New York State can provide its needy residents with better nursing home care and save about $1.2 billion annually by changing the way its Medicaid program pays nursing homes. The current payment method perpetuates inefficiencies and inequities without assuring high quality care.

New York State has an opportunity to become a national leader in nursing home standards by modernizing its payment system to reward homes that do a better job at lower cost. This paper explains why the current system is wasteful, and how a better payment system might work.