Medicaid payment rates for nursing homes, 1979-86

The issue of the cost containment effects of payment systems on per diem payments by Medicaid to nursing homes is addressed. Estimates of real payment rates as a function of broadly defined payment system classifications and economic and demographic variables using State-level data are presented. Little support for the notion that prospective payment systems substantially restrain payment rates for intermediate care facilities is found, but some model specifications indicate possible cost savings associated with prospective payment systems for skilled nursing facilities. Significant methodological concerns that need to be addressed in future research on the cost containment effects of payment systems are also discussed.