Ernest Hemingway's double entendre in his title is a key to the significance of the setting. For, a soldiers' home is a veteran's hospital where old soldiers just sit and wait to die. And, of course, "soldier's home" also means "the soldier is home."
And, for Krebs to be home is much like the old soldiers' home: a setting of stoic holding on against his despair. For,
A distaste for everything that had happened to him in the war set in because of the lies he had told. All of the times that had been able to make him feel cool and clear inside himself when he though of them; the times so long back when he had done the one thing, the only thing for a man to do, easily and naturally, when he might have done something else, now lost their cool, valuable quality and then were lost themselves.
At home, Krebs can no longer relate to his family or be truthful with them. While "[N]othing was changed in the town except that the young girls had grown up," Krebs cannot return to what he was before the war; "he did not feel the energy or the courage to break into it." He does not want to have a relationship with a girl because so much of a relationship is a lie or is "too complicated." Besides, the world that the girls are in is "not the world he was in." Krebs "had been a good soldier," but he does not make a good civilian. He feels alienated, and the little rituals of remembering often lead him to thinking about disturbing things that he has experienced as a soldier.
Truly, as Thomas Wolfe wrote, Krebs "cannot go home again"; he cannot be the son who calls his mother "Mummy"; he must lie if he stays at his old home. So, because he wants order, "he wanted his life to go smoothly," Krebs decides to go to Kansas City and get a job where he can hold on against the odds. "Soldier's Home" is too confining, with either meaning.