.
This paper will explore what is known about the impact of ownership and the corporatization of health care in the nursing home industry. It will discuss the history of nursing homes, identify the current structure of the industry and the public policies that have contributed to this structure, and indicate potential results if current ownership trends persist. Finally, it will attempt to apply what is known about developments in nursing homes to the hospital sector.
Nursing home care is the third largest segment of the health care industry. It will continue to grow in prominence with increasing longevity, shifts in morbidity, and changing demographic, social, and economic patterns in the family. Given present demographic trends, (in particular, the dramatic growth of the 85 years of age and older segment of the population), the United States will need to increase its nursing home bed supply by an estimated 57 percent between 1980 and the year 1995 to keep pace with the current level of utilization (Harrington and Grant, 1985; Doty et al., 1985; Lane, 1984). Some experts predicted the need for an additional 1 million to 1.5 million beds by the year 2000, based on current utilization, prior rates of increase in utilization, and estimated rates of dependency among the elderly (Rice, 1984; Scanlon and Feder, 1984; U.S. DHHS, 1981b; Weissert, 1985). By 2040, 4.3 million elderly are expected to be institutionalized (Doty et al., 1985).
This apparent need for additional long-term care beds presents policymakers with an important opportunity to affect the future shape of the long-term care system. The debate about whether proprietary interests should be permitted to remain in the nursing home business, however, "is essentially moot" (Vladeck, 1980). For-profit interests own more than 75 percent of the nursing homes nationwide and are rapidly expanding in the home health and life care markets. Yet, today's public policy decisions on reimbursement, health planning, licensure, and the use of low-interest bonds for new construction can affect the structure of tomorrow's industry. Thus, the possibility exists for public policies to significantly affect the structure of the health care sector.
Public policymakers have a clear stake in the emerging shape of the nursing home industry. First, government has a fundamental regulatory role as the primary purchaser of formal long-term care services. It dispenses more than half of the dollars spent for nursing home care and assists in paying for nearly 70 percent of all the patients in nursing homes.1 As such, government has a responsibility to ensure that its funds are well spent.
Second, the regulatory system bears a significant responsibility for the quality of nursing home care because of the frailty of most consumers. Consumers needing long-term care generally suffer from a bewildering array of chronic physical, functional, or mental disabilities. In fact, studies indicate that the nursing home population is becoming even more aged and disabled, and this trend is likely to continue (GAO, 1982, 1983b; Manton, 1984). These consumers have only a limited ability to choose rationally among providers of long-term care. They have poor access to accurate information, limited ability to evaluate the information, and multiple disabilities that restrict their mobility and ability to switch easily from one provider to another. Thus, consumers have little to influence facilities' decisions and behavior.
Third, most nursing home patients lack advocates to represent their interests. An estimated 30 percent of the patients have no living immediate family members, and as many as half have no relatives nearby (Brody, 1977; U.S. Senate Special Committee on Aging, 1974). While physicians may recommend nursing home placement, they seldom choose the facility. Placement decisions for many individuals entering nursing homes are made by case workers and hospital discharge planners. These individuals may have the best interest of the patient at heart, but they labor under a set of incentives in which locating an empty bed—in any facility that will accept the patient—is a strong priority. Even when family members are present, they too labor under the burden of needing to locate an available bed while lacking useful information on the comparative merits of different providers.
As a result, government's role in quality assurance is essential. Moreover, it is crucial. Despite considerable improvement in nursing homes since the inception of Medicare and Medicaid, substandard quality of patient care and quality of life remain serious problems nationwide. Inadequate nutrition, dehydration, overdrugging, excessive use of physical restraints, failure to provide prescribed therapies, inattention to the psychosocial needs of nursing home residents, and ineffective government regulatory activity are but a few of the problems commonly cited (Mech, 1980; Kane, 1983; Kane et al., 1979; Himmelstein et al., 1983; Zimmer, 1979; Ohio Nursing Home Commission, 1979; Virginia Joint Legislative Audit and Review Commission, 1978; Mendelson, 1974; Texas Nursing Home Task Force, 1978; AFL-CIO, 1977, 1983b; U.S. Senate Special Committee on Aging, 1974, 1975a, b; U.S. DHEW, 1975a; Ray et al., 1980; Ouslander et al., 1982; California Health Facilities Commission, 1982; California Commission on State Government Organization and Economy, 1983; Illinois Legislative Investigating Commission, 1983; Missouri State Senate, 1978; New Jersey State Nursing Home Commission, 1978).
Furthermore, nursing home costs have escalated at an even more dramatic rate than costs for hospital care. Discrimination against recipients of Medicaid and those individuals with heavy-care needs is widely acknowledged (Harrington and Grant, 1985; GAO, 1979, 1983a, b; Feder and Scanlon, 1981; Scanlon, 1980a, b; Vogel and Palmer, 1983). Given these problems in quality, cost, and accessibility of nursing home care, information about the impact of ownership is essential to rational policymaking in long-term care, particularly given the ability of public policies to restructure the industry.