Local Government Nursing Homes: Incentives, Quality, and Sustainability
Date:
Medicaid supplemental payments are a vital but often opaque tool in financing long- term care, designed to stabilize providers and ensure access for low-income populations. Yet these payments also create powerful incentives that shape ownership and governance decisions. This paper examines the growing trend of nursing homes converting to local government ownership as a strategy to capture supplemental payments. Using national nursing home data linked to ownership status and quality indicators, I find evidence of a selection effect: facilities with poorer quality (measured by higher rates of on-site inspection deficiencies) are disproportionately those that transition into local government ownership.
While this strategy may generate short-term financial benefits, it raises concerns about long-term sustainability. If federal or state policymakers curtail supplemental payments, local governments may be left bearing new fiscal liabilities, and vulnerable residents may face disruptions in care. These findings highlight an underexplored di- mension of fiscal federalism: how intergovernmental transfers and financing flexibility can create moral hazard, shifting risk to local governments while failing to improve care quality. By connecting Medicaid financing to governance, sustainability, and service de- livery, this research underscores the need for policies that balance fiscal innovation with accountability and long-term resilience in public services.
Megdalynn Fisher. “Local Government Nursing Homes: Incentives, Quality, and Sustainability.” Oral presentation, American Society for Public Administration (ASPA) Annual Conference, Los Angeles, CA, March 2026 [expected].