McFadden says that the private-paying clients his home serves used to run out of money in two or three years. Now they become broke much more quickly. Once they can't pay, Medicaid picks up only some of the tab, and the Lutheran Home then starts losing money on them. It's illegal for a Medicaid-certified nursing home to ask patients to leave because they run out of money.
Residing at a nursing home is not cheap. The median annual cost of a private U.S. nursing home room rose to $77,745 in 2011 -- up almost 30% from 2005. People without chronic conditions have less costly options: It takes about $43,500 yearly to pay for a home health care aide who doesn't have specialized medical skills, and $39,000 to live in an assisted-living facility that provides help with daily activities like cooking but doesn't necessarily offer health care services.
If nursing homes continue to be squeezed, they may need to cut more staff. A November 2011 report by the University of California-San Francisco concluded that poor quality of care is already endemic in many nursing homes, especially the largest for-profit chains where staffing levels have been cut the deepest to save money. Parkinson maintains that so far, homes in his association are keeping up their level of service with less money by eliminating managers, freezing wages and cutting capital improvements like painting walls and replacing carpets -- anything to avoid laying off caregiver staff.
Bill Mulligan, a managing director at Ziegler Capital Management, which provides low-cost financing for nursing home developments, says that given the decreasing supply and rising demand, nursing homes are still a good investment. "The demographics are going to level off the number (of homes), maybe even increase it at some point," he says.
But Steinfeldt, who also works with developers, has little confidence in their profitability, asking, "Why would you go into a business that can't cover its costs?"
If major shortages of nursing home space do surface, they'll likely show up in urban and high-poverty areas first. Widespread waiting lists have already been reported in Tallahassee, Fla.; Rapid City, S.D.; and San Francisco. Homes also have been closing in poor neighborhoods. A study published last year in the Archives of Internal Medicine showed that nursing homes shut down there more often than elsewhere (the hardest-hit cities were New Orleans, Oklahoma City, San Francisco and Dallas).
And Medicaid patients may have an increasingly hard time finding nursing homes that will take them. When homes replace their old buildings, Kramer says, they often cut the number of beds to make space for more private rooms and sophisticated medical facilities that can attract the higher-paying Medicare and private-pay clients.
"Every adult is going to face this nursing home crisis in some way, whether it's through their own care or the care of loved ones," says McFadden. "Ignoring it is not going to make it better."
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