TY  - RPRT
        AU  - Hackmann, Martin B.
AU  - Rojas, Juan
AU  - Ziebarth, Nicolas R.
        TI  - Creative Financing and Public Moral Hazard: Evidence from Medicaid and the Nursing Home Industry
        PY  - 2026/Aug/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 18860
        UR  - https://www.iza.org/index.php/publications/dp18860
        AB  - Medicaid finances U.S. nursing home care through federal matching grants that reward verifiable volume, not quality. We show that states exploit this through creative financing, diverting funds earmarked for nursing homes. This turns the federal match into a pure volume subsidy and generates a novel allocative distortion we term public moral hazard. We develop the mechanism theoretically and test its predictions using 24 federal audits and administrative microdata from Indiana. Event studies show Medicaid dementia volume rises 12\%; structural quality estimates show the expansion concentrates in the lowest-quality facilities, reallocating patients toward worse providers and reducing one-year survival.
        KW  - fiscal federalism
KW  - moral hazard
KW  - Medicaid
KW  - nursing homes
KW  - quality of care
KW  - joint funding
KW  - misallocation of matching funds
        ER  -