Assisted living: Will it reduce long-term care costs?

In their quest to reduce nursing home care expenditures, the various states in this country have looked to assisted living as a potentially preferred and lower-cost housing alternative for their Medicaid patients. For an assisted-living program to save costs, states must recognize that some assisted-living residents will not come from nursing homes, bul rather from private residences, resulting in cost increases. This article argues that this “woodwork effect M-new clients appearing-is likely to be smaller than the level reported in the home and community care demonstrations, but that the numbers are difficult to predict with the possibility of divestiture. It also argues that the true savings from substitution, or of one form of care for another, depend on the nursing home reimbursement system in effect at the time.