Medicaid's effect on the elderly: how reimbursement policy affects priorities in the nursing home

This article examines the social impact of Medicaid policy on the elderly in long-term care and identifies a previously unrecognized problem produced by Medicaid in New York State. Recent fieldwork in proprietary nursing homes in New York City shows that this state's Medicaid system results in a selection hierarchy on admissions and within nursing homes not only in terms of sponsor of payment but also in value, based on residents' functional level. Specifically, New York State Medicaid's Resource Utilization Groups (RUGs II) system is responsible for a new and startling phenomenon in long-term health care of the elderly: the creation of "minihospitals" in lieu of traditional skilled nursing facilities. This problem indicates the complex ways in which reimbursement policy drives priorities in nursing homes and creates unintended negative outcomes. In light of this consideration, various policy alternatives to Medicaid that would improve the plight of the elderly in long-term care are suggested and evaluated.