The Institute of Medicine recently published Dying in America, a sweeping report arguing that the health care system does not match the needs of people as they near the end of life. The dying process, the report explained, is too medicalized and too costly. Such outcomes are predictable consequences of the “perverse financial incentives” embedded in Medicare and Medicaid’s fee-for-service reimbursement formulas.

As much as fee-for-service shapes hospital care, it shapes nursing home care even more profoundly. Nursing home care is expensive and insurance coverage is terribly inadequate. The average daily charge for a night in a nursing home is about $225 per day, or $7,000 monthly and $84,000 annually. Although Medicare is the insurance program for people over the age of 65, it does not cover long-term nursing home care. Medicaid covers those costs, but only after residents’ life savings have been depleted. People in nursing homes who outlive their savings default to Medicaid, which provides insurance coverage until the end of life.

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