Annual Expenditures for Nursing Home Care

Private and Public Payer Price Growth, 1977 to 2004

Published In: Medical Care, v. 47, no. 3, Mar. 2009, 295-301

Posted on RAND.org on January 01, 2009

by Kate Stewart, David C. Grabowski, Darius N. Lakdawalla

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BACKGROUND: Long-term nursing home care is primarily funded by out-of-pocket payments and public Medicaid programs. Few studies have explored price growth in nursing home care, particularly trends in the real cost of a year spent in a nursing home. OBJECTIVES: To evaluate changes in private and public prices for annual nursing home care from 1977 to 2004, and to compare nursing home price growth to overall price growth and growth in the price of medical care. RESEARCH DESIGN: We estimated annual private prices for nursing home care between 1977 and 2004 using data from the National Nursing Home Survey. We compared private nursing home price growth to public prices obtained from surveys of state Medicaid offices, and evaluated the Bureau of Labor Statistics Consumer Price Indexes to compare prices for nursing homes, medical care, and general goods and services over time. RESULTS: Annual private pay nursing homes prices grew by 7.5% annually from $8645 in 1977 to $60,249 in 2004. Medicaid prices grew by 6.7% annually from $9491 in 1979 to $48,056 in 2004. Annual price growth for private pay nursing home care outpaced medical care and other goods and services (7.5% vs. 6.6% and 4.4%, respectively) between 1977 and 2004. CONCLUSIONS: The recent rapid growth in nursing home prices is likely to persist, because of an aging population and greater disability among the near-elderly. The result will place increasing financial pressure on Medicaid programs. Better data on nursing prices are critical for policy-makers and researchers.

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