Staffing Subsidies and the Quality of Care in Nursing Homes
Concerns about the quality of state-financed nursing home care has led to the wide-scale adoption by states of pass-through subsidies, in which Medicaid reimbursement rates are directly tied to staffing expenditure. We examine the effects of Medicaid pass-through on nursing home staffing and quality of care by adapting a two-step FGLS method that addresses clustering and state-level temporal autocorrelation. We find that pass-through increases staffing by 4.4% in higher quality nursing homes and improves quality of care in lower quality nursing homes by an amount equivalent to one sixth the inter-quartile range of the quality distribution.
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