Assisted Living Expansion and the Market for Nursing Home Care

Most people, given the choice, prefer as they age and need care to live in the least restrictive care setting possible. The continuum of care ranges from paid home care to assisted living to nursing home. Most nursing home care is paid for by Medicaid (67%) or Medicare (12%), rather than private monies (20%).

Researchers wanted to see how an increase in the local supply of assisted living was associated with fewer private pay—and sicker—residents in nursing homes. They looked at 13 states for which there was detailed data available on assisted living facilities. For data on nursing homes, they turned to the Centers for Medicare & Medicaid Services (which certifies facilities), and to the Minimum Data Set for facility case mix, and resident clinical and functional status.

Key Finding:

  • From 1993 to 2007, assisted living capacity grew an average 6.3 percent per year, with wide variations among states. As expected, assisted living residences attracted private-pay residents. A 10 percent increase in assisted living capacity led to a 1.4 percent decline in private-pay occupancy of nursing homes and a slight increase in overall patient acuity.

The researchers conclude that for some individuals, assisted living does substitute for nursing home care. “From a budgetary perspective,” they write, “a key issue is whether coverage for assisted living can be structured to enhance substitution away from Medicaid-financed nursing home care while minimizing substitution away from unpaid care by family and friends.”