¹Public policy governing nursing homes is largely a function of the federal standards set for participation in the two health care programs that are the primary payers for nursing home care, that is, Medicare and Medicaid. These programs set standards, specify inspection processes, and mandate enforcement remedies that apply to all facilities that participate in the programs and receive payment for the care of covered program beneficiaries. More than 95 percent of nursing homes participate in Medicare or Medicaid (Strahan 1997). Medicare is a federally funded program that covers acute, ambulatory, and rehabilitative care for the elderly, as well as for those nonelderly persons who are permanently disabled and meet program eligibility criteria. Medicaid is a combined federal and state program that covers specified health care services, including nursing home care for persons who are poor or, in many states, defined as meeting financial criteria for being "medically needy." Because Medicare coverage is restricted to skilled, rehabilitative care, in 1998 it covered only 12 percent of expenditures on nursing homes. Medicaid accounted for 46 percent of the expenditures and helped pay for nearly 68 percent of the residents. The remainder of dollars spent on nursing home care came from out-of-pocket spending by individuals (33%) and other payers, such as private insurance and the Veterans Administration (9%). (The 68 percent of residents who are Medicaid-eligible contribute most of their monthly income—from Social Security and/or pensions—and Medicaid pays the remaining charges after their income is exhausted. This is why Medicaid is a payer for 68 percent of the residents but accounts for only 46 percent of the expenditures on nursing home care.)[Return to Text]