Nursing home payroll subsidies and the trade-off between staffing and access to care for Medicaid enrollees

Payroll subsidies are a promising tool for increasing nursing home staffing levels. However, promoting increased staffing may come at the expense of access to care for Medicaid enrollees if it enables nursing homes to attract more lucrative, non-Medicaid residents. In this study, I examine a set of payroll subsidies offered by state Medicaid programs between 1998 and 2010, using nursing home-level variation in subsidy generosity to identify subsidy effects. I find that each additional (2010) dollar of subsidies offered per resident-day increased staffing by just over 10 min per resident-day, but decreased the Medicaid share of new nursing home admissions by about 1.8 percentage points. These figures translate into overall average treatment effects equivalent to an increase in staffing by approximately 7.4% of pre-subsidy average staffing, and a decrease in the Medicaid-share of admissions by 11.5% relative to the pre-subsidy baseline. The subsidies also increased nursing home resident turnover and decreased the average care needs of newly admitted residents. Overall, these results highlight that while nursing home payroll subsidies are effective tools for encouraging increased staffing levels, the subsidies also can lead to changes in nursing home admissions and the characteristics of admitted residents.