Even with all the new construction, there seemed to be an unquenchable shortage of beds. No matter how many beds were built, there always seemed to be people available to fill them up. Some may have been transferred from the facilities for the mentally ill, but that couldn't explain all the new residents. It may have been caused by the "woodwork" effect -- lots of people who were getting along one way or another without government assistance kept coming out of the woodwork once there were services available that the government would pay for.
Not all of the explosion in nursing home development was related to the availability of payments for welfare recipients. The number of people receiving Social Security increased throughout the 1950's and 1960's as new groups of employees were added to the program, and in 1961 when the retirement age was lowered from 65 to 62 and benefits to aged widows were increased. That enlarged the pool of people who had the financial wherewithal to pay privately for at least some part of their care needs.
Built in 1851 as private home. Converted to Presbyterian Home of Washington DC in 1917. Converted to Stoddard Baptist Home in 1961. Became historic structure and residents moved to new facility in 1981. Library of Congress: Historic American Buildings Survey (HABS)