• Mission & Governance
• Services Overview
• How to Get Involved
• Standing Committees
• NCSL Foundation

• Issue Areas: A-Z
• State-Federal Relations
• NCSL Standing Committees
• News from D.C. and the States

• About State Legislatures
• Elections, Campaigns & Redistricting
• NCSL's StateConnect Directory
• Web Sites

• Online Guide to NCSL Services
• Staff Sections and Networks
• Meetings & Professional Development
• Staff Directories

• Meetings Calendar
• Online Registration
• Meetings Home Page
• Legislative Summit

• Bookstore
• State Legislatures Magazine
• NCSL's StateConnect Directory

Strategy 5: Reconfiguring the Long-Term Care Delivery System

BACK TO REPORT

Description of Strategy

By reconfiguring the long-term care (LTC) delivery system to emphasize home and community care services states may be able to reduce Medicaid spending or cut its rate of growth while providing more attractive and effective services. ). Roughly $3 out of every $4 Medicaid long-term care funds go toward institutional care-primarily nursing homes-with the remaining quarter spent on home and community-based services (HCBS). Per-person costs are less for HCBS than for institutions on average. Cost savings accrue when increased availability of home and community-based services can be coupled with enough reduced spending for institutional services to offset new enrollment in community services. (See table 3 for examples of HCBS.)

Achieving cost containment objectives requires addressing the overall demand for long-term care services and ensuring that per capita costs are no greater than necessary. Controlling demand for long-term services typically involves 1) assessing people in order to identify their level of need and 2) offering community services, such as assisted living, that can serve as direct substitutes for nursing homes for individuals seeking residential care. "Diversion" programs combine these activities by assessing individuals at risk for institutionalization and placing them in lower levels of care, if appropriate.

For HCBS to replace institutional care, the availability of the more expensive care may need to be limited at the same time that the HCB services are offered. States control the supply of more expensive long-term care services by slowing the issuance of certificates of need or imposing moratoriums on new nursing home bed construction.(1)

States can provide HCBS through the Medicaid program in two ways: 1) the state can apply for an HCBS 1915(c) waiver from the federal government or 2) the state can add HCBS to its state Medicaid plan, which would make these services entitlements for all beneficiaries in the state. For the waiver programs, states must define the services (e.g., adult day care and assisted living) to be covered, the providers, caps on benefits and enrollment (if applicable), the geographic limits (e.g., usually specific counties) and the disabled populations (e.g., people with developmental disabilities, frail elderly, etc.) to be covered, and project that services can be provided, in aggregate, for the same or lower per capita costs under the waiver ("cost-effectiveness").

Currently, more than half the states cover personal care services through their state Medicaid plans, and all states have waivers to cover HCBS. Recent growth in HCBS has come from states using the waiver option. Because it does not create an entitlement to HCBS, this vehicle offers more flexibility in setting caseload limits, benefit caps, eligibility requirements and geographic variation. If a state is reconfiguring its long-term care system as a cost containment measure, it would be likely to want the design flexibility afforded by the waiver. (See figure 5.)

Pros and Cons

Pro

• HCBS programs are to improve the quality of life; however, for such programs to be a cost-saving strategy, a state must be willing and able to control overall demand for long-term care services or the amount paid for provided for each person.

Con

• HCBC programs can lead to increased demand for services (known as the "woodwork effect"), making it less effective for cost containment.

State Experience

Vermont has saved money by shifting people and resources from nursing homes into home and community-based services. It has taken the unique step of assessing all nursing home residents to determine whether they could use the community-based service alternative, and has moved 100 nursing home residents into waiver programs. It also merged nursing home care and home and community care funding into one budget line, so that any savings to Medicaid from reducing institutionalization remain available for community care.

In addition to assessing current nursing home residents, Vermont provides pre-admission screening to potential nursing home residents and prioritizes those who might otherwise be admitted for participation in the waiver programs. As a result, nursing home bed days fell by 15,000 in the first three quarters of FY 2001, yielding savings of $3.1 million. The state continues to increase its waiver programs. In its FY 2002 budget, for example, it intends to fund 100 new slots in the home and community waiver program. Although Vermont has saved money, the key to its success is the emphasis on giving people choices. People can choose between nursing care or HCBS; state officials do not tell them which one to choose.

Nebraska received funding from HCFA to "buy back" nursing home beds. The beds were converted to assisted living units, resulting in an increased supply of lower-cost residential service and a decreased supply of nursing home beds. This buy-back served to decrease overall Medicaid spending because the reduction in LTC spending on nursing homes offset the costs of the new assisted living beds.

Design and Policy Issues

• What is the primary goal of this strategy? Is it to improve the quality of life or to reduce costs? The answer to this question will provide guidance on how to design a program and the extent to which mechanisms need to be build in to control the demand for services and/or amount paid for services
• What groups of people could be served more cost effectively in the community (people with physical disabilities, people with mental disabilities, people with developmental disabilities, older people with disabilities)? This involves looking at the characteristics of the population currently receiving LTC under Medicaid, the services that they need, the way in which they currently are provided, and the way in which they might be provided at home or in the community.
• How can the capacity of the existing system to provide services be enhanced?
• Can explicit trade-offs be made among various types of services and providers?
• How can the "woodwork" effect be limited? Does the state have a strategy for reducing the rate of growth of institutional beds as it expands community-based care?

Federal and State Involvement/Constraints

In June 1999, the Supreme Court ruled in L.C. & E.W. vs. Olmstead that states violate the Americans with Disabilities Act when they provide services in institution to people who could be served more appropriately in a community-based setting. States are required to provide community-based services for people with disabilities if treatment professionals determine that it is appropriate, the affected individuals do not object to such placement and the state has the available resources to provide community-based services. Thus, reconfiguring the system is essential to maintaining compliance with federal law and responding to the preferences and needs of individuals.

Read More About It

Doty, Pamela. Cost Effectiveness of Home and Community-Based Long-Term Care Services. Report prepared by the U. S. Department of Health and Human Services Office of Disability, Aging and Long-Term Care Policy, Washington, D. C., June 2000. See http://aspe.hhs.gov/daltcp/reports/costeff.htm

Health Care Financing Administration Section 1915(b)/(c) Waiver Programs. See http://www.hcfa.gov/medicaid/hpg8.htm

National Aging Information Center (NAIC). Aging Internet Information Notes: Long-Term Care Services in the States. See http://www.aoa.gov/NAIC/Notes/longtermstates.html

Smith, Gary; Janet O'Keeffe; et al. George Washington University, Center for Health Policy Research. Understanding Medicaid Home and Community Services: A Primer. Report prepared by the Office of the Assistant Secretary for Planning and Evaluation (ASPE), October 2000. See http://www.communitygateway.org/access/tutorials/medicaid.htm

U.S. General Accounting Office. Medicaid Long-Term Care: Successful State Efforts to Expand Home Services while Limiting Costs. HEHS-94-167. Washington, D. C., 1994.

Notes

1 Certificate of need (CON) programs aim to control health care costs by constraining the supply of medical care facilities and services. Certificate of need is a regulatory review process that requires application to a designated state agency (usually the health department) for, and receipt of, a certificate of need (sometimes called certificate of public approval) prior to the offering or development of a new or changed health facility or service. It often is used, along with moratoria, to limit nursing home beds. For more information, contact The American Health Planning Association, 7245 Arlington Boulevard, Suite 300, Falls Church, VA 22402, http://www.ahpanet.org

BACK TO REPORT