The relationship of Medicaid payment rates, bed constraint policies, and risk-adjusted pressure ulcers

Health Services Research, August, 2004 by David C. Grabowski, Joseph J. Angelelli

We next isolated the model to those high-Medicaid homes to examine the role of Medicaid payment in a resource-poor environment. Across all nursing home markets (see column 3, Table 2), an increase in Medicaid payment had a statistically significant positive association with nursing home quality. The elasticity implied by the estimate from the model was--0.20. Put alternatively, a 10 percent increase in the Medicaid rate was associated with a 2.0 percent decrease in the risk-adjusted pressure ulcer rate within those homes with a high proportion of Medicaid residents. This elasticity is larger than the result reported above for all nursing homes nationwide implying that the level of Medicaid payment is particularly important within facilities that care for a disproportionately high number of Medicaid residents. Thus, this result provides support for our third hypothesis that Medicaid payment would be associated with higher quality within high-Medicaid homes.

When we limited the analysis to high-Medicaid homes in the most restrictive markets (see column 4, Table 2), we once again observed an attenuation of the association between Medicaid payment and nursing home quality. The magnitude of the coefficient (-0.00016) is approximately two-thirds as large as the coefficient (-0.00024) from the high-Medicaid homes model. The result is not statistically significant (at the 5 percent level), although there may be insufficient precision (N = 572) to detect an effect. A Chow test did not indicate a statistically significant difference across the Medicaid payment coefficients from the two models. Nevertheless, these results do support the final hypothesis that a change in Medicaid payment would not be associated with nursing home quality in high-Medicaid homes under a bed constraint.

In terms of other measures included within the model, the coefficient on total state agency spending on regulation per nursing home bed implies that a 10 percent increase in regulatory spending was associated with a 1 percent decrease in the incidence of pressure ulcers within the overall model. This result is attenuated in the other specifications, but the overall finding does provide some support for the idea that greater state regulation of nursing home services is associated with better quality, ceteris paribus. As a final point, it is important to note the low r-squared estimates across the different model specifications. Clearly, the observable determinants of nursing home quality included within the model only explain a small proportion of the overall variance and the issue of omitted variable bias may be of some concern within this study.

In sum, we found general support for our four hypotheses. Higher Medicaid payment was shown to be associated with better nursing home quality across all nursing home markets. This result was modified in the most restrictive nursing home markets, which provided some evidence that CON and moratoria may have a negative effect toward the provision of nursing home quality. However, we must note that--unlike some previous analyses--we were not able to show a negative relationship between Medicaid payment and nursing home quality in the most restrictive markets. The positive relationship between Medicaid payment and quality was particularly strong in those homes that care for predominantly Medicaid residents. However, this result is once again modified in the most restrictive markets.