The marginal cost of nursing home care, New York, 1983

Many believe that nursing homes exclude heavy-care Medicaid patients because their costs exceed the Medicaid reimbursement rate. This paper tests whether this was true in New York in 1983 by calculating the marginal costs of a day of nursing home care and comparing them with the per diem Medicaid reimbursement rate. Contrary to popular beliefs, the marginal cost of the most dependent SNF patient was found to be between $9 and $12 less per patient day than the average Medicaid reimbursement rate for SNF patients. This suggests that excess demand, rather than lower-than-cost reimbursement rates, was creating the heavy-care access problem in New York in 1983. Policy solutions differ depending on the cause of the access problem. The strengths and weaknesses of the different policy solutions are compared.