Association for Public Policy Analysis & Management

Over half of state Medicaid programs have at some point offered payroll subsidies to nursing homes, often in an effort to improve the quality of nursing home care received by Medicaid enrollees. This research provides new evidence on the effect of payroll subsidies on staffing and nursing home care quality through study of a large set of nursing home payroll subsidies established and sometimes repealed by state Medicaid programs between 1996 and 2015. One contribution of this research includes construction of a dataset of state Medicaid nursing home policies during this time period that delineates the size and structure of different state payroll subsidies and which allows for identifying when subsidies were adopted coincident with other types of policy changes. The causal effect of payroll subsidies on nursing home staffing levels is identified using two distinct but complementary sources of variation. The first source of variation is state level variation in when and whether nursing home payroll subsidies were adopted. The second source of variation is in the effective subsidy rates faced by nursing homes within states adopting payroll subsidies, a result of all states that adopted a payroll subsidy having structured it so that the effective rates varied substantially across nursing homes within each adopting state. These two sources of variation allow for estimating both within and across state estimates of the effects of payroll subsidies, lending themselves to application of synthetic control and intensity-of-treatment type research methodologies. Using these methods, this research also compares the relative efficacy of the several different types of payroll subsidy designs adopted by states and the extent to which subsidy efficacy varies by local nursing home market structure.