Moral Hazard in Nursing Home Use

30 Pages Posted: 19 Jan 2006 Last revised: 15 Jul 2022

See all articles by David C. Grabowski

David C. Grabowski

Harvard University - Department of Health Care Policy

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: October 2005

Abstract

Nursing home expenditures are a rapidly growing share of national health care spending with the government functioning as the dominant payer of services. Public insurance for nursing home care is tightly targeted on income and assets, which imposes a major tax on savings; moreover, low state reimbursement for Medicaid patients has been shown to lower treatment quality, and bed supply constraints may deny access to needy individuals. However, expanding eligibility, increasing Medicaid reimbursement, or allowing more nursing home bed slots has the potential to induce more nursing home use, increasing the social costs of long term care. A problem in evaluating this tradeoff is that we know remarkably little about the effects of government policy on nursing home utilization. We attempt to address this shortcoming using multiple waves of the National Long-Term Care Survey, matched to changing state Medicaid rules for nursing home care. We find consistent evidence of no effect of Medicaid policies on nursing home utilization, suggesting that demand for nursing home care is relatively inelastic. From a policy perspective, this finding indicates that changes in overall Medicaid generosity will not have large effects on utilization.

Suggested Citation

Grabowski, David C. and Gruber, Jonathan, Moral Hazard in Nursing Home Use (October 2005). NBER Working Paper No. w11723, Available at SSRN: https://ssrn.com/abstract=837166

David C. Grabowski (Contact Author)

Harvard University - Department of Health Care Policy ( email )

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Boston, MA 02115
United States

Jonathan Gruber

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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United States
617-253-8892 (Phone)
617-253-1330 (Fax)

HOME PAGE: http://web.mit.edu/gruberj/www/

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