Colliding Forces — The Aging of the Baby Boom Generation and Contracting Nursing-Home Supply

The United States is facing a long-anticipated explosion of the population of the “oldest old.” Meanwhile, in recent years, there has been an unexpected contraction in nursing-home supply. In 2026, the oldest members of the Baby Boom generation started turning 80 years old, an age associated with elevated rates of disability, dementia, and needs for daily assistance. For decades, demographic projections have indicated that rapid growth in the population of people 80 years of age or older would increase pressure on long-term services and supports (LTSS) systems. But these projections didn’t anticipate that this transition would coincide with a sustained reduction in the supply of nursing-home–based services.

Nearly 10% of U.S. nursing homes closed between 2011 and 2021.¹ The number of facilities has continued to decrease in recent years, but at a slower pace.² The Covid-19 pandemic marked a turning point in nursing-home operating capacity. In addition to systemic quality problems that became clear during the pandemic, staffing shortages and financial strain have led many facilities to decrease the number of open beds.³

In 2025, there were 14,742 nursing homes providing care to 1.24 million people in the United States, with an average occupancy rate of 84%.² The population of Americans age 80 or older is projected to increase by more than 45% over the next decade, from less than 15 million in 2026 to approximately 22 million in 2036.⁴ Given this growth, the number of nursing-home beds is expected to be insufficient to accommodate demand, even if the current supply is maintained. The simultaneous pressures of an aging population and decreasing nursing-home supply could have implications for access to facility-based LTSS, hospital discharges, and burdens on unpaid caregivers.

Structural factors often drive changes in nursing-home supply. The facilities at greatest risk for closure tend to have high rates of Medicaid-covered stays, low occupancy rates, and narrow operating margins.¹ National data can mask local conditions. Even when overall nursing-home closure rates aren’t alarming, closures may be concentrated in rural or low-income communities, where alternative sources of care are often limited. Beyond facility closures, supply has eroded after facilities closed units or limited admissions because of staffing constraints.³ The number of licensed beds may therefore not reflect actual supply.

In addition to providing LTSS, nursing homes are part of communities’ postacute care infrastructure. Reduced nursing-home supply narrows options for hospital discharge, leading to extended hospital stays.³ Decreased hospital throughput can hinder scheduling of elective procedures, restricting access to health care more broadly and reducing hospital revenue.

Reduced access to nursing homes is particularly consequential for people living with dementia, who account for the majority of people receiving LTSS. Dementia is a leading reason for nursing-home placement; people with dementia often require continuous supervision, structured environments, and trained staff to manage their complex cognitive and behavioral needs. As the U.S. population ages and dementia becomes more prevalent, the demand for dementia care provided by nursing homes is expected to continue to increase.

Alternatives to nursing homes, such as home- and community-based services (HCBS) and assisted-living facilities, are generally considered to be preferable. Access to these services and facilities in the United States has expanded, but they frequently cannot meet the needs of people with moderate-to-severe dementia. As nursing-home access becomes further constrained, increased reliance on HCBS will lead to unpaid caregivers absorbing additional responsibilities, which could increase the risk of caregiver burnout and avoidable hospitalizations. Similarly, assisted-living facilities generally offer limited medical supervision and aren’t designed to provide nursing-home–level care for people with advanced dementia or complex medical needs.

The United States also faces important workforce constraints in this sector (see the Perspective article by Olenski and Grabowski in this issue of the Journal). Workforce shortages are a key driver of declining nursing-home supply.³ Low wages and limited career-advancement opportunities for direct-care staff have hindered recruitment and fueled high turnover rates. These issues were magnified by the Covid-19 pandemic,³ and national data generally show worsening staffing shortfalls in recent years.² Facilities can only operate beds if they recruit and retain the necessary staff.

Immigrants make up a substantial share of the LTSS workforce and help stabilize the labor supply in many regions. Increased immigration has been associated with higher nursing-home staffing levels and improved quality of care. Workforce disruptions caused by recent U.S. immigration policies are likely to reduce nursing-home operating supply and undermine quality. Meanwhile, uncertainty regarding staffing regulations and payment (e.g., because of Medicaid cuts) could create planning challenges for facilities and discourage workforce investments. Most nursing homes are for-profit entities, and they are unlikely to make these investments if returns aren’t expected to be high enough to justify them.

Many of those in the Baby Boom generation have limited retirement savings and may lack the resources to pay for LTSS out of pocket. Medicaid is the primary payer for nearly two thirds of nursing-home residents and is often the only option for people with constrained financial resources who require facility-based LTSS, which aren’t covered by Medicare.² The One Big Beautiful Bill Act tightened Medicaid eligibility, shortened coverage-renewal periods from 12 months to 6 months, and imposed requirements for work verification or waivers for many adults under 65 years of age. As a result, fewer people in need of LTSS in nursing homes will qualify for Medicaid, and the heavier administrative burden on people who do qualify — particularly those with dementia and complex medical conditions — could increase their risk of losing coverage, making them even less attractive as residents.

Medicaid payments to nursing homes cover an average of only 84% of the cost of providing LTSS.⁵ Medicare payments for postacute care are much higher than Medicaid payments for LTSS, which gives facilities an incentive to prioritize people whose care is covered by Medicare. Financial pressures tend to be greatest in nursing homes with a high proportion of Medicaid-covered stays.

The mismatch between rising demand for LTSS and contracting nursing-home supply calls for targeted policy responses. First, policymakers could move from tracking licensed beds to tracking staffed beds. The Centers for Medicare and Medicaid Services and state agencies could also monitor unit closures and admission limits. Implementing a nursing-home–supply surveillance system would permit early warnings of access threats and better inform hospital discharge planning.

Second, Medicaid payment policy could incorporate targeted stabilization adjustments for nursing homes. Time-limited add-on payments could be directed to facilities that are located in rural areas or in highly concentrated markets with few nursing homes and are at high risk for closure or those with a high proportion of Medicaid-covered stays. This approach would mirror critical-access protections for hospitals and focus resources where supply losses could be most harmful.

Third, workforce policy should be treated as a form of LTSS infrastructure policy. Medicare and Medicaid payments to nursing homes could be structured to encourage wage increases and investments in training for direct-care staff. Creating a dedicated visa pathway for direct-care workers, paired with employer-accountability and training standards, could help stabilize staffing in shortage areas.

Fourth, to support access to LTSS for people with dementia who need nursing-home–level care, Medicaid payments could be increased for facilities with a large proportion of residents with de mentia (e.g., above the average for their state), or certification pathways could be tied to dementia-specific training for staff. Finally, states and health systems could be encouraged to develop hospital–nursing home partnerships, such as shared pools of crosstrained staff or cosupported transitional units, in recognition of the importance of nursing homes for hospital discharge processes.

The aging of the Baby Boom generation has long been anticipated, and the contraction in nursing-home supply in favor of HCBS has long been a goal of advocates, but the impending collision of these forces has received little attention. As the population most likely to need intensive LTSS grows, continued declines in nursing-home supply could exacerbate gaps in access, strain hospital discharge processes, and add to family caregiving burdens, especially for people living with dementia. Preserving nursing-home supply will require better measurement of staffed beds, targeted payment adjustments, workforce-infrastructure policies, and incentives specific to dementia care. The ability of the United States to meet the LTSS needs of an aging population will depend on how quickly policymakers respond to the growing mismatch between demographic demand and nursing-home supply.