Nursing Homes in Equilibrium: Implications for Long-term Care Policies

Year of Publication
2020
Author
Tatyana Koreshkova
Minjoon Lee
Series Title
University of Michigan Retirement and Disability Research Center Working Paper
Document Number
MRDRC WP 2020-414
Institution
Michigan Retirement and Disability Research Center, University of Michigan
City
Ann Arbor, MI
Abstract

We build an equilibrium model of the market for nursing home care with decision-makers on
both sides of the market. The nursing home demand arises as a result of stochastic dynamic
optimizations by households heterogeneous in age, health, wealth; and the cost of home-andcommunity-based care. On the supply side, locally competitive nursing homes decide prices
and care intensity. The government pays for the long-term care of the poorest. We estimate the
model parameters using Health and Retirement Survey and simulate the model to quantitatively
evaluate the effects of long-term care policies on prices, intensities, care allocation, and welfare.
URL
https://mrdrc.isr.umich.edu/publications/papers/pdf/wp414.pdf
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