The Effect of Public Policies on Nursing Home Care

Current demographic trends suggest that the demand for beds in nursing facili-ties will grow dramatically in the near future. Population forecasts suggest that the 85 and older age group, the major consumer group behind nursing home care, will continue to burgeon as a percentage of total population to 1.7 percent in 2005, 2 per-cent in 2020, and 4.6 percent by 2050 [Statistical Abstract of the U.S., 1998]. Caring for a growing elderly population most likely means rising health care costs. Mendelson and Schwartz [1993] note that an aging population accounts for 35.4 percent of the annual rise of total real spending on nursing home care. Currently, nursing home care represents the fourth largest personal health care spending category after hospi-tal care, physician care, and drugs. Nursing home care expenditures reached $90 billion in 1999, and have increased at an average annual rate of 7.2 percent since 1980. Public programs funded about 60 percent of nursing home costs in 1999 [Cowan et al., 2001]. With the graying of America and potentially surging nursing home costs, a better understanding of the operation and performance of the nursing home industry seem