NCSL State Legislative Report
Analysis of State Actions on Important Issues
Long-Term Care and the U.S. Supreme Court's Olmstead Decision
By Johanna M. Donlin
March 2002
Volume 27, Number 7
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"We confront the question of whether the proscription of discrimination may require placement of persons with ... disabilities in community settings rather than in institutions. The answer, we hold, is a qualified yes."
-Justice Ruth Bader Ginsburg, U.S. Supreme Court
In 1999, the United States Supreme Court ruled in Olmstead vs. L.C. that states can not discriminate against people with disabilities by providing long-term care services only in institutions, when certain individuals could be served in a community. The decision encourages states to reevaluate how they deliver long-term care services to people with disabilities. Because long-term care spending accounts for some 35 percent of all state and federal Medicaid funds, the Olmstead decision will affect Medicaid programs and budgets, as well as other state programs.
The Case
Olmstead vs. L.C. was filed on behalf of two women, L.C. and E.W. (Lois Curtis and Elaine Wilson), both of whom had mental retardation and mental illness. At the time the suit was filed against Tommy Olmstead, the commissioner of Georgia's Department of Human Resources, both women were living in a state run long-term care institution. They had requested community-based placements and their treatment professionals determined they could both live in a community setting with appropriate supports. The state of Georgia refused to move the women because there were no community placements available because of funding constraints. The state claimed the decision to keep the women in an institution was not based on their disabilities.
L.C. and E.W. believed their continued institutionalization constituted discrimination, violating their civil rights under Title II of the Americans with Disabilities Act (ADA). Under Title II of the ADA, state and local governments cannot discriminate against people with disabilities in providing public services and must provide services in the most integrated setting possible. The question presented before the Court was whether the anti-discrimination requirement of the ADA-the most integrated setting requirement-would require placement of the two women in community settings rather than an institution.
The Supreme Court ruled against the state of Georgia and determined that the women's continued institutionalization was discrimination based on disability, and that it violated their rights under Title II of the ADA. L.C. and E. W. did not choose to be isolated in the institution and were not in the most integrated setting possible. The Court stated that "Unjustified isolation.. is properly regarded as discrimination based on disability." As a result, the ruling requires states to provide community-based services for people with disabilities otherwise entitled to institutional services, whenever the following three factors are in place:
1. The state's treatment professionals have determined this is appropriate;
2. The transfer from institutional care to a less restrictive setting is not opposed by the affected individual; and
3. The placement can be reasonably accommodated, taking into account the resources available to the state and the needs of other state citizens with disabilities.
Olmstead does not require states to close down every long-term care institution. Rather, the decision focuses on giving people with disabilities the right and opportunity to choose their long-term care setting, if the specified conditions exist. The Court stated that "nothing in the ADA ... condones termination of institutional settings for persons unable to handle or benefit from community settings."
Also, the Olmstead decision applies to all people with disabilities. Although the plaintiffs had mental illness and mental retardation, the case is based on the ADA and therefore covers a wide range of people with disabilities. The Court also specified that the case covers those who may be at-risk of being institutionalized and those who may need periodic institutional services. This detail requires states to look at a continuum of care for individuals whose needs may change throughout their lifetimes, inclusive of non-Medicaid resources, such as housing and transportation.
Cost Does Matter in Implementation
While the decision clearly stated that improper institutionalization constitutes discrimination, the Court was not as clear when it addressed the issue of state responsibility and implementation costs. "The state's responsibility, once it provides community-based treatment to qualified people with disabilities, is not boundless," the Court ruled. In fact, the case leaves some flexibility for states to take into account the "available resources to the state and the needs of other state citizens with disabilities." States do not need to "fundamentally alter" their publicly funded long-term care programs.
The Court took the extra step to suggest two ways by which a state can show compliance with Olmstead.
1. A state may develop a comprehensive, effective working plan, including timetables and progress reports, for placing qualified people in community-based settings.
2. A state may maintain a waiting list for community-based services, but the list must move at a reasonable pace and may not be motivated by a desire to fill institutions.
Proving what constitutes a "fundamental alteration" or a "reasonable pace" will be a challenge for the states. These terms will most likely be defined in the lower courts, if more people with disabilities file suits against the states.
Impact on the States
Medicaid and the "Institutional Bias"
Because Medicaid is the primary funder of long-term care services and covers a large number of people with disabilities, the Olmstead decision could strongly affect state Medicaid budgets.
According to the National Center for Health Statistics, almost 150,000-8.5 percent-of the people in skilled nursing homes today are under the age of 65. They are people with physical disabilities, mental retardation and developmental disabilities, psychiatric disabilities and traumatic brain injuries, among other conditions. Most of these individuals are in a nursing home because there are limited community-based alternatives, and because Medicaid pays for the majority of their long-term care.
Medicaid long-term care spending accounts for some 35 percent of all federal and state Medicaid spending. Currently, states have the option to cover certain services in their state plans that can be used in home- and community-based settings. These optional services include: personal care services, rehabilitation services, private duty nursing, physical and occupational therapy, and transportation services. In 2000, 27 states covered personal care services in their state plans. While these optional services do provide opportunities for individuals to remain in their homes, states often limit the amount, duration and scope of these services. Therefore, individuals who need more extensive services often are admitted to a long-term care institution.
The federal Omnibus Budget Reconciliation Act of 1981 (OBRA-81) authorized home- and community-based services waivers (HCBS) under Medicaid and gave states more flexibility in how they provide long-term care services. States can obtain waivers to cover a broader range of home- and community-based health and support services to Medicaid-eligible people who otherwise would be in an institutional setting. A waiver may cover personal care assistance, family supports, supported employment and other individualized services and supports.
While these waivers have helped increase home- and community-based services for people with disabilities, the Medicaid entitlement still applies only to the institutional setting. The 250 Medicaid home- and community-based services waivers operating around the country in 2000 accounted for only 27 percent of Medicaid's long-term care spending. Seventy-three percent went to institutions. Many disability advocates refer to this as the "Medicaid institutional bias," which has developed over the last four decades. The Olmstead decision may be the impetus for states to use the HCBS waivers and to move Medicaid long-term care money away from institutional settings.
Is There a "Woodwork Effect"?
Some state policymakers have feared a possible "woodwork effect" as they evaluate the costs of expanding community-based services for people with disabilities. That is, people in need of community-based services, who are already living in the community with the help of parents or some other source of support, might start "coming out of the woodwork" and seek expanded, state-funded community-based services. The "woodwork effect" may be limited because of the institutional eligibility requirement. To qualify for home- and community based services, an individual must first meet the Medicaid criteria for institutional placement, which consists of both income and disability related standards. On the other hand, some of the underserved people who might be counted in a "woodwork effect" are already on waiting lists, but refuse to be institutionalized while they await services.
Federal Actions and Assistance
The U.S. Department of Health and Human Services (HHS) has taken the lead in working with states to implement the Olmstead decision. Various agencies have provided technical assistance and financial support to help states assess their long-term care systems and how Olmstead vs. L.C. may change their current methods of delivering long-term care services.
Enforcement
The Office for Civil Rights (OCR), a division of the Department of Health and Human Services, enforces the ADA and Section 504 of the Rehabilitation Act, both of which relate to the Olmstead decision and community-based services. The Office for Civil Rights:
- Investigates complaints;
- Conducts compliance reviews; and
- Provides training and technical assistance to state stakeholders on a variety of issues including but not limited to the issue of ensuring caring treatment in a most integrated setting.
The Office for Civil Rights receives numerous complaints from citizens who believe their civil rights have been violated because a state cannot provide community-based, long-term care services and, as a result, they or their family members now live in an institutional setting. Since 1999, OCR has received over 400 Olmstead-related complaints.
With the Olmstead decision, the OCR has preferred a collaborative approach with states over a punitive one to encourage compliance. It encourages stakeholders to collaborate and compromise and views litigation as a last resort. OCR sends letters to all states against which the office receives complaints, encouraging them to implement the two criteria the Supreme Court set out as possible ways to comply with Olmstead: development of a comprehensive, effective working plan and a waiting list that moves at a reasonable pace.
Education and Financial Assistance
The Centers for Medicare and Medicaid Services (CMS), another HHS division formerly known as the Health Care Financing Administration (HCFA), also plays a key role in educating states about Olmstead and providing technical assistance and financing to help states move the implementation process forward. In coordination with Office for Civil Rights, CMS has sent out five instructive letters to all state Medicaid directors. The first letter gave guidance on how a state could comply with Olmstead and offered some recommendations about how a state may develop a plan that was truly "comprehensive and effectively working." Letters two through four addressed a variety of state concerns, Olmstead planning and implementation. The fifth letter announced HHS's plan to release up to $70 million in "real choice grants" to assist states in developing opportunities for people with disabilities to live in more community-based settings. (The letters are available on the NCSL Olmstead Web site at http://www.ncsl.org/programs/health/disabil2.htm.)
In February 2001, Tommy Thompson, secretary of the Department of Health and Human Services, announced the availability of the first "starter grants" from the $70 million allocation. These $50,000 grants were intended to help states develop plans for improving their long-term support systems for community living; to include people with disabilities or long-term illness in the planning process; and to prepare for other forthcoming grant opportunities. By June 2001, 49 states had received HHS "starter grants."
In September 2001, HHS announced the recipients of the larger "Systems Changes for Community Living" grants. Thirty-seven states and one territory received a total of $64 million to develop programs for people with disabilities and long-term illnesses. Four different types of grants make up the program:
- Real Choice Systems Change grants help design and implement effective and enduring improvements in community long-term care support systems so children and adults of any age who have a disability or long-term illness can live and participate in their communities;
- Community-Integrated Personal Assistance Services and Support grants improve personal assistance services that are consumer-directed and/or offer maximum individual control;
- Nursing Facility Transitions grants help states transition eligible individuals from nursing facilities to the community; and
- National Technical Assistance Exchange for Community Living provides technical assistance, training and information to states, consumers, families and other agencies and organizations.
Both the starter grants and the systems change grants represent a key part of President Bush's "New Freedom Initiative," the administration's policy on removing barriers to equality for 54 million Americans living with disabilities.
On June 18, 2001, President Bush signed an executive order calling for the swift implementation of the Olmstead decision as part of the New Freedom Initiative. Among other things, President Bush ordered several federal agencies to review their "policies, programs, statutes and regulations to determine whether any should be revised or modified to improve the availability of community-based services for qualified individuals with disabilities." The designated agencies must also include involvement of consumers, advocates and other relevant representatives in their review. In response to the Executive Order, Secretary Thompson presented his preliminary report to President Bush on Dec. 21, 2001. (The report can be viewed at http://www.hhs.gov/newfreedom/presidentrpt.html.)
State Actions
As a result of Olmstead vs. L.C., legislators, executive branch officials, consumer advocacy groups and individual citizens are working together to implement the Olmstead decision. In some states, almost half of Medicaid long-term care spending supports community-based care for people who qualify for institutional services. In these states, Olmstead vs. L.C. provides an opportunity to improve community-based services that are already in place. The Olmstead decision is likely to have a much greater impact on state budgets and the long-term care systems in those states that are spending the majority of long-term care resources on institutional settings.
State Plans
Many states have focused on the Supreme Court's guidelines for developing an Olmstead state plan. As of October 2001, 40 states and the District of Columbia had task forces or commissions dedicated to the planning process. In at least three states-Missouri, Utah and Wisconsin-legislators and legislative staff are members of the commissions. Eighteen states had completed some type of written report or plan: Arizona, Connecticut, Delaware, Georgia, Illinois, Indiana, Iowa, Kentucky, Maryland, Mississippi, Missouri, Montana, North Carolina, Ohio, South Carolina, Texas, Wisconsin and Wyoming. Another eight states had begun the process, and have reports or plans are pending. The state commissions have issued numerous recommendations that address eight major issues: housing, transportation, assessment, waiver program expansion, transitioning individuals from institutions into the community, staffing, data collection and consumer/provider/state agency education and outreach. (The NCSL publication, The States' Response to the Olmstead Decision: A Work in Progress, analyzes the different state plans and can be found on the NCSL Olmstead Decision Web site at http://www.ncsl.org/programs/health/disabil2.htm.)
Legislative Activity
Planning also has been closely tied to the legislative process. Legislatures in California, Hawaii, Illinois and Kentucky enacted legislation to form their commissions. The Alaska Legislature enacted a law in 2000 requiring the state Department of Health and Social Services to submit an annual report concerning the waiting list for people with developmental disabilities. The governor in Kentucky issued an executive order to create an Olmstead Coordinating Council, and the legislature established two commissions to work on state plans for mental retardation/developmental disabilities and mental health. Likewise, although Iowa's governor had directed the Department of Human Services to be the lead agency for Olmstead planning in May 2000, the General Assembly's Legislative Council authorized the creation of the Mental Health and Developmental Disabilities Services Task Force in June 2000 to recommend ways to improve service delivery for people with mental retardation/developmental disabilities and mental illness.
In 2001, a few states passed substantive legislation affecting their Medicaid long-term care programs. For instance, Maryland expanded its Medicaid waiver program to include individuals with incomes up to 300 percent of the supplemental security income eligibility level. The new law also requires the Departments of Human Resources and Health and Mental Hygiene to administer a Community Attendant Services and Support Program for additional people with disabilities between ages 21 and 59.
In Missouri, the legislature enacted legislation to: increase salaries for aides caring for people with mental retardation and developmental disabilities, ensure training for staff and individuals who are interested in transferring into the community, make personal care services an entitlement, and establish a fund to allow individuals who are moving into the community to apply for a one-time grant of up to $1,500.
To date, the state executive branches have played the dominant role in developing Olmstead plans, but state legislatures will likely play their most significant part during the 2002 legislative sessions. Most Olmstead commissions and work groups have developed their plans, and state agencies will be submitting budget requests to implement these plans.
Challenges
States have encountered many challenges in implementing the Olmstead decision, especially with budget shortfalls and declining state revenues. In a recent NCSL survey, 43 states reported revenue shortfalls and 36 states are considering budget cuts or holdbacks to address fiscal problems. In addition, 18 states reported Medicaid spending is above budgeted levels and several other states expressed concern over Medicaid expenditures in FY 2002. As states assess the expansion of community-based services, they may realize savings from decreased reliance on generally more expensive institutional settings. Some of the largest barriers to implementation, however, extend beyond the delivery of direct health care services and long-term care and include staffing, housing, transportation and data collection.
Health Care Workforce Shortage
Many states are already trying to address serious shortages of health care workers in a variety of specialties. The shortage is especially severe in the area of long-term care-where nurses, certified nursing assistants (CNAs), home health aides and other paraprofessionals play a significant role in the day-to-day health care needs of people with disabilities. Low wages, limited career development, physical demands of the work and poor workplace conditions make these positions difficult to fill and result in high staff turnover. State legislators are looking at a variety of options to increase the stature of these positions by providing training and developing career paths. Some states have passed legislation to increase certain direct caregivers' salaries.
Housing
One of the biggest barriers to moving people with disabilities into the community is the shortage of affordable housing that is accessible to people with disabilities. This is an essential factor if people with disabilities are to be fully integrated into communities around the country. The federal Department of Housing and Urban Development currently issues Section 8 vouchers to help people meet housing costs and move towards home ownership, but the numbers of vouchers are limited. Even with Section 8 vouchers, many people with disabilities cannot find any rental properties or homes that fit their specific needs, or the market is priced too high even with Section 8 vouchers.
Transportation
For individuals living in a community, transportation to and from work, to school or to any other type of activity is essential to their independence. The Americans with Disabilities Act covers all public transportation, but enforcement is lagging and access to and within rural areas poses a different set of problems.
Data Collection
Before states can assess how much Olmstead implementation may cost, they must determine how many people with disabilities are inappropriately institutionalized, and how many live in community-based settings or with family members to avoid being placed in a long-term care institution.
Conclusion
The U.S. Supreme Court clearly stated in Olmstead vs. L.C. that unnecessary institutionalization of people with disabilities, if certain conditions exist, is discrimination under the Americans with Disabilities Act. States must comply with this ruling, but they will vary greatly in how they reassess and reform their long-term care systems. The Court gave states guidance on how they might comply and most states are moving forward with the early stages of implementation. As in many civil rights cases, implementation will continue over the next several years and interpretation of the details of the case may be determined in the lower courts. The process will involve a wide variety of stakeholders, and state legislators will play a significant role in transforming their long-term care systems and to help people with disabilities move into integrated settings where they can ultimately live more productive lives.
Acknowledgments
The author gives special thanks to the following people who read and commented on early drafts of this paper: Richard Hemp, senior professional research assistant, State of the States in Developmental Disabilities Project; Peter Youngbaer, executive director, Vermont Coalition for Disability Rights; Martha King, director, Health Care Program, National Conference of State Legislatures; Wendy Fox-Grage and Donna Folkemer, The Forum for State Health Policy Leadership, National Conference of State Legislatures.
This State Legislative Report contains information that resulted from Contract No. 500-96-0006/Task Order Number 02, between The MEDSTAT Group Inc. and the National Conference of State Legislatures. Preparation and dissemination of this report was also supported in part by the State of the States in Developmental Disabilities Research Project, at the University of Colorado Department of Psychiatry and the Coleman Institute for Cognitive Disabilities, U.S. Department of Health and Human Services.
STATE LEGISLATIVE REPORT is published 12 to 18 times a year. It is distributed without charge to legislative leaders, council and research directors, legislative librarians, and selected groups for each issue. For further information on STATE LEGISLATIVE REPORT or to obtain copies, contact the NCSL Book Order Department in Denver at (303) 830-2054.
© 2002 by the National Conference of State Legislatures
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