Nursing Homes

History

The current nursing home industry is generally seen as an outgrowth of Medicare and Medicaid; however, its roots are older and more complex. From colonial times to the Great Depression, public policy in the United States followed the tradition of the English poor laws, leaving care of the poor to local governments and relying almost totally on “indoor relief” rather than direct income assistance. For the aged and infirm poor in America, this meant that the only form of public support was largely in alms-houses and poor farms. Private support during this period came from homes for the aged, sponsored largely by immigrant and religious groups. The wretched conditions in the almshouses and poor farms and the poverty rates among older Americans began to attract the attention of policymakers during the 1920s and early 1930s and helped generate federal grants to states for old age assistance (OAA) in the Social Security Act (SSA). OAA was a program of income support for poor older persons that prohibited payments to “any inmate of a public institution.” This policy gave the elderly poor sufficient funds to turn away from the almshouses and poor farms to small, for-profit nursing homes operated as “mom and pop” enterprises in private homes. This started the process by which public policy created and transformed the nursing home industry through such policies as OAA; federally backed construction loans; the 1950 amendments to the SSA, which allowed payments from the states to be paid directly to facilities (“vendors”) for the care of OAA beneficiaries; and finally the 1965 amendments to the SSA, known as the Medicare and Medicaid programs. The vendor payment system and construction loans attracted proprietary operators, a trend solidified by Medicare and Medicaid. As a result, nursing homes have been transformed in 11 decades from 1,200 facilities with 25,000 beds in 1939 to just under 16,000 facilities with 1,669,220 beds in 2008 and from almshouses and charitable institutions to an industry dominated by for-profit facilities and multi-facility systems, known as nursing home chains.

Recent Trends in Nursing Homeownership

Just as OAA spelled the demise of the almshouses as a source of care and housing for the elderly, so the advent of public funding through Medicare and Medicaid made the “mom and pop” nursing homes largely extinct. By 2011, the proportion of nursing home beds controlled by chains increased to approximately 55%. Several studies have found that chain-owned, for-profit nursing homes tend to offer worse performance and lower quality of care, as measured by such indicators as staffing levels and deficiencies, particularly when compared to not-for-profit homes. Further, acquisition of a nursing home by a chain often resulted in decreased spending on staffing and other direct resident care costs and declines in quality.

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