Labor Prices and the Treatment of Nursing Home Residents with Dementia

An important aspect of dementia care for nursing home residents is the management of symptoms such as behavioral problems and wandering. Nursing homes can manage these symptoms using a mix of labor, medications and physical restraints. Medications such as antipsychotics are hypothesized to be a substitute for direct care staff, while physical restraints are considered to be a complement to staff time. Using an instrumental variables approach, we investigate whether an increase in nursing home wages leads to greater substitution towards antipsychotic medications and away from the use of physical restraints. Our results suggest a 10% increase in weekly nursing home wages increases the inappropriate use of antipsychotics among dementia patients by 1.1% to 3.5%, while it decreases the use of physical restraints by roughly 26% to 28%. These findings suggest policymakers should consider nursing home market factors when overseeing and regulating issues of nursing home quality.