Nursing Home Shortage Crisis Averted: States Can’t Afford Them Anyway

This is the first in a multi-part series exploring senior housing & care options and alternatives following the article, Will the Nation Go Broke Paying for Senior Housing & Long-Term Care?

recent article in The Fiscal Times pondered the “coming nursing home shortage,” and posed the question: Are the elderly the latest casualty of the Great Recession, thanks to cuts in government payments for patient care and less construction of new nursing homes?

The article cited the growing senior population and the fact that the number of nursing homes dropped nearly 9% between 2000 and 2009, but it’s not just nursing homes that are getting fewer in number: there are fewer nursing home residents, too.


Number of Nursing Homes Residents Declining Along with Facilities Themselves

In the wake of the Great Recession, managing care costs is becoming an increasingly important strategy for many states, according to an AARP report, “On the Verge: The Transformation of Long-Term Services and Supports,” and in many instances, this is being manifested through a flat or declining nursing home census as states shift away from institutionalized care.

More than half of state officials who responded to AARP’s state survey, at 56%, said the Medicaid nursing home resident census decreased in fiscal year 2011, with nine more saying the census remained static and only seven reporting growth.


There’s been a trend away from nursing home care, according to National Nursing Home Survey findings, which indicate that the rate of individuals aged 65 and older who choose nursing home care has declined 35% between 1984 and 2004.

“Although the number of older adults in the United States continues to grow, the absolute number of certified nursing home residents has slowly but steadily declined since 2000,” AARP says, citing the report.


Rather than seeing this as a cause for alarm, though, some say it merely reflects the expanding options for senior housing and care.

Trends Point Away from Institutional Care Toward Home and Community Based Care

AARP’s report shows an growing trend of restructuring service delivery systems and increasing home- and community-based services (HCBS) for Medicaid patients, which includes receiving care at home, at an adult day care facility, or at some sort of residential care facility, rather than in an institutional setting.

More than 70% of states responding to AARP’s survey reported an increased HCBS census from 2010 to 2011, and 31 out of 37 respondents expect increases between 2011 and 2012.

Out of 33 states that reported both nursing home HCBS caseloads, 15 saw increased HCBS caseloads and decreased nursing home caseloads, whereas none reported decreased HCBS caseloads and increased nursing home caseloads. This trend is expected to continue into 2012.

“Many states are undergoing or are about to undergo a dizzying array of long-term services and supports (LTSS) transformations,” says AARP. “The lagging economy and the increased demand for publicly funded LTSS have put pressure on state policymakers to redefine the way LTSS are financed and delivered in order to maximize access and system capacity.”

This is pushing a move “toward capitated, risk-based managed care for Medicaid enrollees with LTSS needs and focusing on better care and cost containment for people who are dually eligible for both Medicare and Medicaid coverage.”

Is There Actually a Need for More Nursing Homes?

It’s true that there’s been reduced construction of nursing homes in the past few years, but a lot of the lack of development has to do with states not believing it’s necessary to build more, points out Bruce Lederman, who has more than 20 years of experience in the senior care field in both management and community leadership roles.

Thirty-six states participate in some form of “Certificate of Need” programs, which are “aimed at restraining health care facility costs and allowing coordinated planning of new services and construction,” according to the National Conference of State Legislatures, and the remaining 14 states “still retain some mechanisms intended to regulate costs and duplication of services.”

This means that before building a nursing home in states participating in these programs, developers must first obtain a certificate of need from a state review board, says Lederman.

And with occupancy rates for nursing care hovering around 88%, according to the National Investment Center for the Seniors Housing & Care Industry, there are still plenty empty beds to be filled—and therefore not too much current “need.”

As for the future of the nursing home occupancy: it may keep declining.

“We can expect nursing facility census to follow trends of flat to decreasing census,” Jenna Walls, a senior consultant with Health Management Associates, told SHN during a discussion of AARP’s LTSS report.

Ultimately, Medicaid expenditures are projected to keep rising and continue to be a primary concern for states, Walls said, with state Medicaid spending accounting for nearly 24% of annual budget growth in 2012. This puts continued pressure on states to invest in alternatives to institutional care in an effort to stretch available funding to provide for a greater number of people.

The full AARP report can be viewed here.

Written by Alyssa Gerace