The roles of Medicaid and economic factors in the demand for nursing home care.

OBJECTIVE: To examine nursing home demand, focusing on how Medicaid affects demand, the role of economic variables, and on important interactions between explanatory factors. DATA SOURCES: From the 1989 National Long Term Care Survey, a nationally representative sample of community-based and institutionalized elderly persons with disabilities (N = 3,837). Survey data are merged with state- and county-level data on Medicaid policy and local market conditions. STUDY DESIGN: Sample members are classified as Medicaid-eligible or private pay, were they to enter a nursing home. The probability of being in a nursing home is estimated separately on these two groups using probit. To explore interactions, these subsamples are further divided between married and unmarried persons and between persons with high and low levels of disability. PRINCIPAL FINDINGS: Demand for nursing home care systematically differs, depending on eligibility for Medicaid. This is attributed in part to the structure of Medicaid benefits. Although economic factors do not appear important to demand decisions in the aggregate, they play a larger role among married persons relative to unmarried persons, and among less disabled persons relative to highly disabled persons. CONCLUSIONS: Understanding the nature of nursing home demand requires careful consideration of the different consumption choices people face by virtue of their eligibility for public benefits. Because behavioral responses to changes in policy are found to differ among various groups of disabled persons, policymakers should be sensitive to how these differences affect the efficiency and distributional effects of specific policy changes.