The Advisory Council suggested that these additional payments should be made directly to medical providers, rather than to the recipients. At that time, federal matching for state expenditures was only allowed for payments made directly to the assistance recipient. (Advisory Council, 1948)
Two years later, in 1950, amendments to the Social Security Act said, "[The] Federal Government will share in cost of payments made directly to medical practitioners and other suppliers of medical services, which when added to any money paid to the individual, does not exceed the monthly maximums on individual payments." This created a significant change in the way that welfare was delivered and paid for. Nursing home operators could now contract directly with the states for payment, providing nursing homes with a new and more reliable source of income. Individuals were more time-consuming to deal with, and they didn't always pay their bills. The check from the government was one a nursing home could count on.
Initially, the payment to medical providers was capped so that it would not exceed the amount that would have been paid to the individual, but in 1956 the Social Security Act was again amended to eliminate that cap. This was extremely important because nursing home costs were much higher than the individual OAA payment. The elimination of the cap on payments meant that the government quickly became the primary purchaser of nursing home care.