The Effects of Medicare Payment Changes on Nursing Home Staffing

In light of persistent shortcomings in nursing home care quality and evidence that higher nurse staffing levels could benefit residents, we examine whether staffing levels are affected by changes in Medicare reimbursement rates. We exploit a 2006 change in Medicare’s methodology for adjusting provider payments for geographic differences in costs, a change that generated plausibly exogenous variation in nursing facility reimbursement rates, and we compare facilities whose revenues were differentially affected. Using panel data on U.S. nursing homes from 2003 through 2009, we find that higher Medicare payments increased staffing hours per resident day among low-quality facilities, defined as those with high counts of inspection deficiencies. The increases in staffing hours per resident day did not result from decreases in the number of resident days. However, we find no evidence that higher Medicare payments led to improvements in any of a large number of process and outcome measures of quality.