National Bureau of Economic Research

Nursing homes certified by the Centers for Medicare & Medicaid Services to provide care and receive public reimbursement through Medicare and Medicaid are subject to mandatory annual inspections. While inspections are unannounced, they typically occur on an approximately yearly basis, as 74 percent of inspections take place between 40 and 60 weeks after the previous one. The average gap is around 53 weeks.

With the aging of the US population, demand for medical and nonmedical assistance with basic daily activities is high and rising. Medicaid bears over 60 percent of the costs of this assistance, paying $255 billion in 2022 for long-term services and supports (LTSS). In response to these costs, some state Medicaid programs have shifted delivery of these services from fee-for-service to managed care.

We are thankful for comments and suggestions from Marcella Alsan, Lori Beaman, Emily Breza, Lucia Corno, Jon Denton-Schneider, Seth Gitter, Eliana La Ferrara, Mushfiq Mobarak, Martina Bjorkman Nyqvist, Frank Schilbach, Anna Tompsett, Zachary Wagner, and seminar participants at numerous conferences. Fatimeh Munawar, Syed Ali Rehan, and Ibadullah Channa provided invaluable research assistance.

We thank George-Marios Angeletos, Oleg Itskhoki, Robert Kollmann, and seminar participants at the Boston Fed, HEC, Kiel Institute, KU Leuven, and PSE for comments and stimulating conversations. Chen Lian thanks the Alfred P. Sloan Foundation and the BB90 fund for financial support. Dmitry Mukhin acknowledges the support from the Economic and Social Research Council (ESRC) [grant number ES/Y001540/1].

We thank Steven Berry, Mikhail Chernov, Carter Davis, Zhiyu Fu, William Fuchs, Satoshi Fukuda, Xavier Gabaix, Sergei Glebkin, Paul Goldsmith-Pinkham, Elise Gourier, Lars Peter Hansen, Kristy Jansen, Ralph Koijen, Jane Li, Lira Mota, Daniel Neuhann, Anna Pavlova, Aleksandra Rzeźnik, Milena Wittwer, Hanbin Yang, Motohiro Yogo, and seminar and conference participants at Minnesota Carlson, Chicago Booth Alumni Insights, UCLA Anderson, Stockholm School of Economics, Demand in Asset Markets Working...

We thank Anna Dreber Almenberg, Martha Bailey, Jonathan Cohen, Emma Duchini, Alex Frankel, Ryan Kellogg, Jack Mountjoy, Virginia Minni, Matt Notowidigo, Mikkel Plagborg-Møller, Charlie Rafkin, Shanthi Ramanth, Lutz Sager, and Witold Więcek for helpful conversations. We thank Giuseppe Cognata, Shravan Haribalaraman, Ari Jacob, Sedona Jolly, and Min Seo Kim for their excellent research assistance.

We thank Agostino Capponi, Lin Wlliam Cong, Phil Dybvig, Rodney Garratt, Allaudeen Hameed, Campbell Harvey, Emir Hrnkic, Kose John, Leonid Kogan, Erica Li, Yupeng Lin, Olga Klein, Evgeny Lyandres, Mei Luo, Simon Mayer, Danqing Mei, Katya Malinova, Karsten Muller, Dan Su, Gerry Tsoloukas, Xuan Tian, Charles Wang, Josh White, David Yermack, Yao Zeng, and Jin Zhao, as well as discussions at the 2026 Central Banking Research Association (CEBRA) Annual Meeting in Copenhagen, 11th Bank of Finland...

We thank Brian Copeland, Lucas Davis, Tatyana Deryugina, Jenya Kahn-Lang, Matthew Kotchen, Severin Borenstein, Stephanie Weber, Catherine Wolfram, and participants at the UC Berkeley Energy Camp for helpful discussions, Andrew Tang and Benji Reade Malagueno for excellent research assistance, and the Sloan Foundation through the Environmental and Energy Policy and the Economy series, the Cowles Foundation, the Yale Economic Growth Center, and the Stanford Institute for Economic Policy Research...

The authors thank the Center for Connecticut Education Research Collaboration for financial support in conducting this research and the Connecticut State Department of Education for both providing administrative data and advice on the usage of the data.

We are grateful to Hassan Afrouzi, Andrew Atkeson, Jaroslav Borovicka, Ryan Chahrour, Tim Christensen, Stefano Eusepi, Basil Halperin, Christian Hellwig, Alexandre Kohlhas, Guido Menzio, Pooya Molavi, Kris Nimark, Larry Samuelson, Jakub Steiner, and seminar participants at the Columbia Measured Beliefs Conference, the Oxford-Paris Conference on the Macroeconomics of Expectations, the Northwestern Kellogg Learning and Bounded Rationality Conference, the T2M Conference, and the Macro Theory...