U.S. Department of Health and Human ServicesU.S. Department of Health and Human Services
This report was prepared under contract #HHS-100-97-0014 between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and the Research Triangle Institute. For additional information about the study, you may visit the DALTCP home page at http://aspe.hhs.gov/daltcp/home.htm or contact the ASPE Project Officer, Gavin Kennedy, at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. His e-mail address is: Gavin.Kennedy@osaspe.dhhs.gov.
We thank the many respondents who participated in this study, particularly the Medicaid program staff, who answered numerous follow-up questions. We also thank Gavin Kennedy and Pamela Doty for their thoughtful comments on earlier drafts. We dedicate this report to the memory of Richard Ladd, one of our respondents for this study. As Director of Oregon's Senior and Disabled Division in the 1980s, he pioneered the use of Medicaid waiver funds in assisted living and other types of residential care.
The anticipated increase in the population aged 65 and older in the coming decades, particularly those aged 85 and older, will lead to an increase in the number of people who need long-term care services. Virtually all individuals who need long term care services prefer to receive them in their own homes. However, some people with long term care needs cannot live in their own homes, often because they live alone and need unscheduled assistance and protective oversight on a 24 hour basis.
Residential care settings have traditionally provided such assistance and oversight to persons with physical and mental impairments who cannot live at home alone but do not require a nursing home level of care. As such, residential care lies on the long term care continuum between home care and nursing home care.
Since the mid-seventies, states have had the option to use Medicaid to cover services in residential care settings under the personal care option, and since 1981, under the home and community-based services (HCBS) waiver program. Until the 1990s, most states used the waiver program to pay for services in residential care settings only for persons with mental retardation and other developmental disabilities, as an alternative to intermediate care facilities for persons with mental retardation. By 2002, however, 36 states had amended their Medicaid waiver programs to permit payment for services in residential care settings for elderly persons, and 13 states covered personal care in these settings under the state plan, together serving approximately 102,000 elderly Medicaid clients.
Historically, states have licensed two general types of residential care: (1) adult foster care, which typically serves five or fewer residents in a provider's home, and (2) congregate care, which typically serves six or more residents in a range of settings -- from large residential homes to settings that look like commercial apartment buildings or nursing homes. These settings have been in existence for a long time. But with Medicaid funding, they are getting increased attention.
To date, there has been little research on how states use Medicaid to pay for services for elderly persons in these settings. This report is intended to fill that gap, by describing in depth how six states use their Medicaid programs to fund residential care services for elderly persons. These states are Florida, Minnesota, North Carolina, Oregon, Texas, and Wisconsin.
Our findings are based on three sources: (1) an extensive review of published and unpublished information about the six states' long term care systems, with a focus on their residential care systems and Medicaid programs; (2) consultation with Medicaid program staff and policy makers and other key staff to obtain additional information and to clarify information obtained through the Internet and other sources; and (3) interviews with current and former state staff and policy makers, residential care providers, representatives of provider and consumer organizations, and academic experts and policy analysts. Appendix A contains additional information about the qualitative methodology we used to conduct this study.
A primary purpose of the study was to gain an understanding of how state staff and policy makers and key stakeholders view Medicaid coverage of services in residential care for elderly persons.
All of the respondents we interviewed believed that their states' decision to use Medicaid to provide services in residential care settings was the right one. In states using the personal care option in their state plan, respondents felt that Medicaid had brought much needed revenues to a residential care sector that historically had been under-funded for Supplemental Security Income (SSI) recipients. In states using the waiver program, respondents felt that by providing an alternative to nursing homes for waiver clients who cannot be served at home, Medicaid funding had both afforded consumers additional long term care options and saved the states money.
At the same time, the individuals interviewed for this report, who were typically quite candid in their comments, cited a range of concerns about the residential care system generally. With the exception of Oregon, stakeholders in each state said that public confusion about residential care options was a problem. The confusion is due primarily to the use of the term "assisted living" to market very different types of facilities, both in terms of the housing and the services offered.
Stakeholders also raised concerns about both overly prescriptive regulations and the lack of enforcement of existing regulations. Respondents in every state had concerns that providers were keeping residents longer and that regulatory changes were needed to address the increased nursing needs and acuity levels of residents in residential care settings.
Whatever their views on specific regulations, nearly everyone interviewed believed that licensing and regulation were state functions and there should be no national regulations for residential care.
Almost every person we interviewed had concerns about staffing levels in residential care settings, both the quality and quantity. Several noted that even with highly trained, competent staff, insufficient staffing would compromise the quality of care. All acknowledged that low pay, lack of benefits, lack of a career ladder, poor management and oversight, and, in some cases, an unpleasant work environment made it very difficult to recruit and retain staff and that general workforce shortages exacerbated the problems.
Most of those we interviewed felt that their state's admission and retention requirements were appropriate, but many expressed considerable concern about how these requirements worked in practice. While very few had concerns about admissions, nearly everyone we interviewed had concerns related to discharge and agreed that issues related to the ability to age in place were far from settled.
Respondents in all states cited similar barriers to expanding Medicaid coverage of services in residential care settings, including a lack of funding for long term care programs generally and insufficient funding for waiver programs in particular. In the two states that do not limit the amount that providers can charge Medicaid clients for room and board, several noted that room and board charges were unaffordable for Medicaid clients.
Inadequate service rates were cited by some in every state as a disincentive for providers to serve Medicaid beneficiaries, particularly in states that restrict room and board payments to SSI levels. On the other hand, in states with relatively high rates, such as Wisconsin, some were concerned that providers are making too much of a profit. In states with relatively low rates, such as Florida and North Carolina, there are concerns about inadequate care.
Those we interviewed had numerous suggestions for improving the Medicaid funded residential care system. The most frequent suggestion was increased funding for both the service component of residential care and the housing component. Several suggested that states allow long term care funding to "follow the person." Texas is using this approach by allowing money from its nursing home budget to pay for waiver services for people transitioned to home and residential care settings.
There was consensus among those we interviewed that states need to pay more attention to quality of care issues generally, and staffing issues specifically. To increase the recruitment and retention of direct care staff, many respondents noted a need for better pay and benefits, more training, career ladders, improved management, and better work environments.
In light of the older ages, higher levels of impairment, and chronic health conditions characteristic of residential care residents, several noted the need to increase both the quantity and quality of health and nursing services provided in residential care settings.
There was agreement among state staff, providers, and consumer advocates that service rates must reflect actual costs and that reimbursement systems need to better match payment rates to residents' needs.
Finally, at least one person in each state felt that the state needed to help consumers better understand the long term care system generally and the differences between different services options. Several said that consumers and their families needed some method to help them compare residential care options and choose those that were best suited to their needs and preferences.
In each of the six states, there is very strong interest in developing affordable residential alternatives to nursing homes that will provide quality care. The individuals interviewed for this report were typically quite candid in their comments, which frequently reflected their frustration in coping with the challenges of developing affordable residential care. State staff, in particular, find themselves grappling with a number of issues that require the reconciliation of what appear to be inherently contradictory goals. These issues are:
finding ways to cover the actual costs of serving frail older individuals with chronic care needs in residential care settings, when Medicaid is not permitted to pay for room and board and the payment sources available to cover room and board are insufficient;
finding ways to meet expectations for privacy, amenities, and quality services that have been set by the private pay dominated model of "assisted living" when Medicaid cannot afford to pay private pay rates;
finding ways to make it possible for individuals to "age in place" without making residential care settings into de facto nursing homes by virtue of having to meet the needs of ever older and more impaired residents;
finding ways to give consumers a sense of what they should reasonably be able to expect from a setting that calls itself "assisted living" or "adult foster care" or some other name, without imposing uniform definitions through state regulation; and
finding ways to assure a minimally acceptable quality of care without imposing rules that stifle improvements and without the regulated "floor" becoming the "ceiling."
The appropriate balance point between these goals will vary depending on the unique characteristics of each state's long term care system and residential care systems. While the states may face the same challenges, the tradeoffs in attempting to reach the balance will also differ based on the states' characteristics. However, states can gain valuable insights by examining the experiences of other states as they work to develop affordable residential care alternatives to nursing homes for low income and Medicaid-eligible elderly persons.
The anticipated increase in the population aged 65 and older in the coming decades, particularly those aged 85 and older, will lead to an increase in the number of people who need long term care services. Virtually all individuals who need long term care services prefer to receive them in their own homes. However, some people with long term care needs cannot live in their own homes, often because they live alone and need unscheduled assistance and protective oversight on a 24 hour basis.
Residential care settings have traditionally provided such assistance and oversight to persons with physical and mental impairments who do not require a nursing home level of care. As such, they are often viewed as the midpoint of the long term care continuum between home care and nursing home care. These settings are licensed, regulated, and monitored at the state level, and serve both private pay and publicly subsidized residents. The public subsidy is typically through the Supplemental Security Income (SSI) program and, in many states, a state funded SSI supplement. SSI and state supplement recipients can use the payments to pay for room and board and custodial care.
Every state's long term care system includes two major types of out-of-home residential care:
adult foster care in private or corporate-owned homes that serve a small number of residents (typically five or fewer), and
congregate care settings with bed sizes greater than foster care, which vary from 6 to 200 or more.
Congregate care settings traditionally have been known by a variety of names, which vary by state. The more common names are domiciliary care homes, board and care homes, adult care homes, and rest homes.
In the U.S., between 800,000 and 1,000,000 aged persons live in licensed residential care settings. An equal number are thought to live in unlicensed boarding homes.1
In the late 1980s, a new model of residential care for elderly persons was introduced in Oregon and spread rapidly across the country.2 This model, called assisted living, differed from the other two types of residential care in that it was based on a philosophy that emphasized privacy and a homelike environment; services and oversight available 24 hours a day to meet both scheduled and unscheduled needs; services provided or arranged to promote independence; and an emphasis on consumer dignity, autonomy, and choice.3 In the assisted living model, privacy and a homelike environment is assured by providing residents with, at a minimum, a private room and bath with a lockable door. The original model as piloted in Oregon provided a full apartment with separate living space for sleeping and a full kitchen or kitchenette. Assisted living potentially combines ordinary accessible housing with services so that people who need long term care services can receive them without the lifestyle sacrifices required by nursing home admission.4
A national survey of residential care facilities in 1998 found that while basic rates ranged from $16,000 to $26,000 per year, persons seeking high privacy and high service levels can expect to pay about 30 percent more.5 Considering these rates, assisted living serves a predominantly private pay clientele. The popularity of the assisted living residential care model in the private pay market has led to increased interest among aging services providers, consumer advocates, and states in developing affordable versions of the model for low income and Medicaid-eligible persons.
States in particular are interested in the potential of this model of residential care to serve as an alternative to nursing home care for some Medicaid waiver clients who cannot safely be served in their own homes but do not need the skilled care provided in nursing homes. Unlike Medicaid coverage of nursing home care, which includes payment for all services and room and board, Medicaid does not cover room and board in residential care settings. However, states have the option to use Medicaid to cover services in these settings. Paying only for services in a residential care setting and not for room and board can potentially reduce state spending for nursing home eligible individuals.
From the inception of the waiver program, states have used waivers to pay for services in residential care settings as an alternative to intermediate care facilities for persons with mental retardation (ICF-MRs). Apart from Oregon, few states used waivers to pay for residential care services for the elderly population until the 1990s. By 2002, however, 36 states had amended their Medicaid waiver programs to permit payment for services in out-of-home residential care settings, and 13 states covered personal care under the state plan in these settings. However, relatively few persons in these settings receive services through the waiver program compared to the number receiving personal care services through the state Medicaid plan.
To date, there has been little research on how states use Medicaid to pay for services for elderly persons in residential care settings.6 A recent publication on Medicaid home and community services briefly discussed options for Medicaid coverage of assisted living and the factors states need to consider when deciding whether and how to cover services in assisted living (see Appendix H for this information.)7 This report builds on that discussion by examining in depth how six states are using Medicaid to pay for services for elderly persons in residential care settings. The states are Florida, Minnesota, North Carolina, Oregon, Texas, and Wisconsin.8
A primary purpose of the study was to gain an understanding of how state staff and policy makers and stakeholders view Medicaid coverage of services in residential care for elderly persons. As stated earlier, the names used to describe residential care settings have historically varied, both within and among states. In the past several years, many states have begun to use the term "assisted living" generically to cover all three types of residential care: adult foster care, congregate care, and the new assisted living model. Minnesota defines assisted living as a program and not a place. At the same time, some consumers, providers, and states view assisted living as a distinct model of care. Therefore, to prevent confusion about which type of residential care is being referred to, this report uses the generic term "residential care setting" to include all types of residential care, including adult foster homes, small board and care homes, large domiciliary care homes, and private assisted living apartments. We will use different terms only when needed to distinguish between the three specific residential care models and when describing specific settings in a given state.
Our findings are based on three sources: (1) an extensive review of published and unpublished information about the six states' long term care systems, with a focus on their residential care systems and Medicaid programs; (2) consultation with Medicaid program staff and policy makers and other key staff to obtain additional information and to clarify information obtained through the Internet and other sources; and (3) interviews with current and former state staff and policy makers, residential care providers, and representatives of provider and consumer organizations. These interviews occurred between June 2002 and February 2003.
This report is organized as follows. The next section provides information on the two Medicaid options for covering services in residential care settings and a brief description of the six states' reasons for using specific options. The following two sections present the views of state staff and policy makers and key stakeholders about Medicaid coverage of services in residential care settings and their suggestions for improving the Medicaid-funded residential care system. The final section presents concluding remarks.
Appendix A contains a discussion of the qualitative methodology we used to conduct this study. Appendices B through G contain a description of each state's long term care system focused on its Medicaid program and residential care system. The state descriptions provide background and technical information, as well as summaries of the views of those we interviewed. Appendix H provides technical information about factors for states to consider when choosing to cover Medicaid services in residential care settings.
States have the option of paying for custodial care -- including personal care -- in residential care settings through state funded supplemental payments to SSI recipients. The disadvantage for the states in using this option is that the supplement is not matched by federal funds. States also have the option to pay for personal care and other long term care services in residential care settings through the Medicaid state plan personal care option and the home and community-based services (HCBS) waiver program. This section describes these options and the six states' reasons for choosing particular options.9
Since the mid-1970s, states have had the option to offer personal care services under the Medicaid state plan in individuals' place of residence, whether in their own home or in a residential care setting. Until 1993, the Medicaid personal care option had a medical orientation: services had to be prescribed by a physician, supervised by a nurse, and delivered in accordance with a care plan. In 1993, Congress amended Medicaid law to allow states to use means other than physician prescription to authorize personal care services and other than nurse supervision to oversee the provision of care. States may impose reasonable medical necessity criteria for receiving personal care services, but may not restrict it to persons who require a nursing home level of care.
Because personal care is an optional Medicaid service, states have considerable discretion in its provision. While optional services must be offered statewide, states can set additional eligibility criteria for the receipt of services. For example, Florida restricts eligibility for personal care services to residents of group living arrangements, and, prior to 1995, North Carolina restricted eligibility to people in their own homes.
An advantage of using the personal care option to cover services in residential care settings is that the state can provide services to a less severely impaired population than those eligible for nursing home care. From the perspective of individuals who need personal care, a disadvantage of the personal care option is that it lacks the higher income eligibility standard that states may use for waiver programs. From the state's perspective, however, this limitation may be seen as an advantage because it enables the state to limit costs by restricting the benefit to those who meet the lower income eligibility standard.
As of 2003, 36 states have the personal care option in their state Medicaid plan, but only 13 use the option to cover services in residential care settings.10
States have had the option of covering services in residential care settings through the HCBS waiver program since 1981 when Congress first established the waiver authority. This option is limited only by a state's ability to serve residents who meet the state's nursing home level-of-care criteria under current licensing and regulatory provisions for residential care settings. States can either amend an existing waiver to add services provided in residential care settings, or they can apply for a new separate waiver to cover services in residential care settings.
Adding to an existing waiver program is simple and minimizes reporting and tracking requirements. However, advocates for home and community services may perceive the addition of services in residential care settings as increased competition for a limited number of slots available for home services more generally.
The option to use the waiver program to cover services in residential care settings was rarely used until the late eighties and early nineties, when the introduction and popularity of the private pay model of assisted living led to increased state interest in providing this option for waiver clients who could not be safely cared for at home. In response to this increased interest, the Centers for Medicaid & Medicare Services (CMS)11 added assisted living to the standardized waiver format as one of two types of service under the heading of Adult Residential Care. It is defined as:
Assisted living: Personal care and services, homemaker, chore, attendant care, companion services, medication oversight (to the extent permitted under state law), therapeutic social and recreational programming, provided in a home-like environment in a licensed (where applicable) community care facility, in conjunction with residing in the facility. This service includes 24 hours on-site response staff to meet scheduled or unpredictable needs in a way that promotes maximum dignity and independence, and to provide supervision, safety and security. Other individuals or agencies may also furnish care directly, or under arrangement with the community care facility, but the care provided by these other entities supplements that provided by the community care facility and does not supplant it.
Personalized care is furnished to individuals who reside in their own living units (which may include dually occupied units when both occupants consent to the arrangement, which may or may not include a kitchenette and/or living room, and which contain bedrooms and toilet facilities. The consumer has a right to privacy. Living units may be locked at the discretion of the consumer, except when a physician or mental health professional has certified in writing that the consumer is sufficiently cognitively impaired as to be a danger to self or others if given the opportunity to lock the door. (This requirement does not apply where it conflicts with a fire code.)
Each living unit is separate and distinct from each other. The facility must have a central dining room, living room or parlor, and common activity center(s) (which may also serve as living rooms or dining rooms). The consumer retains the right to assume risk, tempered only by the individual's ability to assume responsibility for that risk. Care must be furnished in a way which fosters the independence of each consumer to facilitate aging in place. Routines of care provision and service delivery must be consumer-driven to the maximum extent possible, and treat each person with dignity and respect.
This definition incorporates the central tenets of the assisted living philosophy -- privacy, autonomy, and choice -- but states have the option to use a different definition. Medicaid will pay for services provided in adult residential care settings as long as a "homelike environment" is preserved; thus, it will not pay for services in a facility that is located in the wing of a nursing home.
If states do not currently license residential care settings to provide services to persons with a nursing home level of need, they have two options. They can amend licensing and regulatory requirements for existing residential care settings to allow them to serve a more highly impaired and chronically ill population, or they can create a new category of residential care settings that is licensed to cover this population.
As shown in Table 1, four of the six states use both the personal care option and the waiver program to pay for services in residential care settings, while one uses only the personal care option and another uses only the waiver option. The reasons for choosing the options -- as described by those we interviewed -- are unique to each state's long term care system, philosophy, and goals.
| TABLE 1. Use of Medicaid Optoins to Pay for Services in Residential Care Settings | |
|---|---|
| Medicaid Option | State |
| Pays for services through Personal Care Option | North Carolina |
| Pays for services through Personal Care Option and HCBS Waiver Program | Florida Minnesota Wisconsin |
| Pays for services through HCBS Waiver Program | Oregon Texas |
However, there was consensus among the respondents that states' primary goals in using Medicaid to pay for services in residential care settings are (1) to provide an alternative to nursing homes for people who cannot live at home, thereby providing consumers with more choice; (2) to reduce nursing home utilization; and (3) to save money.
Nearly all respondents felt that their state's decision to use Medicaid to fund services in residential care settings was a positive development. The following comments are illustrative of their views.13
The most important feature of Medicaid paying for services in residential care facilities is that it provides the flexibility to provide services based on people's needs. If consumers can't live at home, it gives them a choice other than the nursing home. Some people choose to live in a residential care setting and it's also a safety net for people who wind up there because they have no other choice.
The use of Medicaid to support older persons with dementia in a residential care setting has been highly successful. A good residential care setting is highly preferable to a nursing home.
People were becoming more frail and needing more services, but not qualifying for a nursing home, and couldn't afford a private assisted living facility. Under the personal care option, they can now get some services.
The waiver program has achieved the primary goals of cost saving, reduction in the nursing home bed base, and more humane long term care alternatives. Each dollar spent on the waiver would have cost $2.70 in the nursing home.
Including personal care in the state plan was key to the state's efforts to provide additional revenues to assisted living facilities. It has been instrumental in attracting providers who were reluctant to take state supplement recipients in the past and provides Medicaid funding for frail elders who are not as impaired as waiver clients.
The state wanted to get to the point where nursing homes were not a high priced alternative to community care. Using Medicaid to pay for assisted living fit a niche.
The following descriptions illustrate both the commonalities among the six states in their reasons for choosing specific options and the unique features of their long term care systems influencing their choice of options.
Florida uses both the personal care option and the waiver program to cover services in residential care settings. Since 1975, Florida licensed a type of residential care setting called Adult Congregate Living Facility (ACLF), which provided room and board, assistance with one Activity of Daily Living (ADL), social services, and supervision of self-administered medication.14 ACLFs served a predominantly private pay clientele, but also some individuals who received SSI and an SSI supplement through the state's Optional State Supplementation program. The state did not have a residential care setting that was licensed to serve state supplement recipients who needed substantial levels of personal or home health care but not the level of skilled nursing care provided in nursing homes. Consequently, individuals with this level of impairment had to either enter a nursing home, at a much greater expense to the state, or find an unlicensed facility that would accept them.
To address this gap, in 1992 the state developed a new licensing category of ACLF called Extended Congregate Care that could serve residents with higher levels of need. However, at that time, Florida's waiver program served only individuals who lived in their own homes. In 1995, Florida initiated a pilot program called the Assisted Living for the Elderly waiver, which was designed to serve only individuals who reside in assisted living facilities. In 1997, the state expanded the waiver to statewide status.
In 2001, Florida amended its state plan to include personal care services, which are provided through a program called Assistive Care Services. Elderly persons who live in their own homes are not eligible to receive these services; only those who live in licensed adult family care homes and licensed assisted living facilities are eligible.15
Prior to the addition of personal care services to the state's Medicaid plan, Florida paid for some personal care in residential care settings through its Optional State Supplementation (OSS) program, which is funded by general revenues. The state supplement is not provided to individuals who live in their own homes. Once personal care was added to the Medicaid program, the state reduced the OSS payment and used the money saved to provide the state match for Medicaid personal care services.
Minnesota uses both the personal care option and the waiver program to cover services in residential care settings. In 1983, to reduce nursing home utilization, the state instituted a moratorium on new nursing home beds, and in 1988, implemented an Elderly Waiver program that provides services in a person's home and in residential care settings. At the same time, the state expanded the services in the Medicaid state plan to include personal care services. The state sought by these actions to maximize the number of supportive service options available to persons at risk of institutionalization. Personal care services --called Personal Care Attendant (PCA) services -- are available to eligible persons in their homes, apartments, registered housing with services, and adult foster care settings.
Minnesota uses a managed care model in its Medicaid program called the Pre-paid Medical Assistance Program (PMAP). Persons eligible for Medicaid are enrolled in PMAP and a capitated fee is paid to the PMAP managed care provider, who then becomes responsible for the delivery of all Medicaid state plan services, including PCA services. The PMAP covers PCA services in a person's place of residence, wherever that may be.
Technically, PCA services are available to an Elderly Waiver client in a residential care setting. However, because the residential care setting typically provides personal care to waiver clients under its own contract with the resident, PCA services from outside the setting (through the state Medicaid plan) are not used. PCA services under the Medicaid state plan are typically used in residential care settings such as adult foster care by persons with disabilities under age 65 who are not eligible for the Elderly Waiver program.
North Carolina uses only the Medicaid state plan personal care option to cover services in adult care homes. Prior to 1995, North Carolina provided Medicaid personal care only to individuals in their own homes. The state funded a small amount of personal care in adult care homes through a relatively generous state supplement called Special Assistance (SA), which is available only to residents of adult care homes.16 The combined SSI+SA payment is set each year by the state as the rate for adult care homes to provide room, board, and custodial care. In 2003, the SA supplement for an SSI recipient is $560.
In the late 1980s to mid 1990s, advocates for the elderly lobbied the state to address perceived quality of care problems in adult care homes. In particular, there were concerns that persons requiring a nursing home level of care were residing in these homes and were not receiving appropriate or adequate services.17 In response, North Carolina commissioned a study, whose findings confirmed these concerns. The study found that adult care home residents in North Carolina had significant levels of impairment.18 It also found that compared to persons in residential care settings in ten other states, North Carolina residents had much higher levels of incontinence, ADL impairments, and cognitive impairment, with nearly two-thirds having moderate to severe cognitive impairment.
These findings led to pressure from advocates to increase the amount of care provided to residents of adult care homes and pressure from providers for higher payments. In response, the state decided to expand the Medicaid personal care program to cover services provided in adult care homes. The expansion was budget neutral because the state reduced the state supplement and used the savings as the state match for the federal funds.
According to one respondent, another factor influencing North Carolina's decision to expand its personal care program to cover services in residential care settings was congressional consideration of a proposal to block grant Medicaid. At the time Congress was discussing the proposal, many in the state felt it would be advantageous to draw as much Medicaid funding as possible before the program was block granted. Even so, the state was concerned about the cost of the new benefit, and so it established three fixed reimbursement levels for personal care in adult care homes -- basic, and two enhanced levels -- to be determined by a case manager. In addition to paying for one hour of personal care per day, the Medicaid program also provides case management to oversee residents with heavy care needs.
North Carolina has chosen not to use the waiver program to cover services in adult care homes because these homes are licensed to provide only custodial care and some personal care. State licensing rules specifically prohibit adult care homes from serving persons who need a nursing home level of care. Thus, residents of adult care homes are not eligible for waiver services even if their condition deteriorates. Residents who need skilled nursing services or skilled therapies receive them through the Medicaid or Medicare Home Health benefit. If North Carolina wanted to serve waiver clients in residential care settings, it would have to either amend adult care home licensing requirements or create a new type of residential care setting with appropriate licensing and regulatory standards.
Oregon uses only the waiver program to fund services in residential care settings. Although the Medicaid state plan includes the personal care option, Oregon decided to use the waiver program alone because its specific goal was to reduce nursing home utilization, and persons who meet a nursing home level of care typically need more than personal care.
The state expanded its community long term care infrastructure by focusing initially on the development of adult foster care, and later on assisted living facilities and other non-medical residential settings. Residents in all residential care settings can receive Medicaid waiver services as long as the facilities meet the regulatory requirements for providing these services.
Texas uses only the waiver program to cover services in residential care settings. In the early 1990s, Texas became interested in supporting residential care alternatives to nursing homes for individuals who met a nursing home level of care but could not be safely cared for at home. In 1994, Texas implemented an HCBS waiver program -- called Community Based Alternatives -- to provide services in private homes, in adult foster care homes, and in assisted living/residential care facilities. The state's primary goal in creating the Community Based Alternatives waiver program was to offer both home and community alternatives to institutional care and to provide an opportunity for persons in institutions to transition to the community.
Wisconsin uses both the personal care option and the waiver program to cover services in residential care settings. In 1981, to decrease nursing home utilization, the state instituted a moratorium for nursing facilities and shortly after implemented an HCBS waiver program to provide services to persons residing in their own homes, supported apartments, and all types of residential care settings. The state's primary goal in using the Medicaid waiver to pay for services in residential care settings is to provide an alternative to nursing homes for people who cannot live in their own homes.
In 1988, Wisconsin amended its state Medicaid plan to provide coverage of personal care. The rationale for adding personal care to the state plan was that the Medicaid home health benefit, which paid for home health aides to perform nurse delegated tasks such as wound care, was not able to meet the personal care needs of many persons with disabilities. When personal care was added to the state plan, it was initially covered only in private homes.
In the 1990s, the state realized that there was inadequate funding to support the care of residents in Community Based Residential Facilities (CBRFs). At this time, personal care services provided in CBRFs was paid through the waiver program, the state's general revenue funded Community Options program, county funding, and federal social services block grant funding. However, these funding sources were not sufficient to meet the need, and people who were eligible for waiver services often faced long waiting lists. Therefore, the state decided to expand its personal care program to cover persons in CBRFs. Coverage in these settings was viewed as cost efficient because the state does not pay for room and board in CBRFs, as it does in nursing homes.
Initially, both waiver services and personal care under the state plan were provided only to residents of CBRFs with no more than eight beds. The state used small bed size as a proxy for "home-like" and did not want to encourage the payment of public money to quasi-institutional residential care facilities, i.e., those with more than eight beds. The bed restriction was recently increased to 20 beds, in part because some residents were being forced to leave their residence and move to one with eight or fewer beds in order to receive Medicaid services.
In addition to providing a technical description of how states use Medicaid to cover services in residential care settings, we wanted to gain an understanding of how the states and key stakeholders viewed this coverage. To ensure a cross section of views, in addition to interviewing state staff and program administrators we interviewed both providers and their representatives as well as consumer advocates.
We were interested in their views generally, such as whether they saw Medicaid coverage as a positive development in their long term care systems. We were also interested in knowing if they had any general or specific concerns about how the residential care system in their state was working for Medicaid clients. Specifically, we asked for their views on a range of issues, including barriers to the provision of Medicaid coverage of services in residential care settings, and licensing and regulatory requirements -- particularly those related to admission and discharge -- that affect the ability to age in place.
Although the purpose of our interviews was to gain a better understanding of Medicaid's coverage of services in residential care settings, nearly everyone we interviewed provided their views on issues related to the state's residential care system regardless of whom it serves: private pay, Medicaid-eligible residents, or a combination of both. Consequently, many of the respondents' views regarding the state's residential care system did not differentiate between Medicaid and private pay residents. For example, concerns expressed about discharge policies apply to both private pay and Medicaid clients. Nonetheless, respondents also had views about issues specific to Medicaid's coverage of services in residential care settings.
Respondents' views are categorized into six major headings:
The content of this section is based solely on the views of those we interviewed, all of whom were quite candid in their discussions with us. For an in-depth description of each state's Medicaid program and residential care system, and specific issues related to Medicaid coverage of services in residential care settings, please see the descriptions of each state in Appendices B through G.
Comments about the residential care system generally were, for the most part, unique to each state and are summarized first, followed by a summary of comments about one issue raised by respondents in all six states.
Florida. The increase in the cost of liability insurance was cited by most respondents as the biggest problem facing the assisted living industry in Florida, and a major barrier to assuring the availability of residential care options for older persons who do not want to live in a nursing home. Recently, assisted living facilities (ALFs) with Extended Congregate Care (ECC) or Limited Nursing Services (LNS) licenses have been notified by insurers that they will be charged the same liability insurance rates as nursing homes. The rate increase is based on insurers' views that these facilities are equally at risk for lawsuits because they are licensed to serve waiver clients who meet the state's nursing home level-of-care criteria.
One provider stated that her annual liability insurance premium had increased from $7,000 three years ago to $55,000 this year. One respondent stated that since January 2002, ALFs with ECC and LNS licenses could not obtain liability insurance at all. Although the legislature authorized a state insurance program that can provide insurance for up to 800 ALFs, two respondents felt that this program would not solve the liability insurance crisis in the absence of tort reform. Most respondents recommended tort reforms that would set a limit on compensatory and punitive damages.
Minnesota. Minnesota's assisted living program is a service model that can be provided in virtually any type of housing, and respondents mentioned a number of issues related to this model. Because admission and discharge decisions in Minnesota's system are solely within the housing providers' discretion, two respondents felt that a resident's bill of rights and an appeals process were needed, particularly to address involuntary discharges. Another felt that a minimum level of care should be required of all settings.
North Carolina. Two respondents felt that the state's Certificate of Need (CON) program for ALFs needed to be better targeted. One noted that the current CON program has a cap by county, but there is a shortage of beds for people who are difficult to place, such as those with AIDS and behavior problems. Another noted that a county could have only two very old facilities with physical plants that no one wants to live in, but if someone wanted to build a better adult care home in that county, the permit would be denied as long as there were vacancies in the existing facilities. Others criticized the state's nursing home moratorium and CON program, stating that they had a negative impact on consumers because they led to an insufficient supply of beds. Consequently, "people who should be in nursing homes wind up in adult care homes."
Oregon. The only major concern, expressed by all respondents, was the effect of budget cuts on the state's residential care system. Nearly all agreed that proposed budget cuts to the waiver program, if enacted, would cause some providers to go out of business, particularly those that serve a high proportion of Medicaid residents.
Texas. The only major concern, expressed by a few respondents, was that the state could be facing a liability insurance crisis in the near future. One noted that an error in the regulations had led to increased liability for providers, and another noted that the 2003 legislative session was going to address tort reform. However, Texas does not currently require ALFs to have liability insurance.
Two respondents mentioned that the federal SSI payment was too low to cover provider costs for room and board and that a state supplement was needed. However, both acknowledged that it was unlikely the state would provide a state supplement given current budget shortfalls.
Wisconsin. A consensus existed that the state was not adequately enforcing its residential care regulations and the primary reason was lack of funding to do so. One respondent felt that the state needed more adult family care homes, i.e., adult foster care homes.
As noted in the beginning of this report, the term "assisted living" originated as a distinct type of residential care model for the private pay market as an alternative to nursing homes and traditional residential care settings such as board and care homes. The model was developed to provide what was perceived to be lacking in these other settings: a private room and bath or full apartment, autonomy, and the ability to tailor service packages as long term care needs increased or decreased, temporarily or permanently.
Respondents in several states noted that due to the popularity of the new model, many residential care settings were using the term "assisted living" in their marketing materials, even though some did not provide private rooms or the ability to age in place. Some states now use the term as an umbrella category for quite different types of residential care settings; some have amended regulations to rename traditional domiciliary care homes as assisted living. Minnesota uses the term to describe a package of services that can be delivered in a wide range of housing settings, some of which market themselves as assisted living.
Respondents in several states noted that use of the term "assisted living" for different types of residential care settings has led to considerable confusion among consumers. Several respondents noted that the residential care system was so confusing that it was difficult for consumers (and their families) to figure out what type of residential care setting would be able to meet their needs.
Oregon is the only state of the six that limits the use of the term to residential care settings that provide individual apartments. There was a consensus among the Oregon respondents that the state was right to limit the use of the term in this way. In marked contrast with other states, no one in Oregon mentioned public confusion about the different types of residential care as an issue.
Minnesota. In Minnesota, assisted living is viewed not as an architectural model but as a service package that can be provided in a wide variety of housing types. One respondent noted that families are surprised to learn that the assisted living model in Minnesota is licensed as a home care provider, that 24-hour supervision is not available in many settings, and that although a residence is licensed, it is not regulated.
North Carolina. According to several respondents, when North Carolina amended its statutory provisions governing domiciliary care, the industry lobbied the legislature to redefine adult care homes as assisted living, because it wanted to be able to market adult care homes as assisted living to compete with the newer, private-pay, high end facilities.
The state's new statutory definition of assisted living includes adult foster care, adult care homes, and a new category of senior housing that provides meals and housekeeping and social services only. Many respondents -- providers, consumer advocates, and state staff -- said that the generic use of the term "assisted living" in North Carolina's residential care system was confusing for the public. They noted that the public does not understand the differences between nursing homes, adult care homes, and assisted living.
Several noted that the situation is particularly confusing when adult care homes with few if any of the features of market rate private-pay assisted living facilities market themselves as such. To add to the confusion, facilities licensed under the same standards offer substantially different levels of care. Some facilities accept only those with few needs, while others accept those with multiple needs.
One respondent said that another source of confusion was the use of the term "assisted living" by adult care homes that did not serve a predominantly elderly population. In North Carolina, adult care homes are permitted to serve persons of varying ages with substantially different service needs in the same facility: young adults with serious mental illness or developmental disabilities and frail elderly persons. Several felt that this caused even more confusion for the public, which generally associates the term "assisted living" with the care of elderly persons.
One person noted that she has received calls from families looking for residential care, who were upset after visiting some of these homes, saying that they could not put their frail mother in an assisted living facility that also served young adults with serious mental illness. They were particularly concerned because these homes did not have private units with lockable doors.
Several respondents, both consumer advocates and providers, said it was impossible to assure that the service needs of different groups -- the seriously mentally ill, developmentally disabled, and frail elderly -- could be met using the same set of licensing and regulatory provisions.
Wisconsin. Wisconsin has a similar situation as North Carolina, having only one licensing standard for all community based residential facilities (CBRFs), which can serve a diverse population, including elderly persons, persons with serious mental illness, traumatic brain injuries, developmental disabilities, veterans, unwed mothers, and even corrections clients.19 As in North Carolina, a few respondents -- both consumer advocates and providers -- said it was not possible to assure that the service needs of such different populations could be met using the same licensing and regulatory provisions.
When Wisconsin created a new licensure category called assisted living and required facilities licensed under this name to provide private apartments, the residential care industry lobbied the state to permit CBRFs (which provide private and shared bedrooms and mostly shared baths) to also market themselves as assisted living. Wisconsin revised the statute to allow this, and due to concerns that the public would be confused if the new apartment model and CBRFs were both called assisted living, it renamed the licensing category of the apartment model from assisted living to Residential Care Apartment Complex (RCAC).
Consequently, the model that matches the assisted living philosophy is not called assisted living. According to several respondents, this has created considerable confusion among the public. Several respondents said that just about any type of setting could call itself assisted living, and that the operative condition in the state when looking for a residential care placement is "buyer beware."
One noted that the state had a website that did an excellent job explaining the differences between RCACs and CBRFs and adult foster care, but that access to the web is an issue. The average age of entry into residential care is the early to mid-eighties, and many older persons and their families do not have computers; those that have computers do not always know how to use them to get information. This same respondent noted that another issue is that many, if not most, residential care placements are made in a crisis situation, after a hospitalization or a nursing home stay, and under these conditions, decisions are often made based on what is convenient and available rather than what is needed and preferred.
Another source of confusion for the public is that while RCACs must provide services up to 28 hours a week, they are permitted to choose which services to offer above the minimum required personal, supportive, and nursing services. One RCAC could limit nursing services to health monitoring, medication management, and administration (i.e., the minimum), and another could offer additional nursing services. Several respondents stated that differences in the services offered made it difficult for people to identify a facility that would best meet their needs over time.
In sum, with the exception of Oregon, respondents in all states agreed that the term "assisted living" has become a generic term that is not helpful to consumers, and that some standard nomenclature is needed to help the public understand the residential care system. A few respondents (all providers) stated that they opposed limiting the term "assisted living" to a specific model. The remainder felt that the term should be used to define a distinct model, because its current generic usage to cover many different types of residential care settings is confusing to the public.
In all the states, while some respondents had concerns about specific Medicaid-related issues, there was unanimous agreement that Medicaid payment for services in residential care settings was overall a positive development. Medicaid payment was universally viewed as a way to reduce nursing home utilization, and in so doing, both save money and increase community alternatives to nursing homes, thereby providing consumers with more choice. A respondent in Oregon stated that the public has many more options because Medicaid participates in the funding of residential care services.
Respondents in Florida noted that prior to the use of the personal care option in residential care settings, many people needed services but did not meet the nursing home level of care criteria and could not afford to pay privately for residential care. Adding personal care under the Medicaid plan was key to the state's efforts to provide additional revenue to residential care settings that previously received only SSI and a state supplement as full payment for room and board and services. Medicaid coverage of personal care in residential care settings has attracted providers who, in the past, were reluctant to take state supplement recipients.
Florida respondents also noted that covering services in residential care settings through the waiver program was responsible for major cost savings. One stated that each dollar spent on the waiver would cost $2.70 in the nursing home. Minnesota respondents expressed satisfaction with Medicaid coverage because it enabled many people to be served in settings outside the nursing home.
North Carolina respondents felt that Medicaid coverage of personal care in residential care settings had improved the quality of care and had saved the state money by shifting some of the cost of personal care to the federal government. However, some felt that the adult care home population is becoming more and more impaired, and that the homes are not able to provide the level of care that many residents need. One respondent felt that the state is using limited resources inefficiently by providing nursing care to large numbers of people in residential care settings through the Medicaid Home Health benefit. Another noted that even though occupancy rates in some adult care homes were low, some facilities did not want to accept Medicaid residents because they would have to submit cost reports.
Of the six states, only Oregon requires assisted living facilities to provide private apartments to Medicaid clients.20 In the other states, Medicaid contracting rules may encourage, but do not require, private bedrooms and bathrooms. Yet, in every state, nearly all respondents who commented on the issue of single vs. double occupancy rooms felt strongly that Medicaid clients should have private rooms and baths in residential care settings, noting that most older people highly value their privacy and want private rooms.
Many were highly critical that the term "assisted living" was used to describe facilities that had two and as many as four people in a room (in Florida). One respondent criticized Florida's Extended Congregate Care regulations for defining privacy as "encompassing dual-occupancy with a choice or roommate where possible." However, some noted that the low room and board rates mandated for Medicaid clients could make it difficult for some providers to offer private rooms.21
In North Carolina, dual occupancy is the standard for Medicaid-eligible residents. Several North Carolina respondents felt that many facilities that called themselves assisted living were similar to institutional care. In Wisconsin, whether a waiver client is served in a single room depends on the availability of these rooms in the area they live in, and whether the facility will accept the low amount that waiver clients typically have to pay for room and board.
Oregon respondents felt that success of the state's assisted living program lay in its offering Medicaid waiver clients the same residential care options available to the private pay market. As one said, "if the private pay market gets privacy and independence, then so should the Medicaid client." Another noted that while giving Medicaid clients private rooms in assisted living had been very successful, the downside was that the state has not invested in the physical upgrading of nursing homes, which are viewed as being "stuck in the 50s and 60s."
One Oregon respondent noted that the assisted living physical plant requirements had generated a greater degree of accessible housing for persons under age 65 with disabilities, noting that ALFs offer a housing option for the younger disabled who need some oversight and services but want privacy and independence.
States have the authority to license and regulate all types of residential care. There are no applicable federal statutes, other than the Keys Amendment to the Social Security Act, which is applicable to board and care facilities in which a "substantial number of SSI recipients" are likely to reside.22 State rules vary widely, and thus, respondents' views on licensing and regulatory issues are state specific.
In order to use Medicaid to cover services in residential care settings, the state must assure that its licensing and regulatory provisions match the needs of the individuals who will receive services in these settings. Licensing and regulatory provisions cover many areas, including construction and physical plant standards, health and safety standards, admission and retention standards, and staffing. A number of these areas are key for states serving a Medicaid population in residential care settings, particularly those who meet the state's nursing home level-of-care criteria.
Federal HCBS waiver regulations require facilities in which waiver services are furnished to meet applicable state standards, so state standards set the minimum requirements for Medicaid providers. However, the state's Medicaid program may set additional or more stringent standards for settings that serve waiver clients. For example, a state may permit residential care settings to offer rooms shared by two, three, or more residents, but a state's assisted living waiver program may choose to contract only with facilities that offer private occupancy unless the resident chooses to share a room or unit. Residential care settings providing waiver services must meet the standards for service provision that are set forth in the approved waiver documents. Medicaid contracting requirements may also specify additional training and other requirements if state licensing rules do not have sufficient requirements for facilities serving people with dementia.
State licensing and regulatory requirements address many areas, and an overview of these requirements for all fifty states can be found in other published sources.23 Appendices B through G of this report describe key licensing and regulatory provisions for residential care settings in the six study states.
All of the respondents we interviewed had strong views about a number of licensing and regulatory provisions issues. Their responses fell into seven categories, each of which is discussed in turn:
In all of the states, nearly everyone interviewed believed that licensing and regulation were state functions and that there should be no national regulations for residential care. There was general agreement that major differences in the states' residential care systems and the heterogeneity of the population served in residential care necessitated different licensing and regulatory provisions. Some felt that federal regulations might stifle state creativity.
In Wisconsin, respondents felt that the licensing and regulatory provisions were good but needed fine tuning. Some stated that the Medicaid waiver program provided quite enough federal oversight. Even in states where considerable dissatisfaction was expressed about certain licensing and regulatory provisions, respondents did not see federal regulation as appropriate or needed.
On the other hand, model standards were viewed as both potentially helpful for informing state licensing and regulatory provisions and also as potentially problematic if they became minimum standards. Some respondents were concerned that model standards would lead to a nursing home regulatory model, which most viewed as both overly prescriptive and not particularly effective in assuring good quality care. Whatever people's views, consensus existed that model standards should not be mandated. As one person in Oregon stated succinctly: "Best practice models? Absolutely. National oversight? Not on your life."
At the same time, a few felt that some type of rating system for residential care settings would be helpful for consumers who currently find it very difficult to evaluate what is available. One respondent suggested a rating system with key features that would enable different settings to be compared in a meaningful way.
Respondents in every state acknowledged that regulations were necessary, if for no other reason than to "keep the bad providers out." But many felt that some prescriptive regulations at best did not guarantee good care and at worst impeded it. A few stated that regulations "got in the way of quality of life."
Several noted that licensing and regulatory provisions are too rigid and need to be more person-centered and outcome-based, though one respondent noted that outcome-based provisions would be better included in Medicaid provider contracts than in licensing and regulatory provisions.
Regulations related to assuring a nutritious diet were most frequently cited as too rigid. Several noted that facilities are required to serve nutritious meals based on the food pyramid, but these meals may not provide the type of food that people like to eat. Some suggested an outcome-based alternative: to simply determine if the residents were maintaining an appropriate weight and were happy with the meals provided.
Inflexible, prescriptive non-person-centered rules were viewed as particularly problematic when caring for persons with dementia. For example, one respondent noted that North Carolina has a rule that there must be a minimum of ten hours between breakfast and dinner, but a resident with dementia wanted to sleep late, have breakfast at 10 AM, and dinner at 5:30 PM. Unless a facility followed this schedule, the resident became agitated; nonetheless, the facility was cited for not adhering to the ten hour rule.
Several providers in Oregon expressed concern that the state had started with a resident-centered model but that the regulations were becoming more prescriptive and more costly for providers to meet. One noted that the state prohibits bed rails because they are considered restraints, but some residents have used bed rails at home and want to continue doing so when they move to an ALF because it makes them feel safer at night. One felt that a potential consequence of more regulations is that ALF providers will admit more private pay residents to help meet the cost of the new regulations, resulting in Medicaid clients having fewer choices and ending up in double occupancy residential care facilities. On the other hand, several respondents felt that more regulation was needed because the nursing needs of the average resident have increased.
Another complaint related to licensing and regulatory provisions that were perceived to increase cost but not quality. For example, Florida prohibits stock supplies of over-the-counter medications for multiple residents and requires all non-prescription drugs to be labeled with a resident's name. One provider noted that this rule prevents providers from giving a resident an aspirin for a headache from a stock bottle. On the other hand, several respondents had major concerns about medication administration by unlicensed, untrained, and unqualified personnel, and felt that additional regulations might be needed to prevent medication errors.
In general, respondents' concerns about staffing related to quantity and quality.
Staffing Levels. Nearly every respondent in every state had concerns about staffing levels in residential care settings, noting that even with highly trained, competent staff, insufficient staffing would compromise the quality of care. All acknowledged that low pay, lack of benefits, lack of a career ladder, poor management and oversight, and, in some cases, an unpleasant work environment made it very difficult to recruit and retain staff and that general workforce shortages exacerbated the problems.
Most felt it would be difficult to impossible to increase staffing at current Medicaid reimbursement rates. On the other hand, some felt that states needed to have a better picture of what care actually costs in residential care settings before simply putting more money into them.
A few said that staffing regulations needed to be based on care needs and not fixed staff-to-resident ratios. In North Carolina, prior to 2000, adult care homes could have one personal care aide for 50 residents on the night shift. Although this was changed to one aide for 30 on the night shift and 1 for 20 on the day shift, one provider stated that 1 aide for 20 residents is "totally insufficient" if residents have heavy care needs. There was agreement that North Carolina needs an improved assessment form and improved methods to determine the level of care people need.24
Staffing Qualifications and Training. Many respondents in every state had concerns about staffing qualifications, some noting that the basic quality problem was staff not knowing and not recognizing signs of need. They noted that many residents are very old, with major health problems and cognitive impairment, and many if not most residential care staff are not adequately trained to provide good care for this vulnerable population.
Respondents in all the states expressed concerns specifically about staff qualifications to administer and manage complex medication regimes, noting that many residents have cognitive impairment and need assistance in this area. In North Carolina, several expressed concerns about medication errors and said there was inadequate nurse or pharmacy supervision. Many noted the need for additional training, and some mentioned the need for certification to be able to dispense and administer medications. Others were concerned about the lack of training to monitor the effects and side effects of medications.
In North Carolina, several expressed concern that new regulatory requirements for increased staff training were not being enforced, and in Wisconsin some providers expressed considerable concern about the additional cost of training requirements.
The need for and provision of nursing care in residential care settings was a major issue that nearly all respondents commented on. Respondents in every state had concerns that providers were keeping residents longer and that regulatory changes were needed to address the increased nursing needs and acuity levels of residents in residential care settings.
Many noted that the average age of residents was the early to mid-eighties, and that this age group has more medical needs. They also noted that with shorter hospital and nursing home stays, residents were returning to residential care settings with higher acuity needs. In several states, respondents felt that residential care settings are, to a large extent, serving the population that used to be served in intermediate care facilities (ICFs); however, they noted that in contrast with the ICFs, residential care settings do not have licensed practical nurses (LPNs) on staff providing direct nursing care, supervision, and oversight.
The problem was seen as particularly acute in North Carolina, where adult care homes are not licensed to provide nursing care; but many felt that there is no difference in the type of residents served by these homes and those that used to be served in ICFs. If a resident needs nursing care, the facility arranges for it through Medicare or Medicaid Home Health. However, one person noted that providing nursing care in this one-on-one manner was not only very expensive but was insufficient because the visit lasts a half hour and there is no registered nurse (RN) or LPN oversight the rest of the day. However, another respondent said that having nurses on staff in these homes was not the solution, because if the state allowed these homes to provide health care, they would become "unlicensed substandard nursing homes."
In Oregon, several people noted that assisted living residents need and want more health and medical services from an RN or certified nursing assistant (CNA), but ALFs are not required to hire CNAs. Several acknowledged that when the state began paying for waiver services in residential care settings, it focused on ADL needs to the exclusion of chronic illness management. Now there is recognition that more nursing is needed in these settings, but they believe a nursing teaching and consultation model should be used, not a nursing services model.
While many states have nurse delegation provisions, Oregon is unique in its extensive use of nurse delegation and nurse consultation services in its HCBS system, and most said that this nursing model was an essential prerequisite for expanding its system. But several in Oregon acknowledged that questions remain about how nursing should be provided in residential care settings, and that if the state was going to require more nursing, it would have to increase reimbursement rates.
In Florida, there were differences of opinion about whether residential care settings that provided nursing care should have higher licensure standards. One respondent expressed concern that facilities licensed under extended congregate care, which enabled residential care settings to admit waiver clients and provide nursing care, were moving toward a medical model and becoming too much like nursing homes.
Most respondents felt that their state's admission and retention requirements were appropriate, but many expressed considerable concern about how these requirements worked in practice. With the exception of Texas, people did not have problems with admission requirements. In Texas there was some concern that current licensing standards are too focused on life and safety distinctions. One person noted that fire and safety regulations have made it possible for facilities to deny residence to people who use wheelchairs. On the other hand, another person noted that the waiver program sometimes pressured facilities to take residents with needs beyond what the facility could provide.
While very few had concerns about admissions, nearly every respondent in every state had concerns related to discharge and agreed that issues related to the ability to age in place were far from settled.
In general, there are two approaches to retention/discharge requirements. One approach sets a maximum, and providers can offer any amount of services up to this limit. Wisconsin uses this approach, allowing CBRFs to provide up to three hours of nursing care per week and RCACs up to 28 hours of care overall, with exceptions for recuperative care.
The other approach sets a minimum, and residential care providers are permitted to set their own ceilings, which allows them to retain residents based on their ability to provide the services needed. Oregon uses this approach, which is less prescriptive, and based on the premise that people should be able to age in place and not be discharged when they reach a specific limit.
However, both approaches recognize that there are circumstances and conditions when nursing home care will be needed. States uniformly require that anyone needing 24-hour-a-day nursing oversight be served only in a nursing home, and some states specifically exclude certain conditions from being cared for in settings other than nursing homes. In Florida, for example, an extended care license permits residential care settings to serve waiver clients, but the statute prohibits them from admitting or retaining persons with specific conditions, such as persons on ventilators.
While most support this latter style of regulation because it permits residents to age in place, they note that it can lead to problems related both to inappropriate retention and inappropriate discharge. A few noted that aging in place policies bring with them liability issues, and this view was supported by others, who noted that with an increasingly older, more impaired and chronically ill population, providers were concerned about lawsuits and increasing premiums for liability insurance.
Even though most respondents felt that retention and discharge problems needed to be addressed, they agreed that rigid discharge requirements were not the solution.
Inappropriate Retention. In all six states, most frequently in North Carolina, inappropriate retention was mentioned as a problem. Inappropriate retention was attributed to residents not wanting to move from familiar surroundings, as well as to providers wanting to retain residents due to low occupancy rates. Several noted that while providers market to healthy, high functioning seniors, there are very few in that category who want to leave their homes to live in a residential care setting, no matter how nice. As one person said, "they can market to the healthy and independent, but the frail show up."
In just one state -- Texas -- a few respondents stated that waiver case managers often pressured facilities to retain a resident, even though rules allowed the facility to discharge based on the resident's condition or behavior. In some states, the reasons mentioned for inappropriate retention were more complex. For example, in North Carolina, there are no residential care settings licensed to care for individuals who need a nursing home level of care. Thus, when residents age and their needs increase, they need to be discharged to a nursing home. However, respondents cited several factors that keep residents in adult care homes past the point where they should be in a nursing home.
A few noted that a major problem in North Carolina is the lack of nursing home beds. Due to a previous moratorium and current CON program for nursing homes, nursing home occupancy rates are quite high. Given high nursing home occupancy rates, some said that it can be very difficult to find a Medicaid bed for a long-term heavy care resident, particularly as facilities often prefer to admit shorter stay Medicare funded residents. Additionally, the state has instituted more stringent nursing home level-of-care criteria for the Medicaid program, making it difficult for some residents whose needs exceed what can be provided in an adult care home from meeting this criteria.
Inappropriate Discharge. Many said that giving discretion to providers to determine when to discharge residents made it easy for them to discharge heavy care or "difficult" clients, even though these residents could be cared for in the community.
Some in Oregon felt that the state was moving away from an aging in place philosophy and was giving providers too much leeway over discharges. They felt that by allowing providers to set their own ceilings, corporate owned ALFs were able to "cream" the lighter care residents. They pointed out that on average, adult foster homes served more severely impaired residents than did ALFs, and that this was true in the state of Washington as well.
On the other hand, some felt that the state was taking a more realistic approach to aging in place, recognizing that individual facilities may have limits on the services they can provide. For example, a small facility that has only one staff person for ten residents can discharge a resident who needs a two-person transfer. Another facility with 20 beds may be able to handle three or four very heavy care residents, but not five or more.
In Minnesota, one respondent said the leading complaint about residential care settings was not lack of care, but "they are making me move." Similarly, in Wisconsin, several noted that a key complaint about RCACs was premature or involuntary discharge and that over half of the residents left because they needed more care than the facility provided. As mentioned previously, Wisconsin sets hourly limits on the amount of care that can be furnished, but providers are free to limit certain types of care, such as nursing, above the minimum required, and to discharge persons who exceed their own established limit.
One person in Wisconsin noted that hours of care is not the only indicator of need, noting that transfer issues cause some people to leave a facility long before they reach the maximum hours. This person also noted even if a facility provided 16 hours of hands-on care a day, it would not address the needs of persons with dementia who could not safely be left in their own unit with a locked door.
Several respondents in different states felt that states need to move away from the idea of aging in place, noting that in order to promote a range of residential care options, facilities needed to be able to market to a particular group. Some providers may want to market to the less frail and others to those with more acute needs. Those supporting this approach stated that people would have to choose a facility knowing they may not be able to stay there forever. However, those advocating this approach stated that to protect the clients and their families, there should be "no surprises down the road" and that full disclosure about the conditions for discharge should be provided before someone entered a facility.
In sum, the concept of aging in place appears to be one that is widely supported. However, even its strongest supporters recognize that many unresolved issues complicate its operationalization, even in states that are strongly committed to the concept, as is Oregon. In general, there was a feeling that aging in place was not working in practice. As one person in Wisconsin noted, the typical service approach is to "fit people into facilities rather than get the facility to match the person's needs."
While some respondents strongly supported or opposed negotiated risk or shared responsibility agreements, many said they did not think there were any issues related to them, and others said they didn't know enough about them to comment. Those that were knowledgeable had conflicting views.
The most frequently cited situation where risk agreements were thought to be needed was the non-compliant diabetic. One provider, asked by a state inspector to explain why a diabetic was eating chocolate cake, responded: "Whose choice is it? The elderly person, the provider, or the government who is paying for service?" Many felt that properly prepared service plans should be able to address such situations and that negotiated risk agreements were not needed.
Others said that providers were very reluctant to have residents assume risk due to both outmoded paternalistic views and concerns about lawsuits. In Florida, where there is a major liability insurance crisis, some saw them as a potential solution, but one noted that trial lawyers opposed them and felt they would not hold up in a lawsuit. In other states, some felt that while families wanted freedom and autonomy for their loved ones, they still wanted the facility to be liable for anything bad that might happen.
A few respondents held the view that until elderly persons are adjudicated incompetent, they should be able to do whatever they want. While others agreed, they said that families would still hold a facility responsibility for a negative outcome.
Some felt that there were certain health and safety responsibilities that providers should never relinquish, and that since providers were paid to use their professional judgment to provide a safe environment, negotiated risk agreements should never be used where there are safety issues. For example, one provider noted that a resident with dementia should not be permitted to use a gas stove. This same person noted that it would be helpful if the state regulatory agency would define parameters -- and identify areas that are not appropriate -- for shared risk agreements.
Very few raised the issue of assessing competency to enter into and continue in a shared responsibility or negotiated risk agreement. When asked specifically about this issue, most agreed that the lack of a standardized method for assessing cognitive impairment and competency, particularly in persons with mild cognitive impairment, was potentially a major problem. One lawyer noted that if he were representing a resident who had signed such an agreement, the first thing he would look at was how a provider determined that the resident was competent to enter the agreement.
Lack of oversight and enforcement of regulations was cited as a concern by at least one person in each state, but many Wisconsin respondents cited it as a major problem. Although some in Wisconsin felt that Community Based Residential Facilities (CBRFs) were over-regulated, most felt that the regulations were excellent but provided a good example of how regulations by themselves do not guarantee quality. All agreed that the major reason for lack of oversight and enforcement was inadequate funding.
On the other hand, Wisconsin's new assisted living model -- called Residential Care Apartment Complexes (RCACs) -- was developed as a minimal regulation model, and many felt that this model required more oversight. Several noted that the state's ombudsman program was not authorized to oversee the care of residents in RCACs and that consumer advocates in the state were working to amend the statute to allow them to do so.
One respondent noted that after several years of a consultative approach to RCACs, the state had realized that more oversight is needed and is now issuing citations. Initially, the state had only one staff person statewide for a new industry that built 5000 units in five years, which one respondent noted did not provide sufficient opportunity for consultation. With recent nursing home closures and reduced nursing home capacity, the state has transferred some of the nursing home enforcement staff to oversee RCACs.
Respondents in all states cited similar barriers to expanding Medicaid coverage of services in residential care settings.
In every state, respondents noted that expansion of residential care for low income elderly persons in general, and Medicaid-eligible persons in particular, would be very difficult given state budget shortfalls. In Florida, one respondent noted that people in residential care settings are not eligible for many public benefits, such as Food Stamps and energy rebates, because of program requirements regarding residency. Eligibility for such benefits was viewed by several respondents as a way to make the room and board component of residential care settings more affordable. In fact, persons who live in specific types of group community living arrangements with no more than 16 persons can receive Food Stamps if they are either blind or disabled and meet the federal financial eligibility criteria. Wisconsin has an initiative to encourage use of this option for residential care residents who would qualify.
Minnesota. Currently, insufficient capacity is not an issue because there is no waiting list for services. However, several respondents expressed concerns about future funding due to increased utilization of the more expensive Assisted Living Plus waiver service package, which includes a requirement for 24 hour supervision. These respondents felt that if the number of people receiving this package continues to increase, waiver slots may be capped.
Texas. All respondents agreed that the large waiting list for waiver slots was a major barrier preventing access, rather than affordability or provider availability issues. One felt that the lack of a guaranteed number of waiver slots was a disincentive for providers to enroll in the program. One provider said the state's bed hold policy was a major disincentive for providers to participate in the waiver program. This respondent said that providers could not afford to have a bed empty for 120 day periods, particularly more than once a year, because the room and board rate is only about $14.00 a day, much less than the private pay rate.
Another provider disincentive is the long time it takes to reduce the number of beds available to waiver clients in a participating facility even when there are no waiver clients to fill the beds. One respondent said that reducing the number of beds set aside for waiver clients usually takes 3 months after the request has been submitted, during which time the facility is losing money on the empty bed.
Wisconsin. In Wisconsin, respondents agreed that the major barrier to expansion is insufficient capacity in the waiver program. Approximately 9000 elderly and working age persons with disabilities are on waiting lists for the state funded Community Options Program and waiver services. Some noted that people who spend down to Medicaid eligibility in residential care settings often have to move to a nursing home because there is no waiver slot.
A few noted that residents and families do not understand why the state would pay more for a person in a nursing home rather than provide waiver services in residential care. But, as one respondent said, while on an individual basis it would cost less to keep people who spend down in residential care, fear of induced demand and fear of having a state funding source drive what's available keeps the state from expanding the waiver to cover people in residential care settings who have spent down. This person noted that doing so would make the waiver program an entitlement for people who spend down in residential care settings but not for people in their own homes. Over time, if the state kept everyone who spent down in residential care on the waiver, then it would wind up spending all of the waiver money in these settings and have very little left for home care.
Inadequate service rates were cited by some respondents in every state as a disincentive for providers to serve Medicaid beneficiaries. They said that service rates have not kept pace with the cost of doing business, noting that if the state restricts room and board payments to SSI or SSI plus a state supplement, then the service rates had to be high enough to cover not only the cost of services, but other costs such as training and, in Florida in particular, liability insurance.
Florida. One respondent noted that while the payment rate was 62 percent of the nursing home rate when the state started the Assisted Living for the Elderly waiver program in 1994, it had dropped to 37 percent in 2002. Another noted that the number of providers was decreasing because they couldn't afford to be in a program that pays so far below the industry standard that it becomes impossible to make a living.
Minnesota. Most respondents felt that Medicaid rates for residential care services are generally adequate; while lower than market rates, some providers accept Medicaid in order to fill empty beds. A few, however, voiced concerns that the state set a maximum rate but gave counties the discretion to negotiate lower rates. They felt that this led to inequities in payment rates. Several said that the state needs to develop tools to help counties determine the number of service hours needed by each resident, which would enable them to better match the reimbursement level to the services needed. One respondent noted that the state is working on developing a service rate that will vary according to the services provided and a more effective contracting mechanism for the counties to use, which will tie the service rate to the care plan.
North Carolina. A few respondents mentioned the need for a different rate system than the current one. There was consensus that the Medicaid payment rates are inadequate, particularly for residents with high service need, noting that Medicaid pays for only one hour of service a day and the rate for that hour -- $8.00 -- is inadequate to cover costs. Several noted that under the current payment system, there is no incentive to take heavy care residents and no incentive for providers who aspire to a higher level of care.
However, the low service rate was not perceived as a barrier to serving Medicaid clients in adult care homes because the state supplement for room and board was so high. But one respondent said that inadequate rates for dementia Special Care Units was a disincentive for providers to accept Medicaid residents. This respondent said that Special Care residents do not qualify for the enhanced personal care rate because Medicaid only pays this rate for hands-on physical assistance. He noted that because cueing a person to perform a task takes more time than doing the task for them, the reimbursement policy encouraged dependence. He felt that a case mix system would solve this problem.
Oregon. Most respondents did not believe that low service rates posed a barrier to residential care for Medicaid waiver clients. A few noted that because Oregon had capped room and board rates for Medicaid eligibles, the state had to pay sufficient service rates to attract providers. One noted that when the program began, setting the assisted living rate at 80 percent of nursing home payment was a clear signal to the industry that the state was encouraging assisted living development and the availability of assisted living for Medicaid waiver clients.
Others felt differently, noting that while rates had been sufficient for a while to get providers to participate, they had not kept pace with inflation and, in particular, rising insurance costs. One noted that acuity levels have gone up but the rates have not. Many felt that the proposed Medicaid budget cuts would lead some facilities to close, especially those that are highly dependent on Medicaid.
A few noted that if the state wants providers to enable people to age in place, the reimbursement rate structure has to take into account that it takes more time to take care of certain people, particularly those who need a two-person transfer or who have behavioral problems.
Texas. A few respondents thought that low rates were a barrier to the expansion of residential care for Medicaid clients. However, one respondent disagreed, noting that waiver payment rates used to be much lower, but that there had been increases to make the rates more competitive with private pay rates. This respondent said that there are now enhanced rates in exchange for the provision of better wages, workers' compensation coverage, and benefits to facility staff, but these rates might be at risk given the state's large budget deficit.
Wisconsin. There were major differences in views regarding the adequacy of service rates. Most respondents felt that market charges for room, board, and services were too high, and that the variation in these charges did not appear to be correlated with the quality of care. A few providers cited the state's payment policies as a problem, saying that Medicaid rates were too low or "wholly inadequate" to cover costs. Some expressed concern that people who spend down in RCACs will not be able to remain there because the facilities will not accept the waiver rate.
One respondent said that a major barrier to serving waiver clients in RCACs is that the state's statutory limit on waiver rates, which is 85 percent of the state's average nursing home rate, is almost double the actual waiver rate of $43 a day. Another respondent strongly disagreed, saying that the counties pay what they are asked to pay and do not have the expertise to figure out from the facility's cost report if they are overcharging. Wisconsin limits the profit on services provided to public pay residents to 10 percent, and a financial audit is required of all providers receiving $25,000 per year or more in public reimbursement. Some felt that counties do not have the expertise to enforce the 10 percent limit, and many facilities exceed it.
A few respondents expressed concerns about the effect of high Medicaid rates on the overall amount of funding available for home and community services, stating that the more money spent in residential care settings, the less available for home care. One said that serving people in residential care settings should offer economies of scale but, in fact, does not, noting that it can cost more to serve people in these settings than it does to provide services in their own homes.
A few respondents stated that the rates are not just for the services themselves, but cover additional operating costs, particularly those incurred to meet regulatory requirements such as training. At the same time, most who were critical of the rates recognized that the state does not have the money to increase them. A few others stated that the problem was not the rate per se, but the lack of a payment system that offers incentives to provide good care. One noted that the state needs to get away from a cost-based program because it does not provide an incentive to be efficient: "when you get efficient your rate goes down."
There was a consensus that it is not possible to get residential care costs low enough to be affordable for people with low incomes. One noted that providers think $2000 is a fair price and that $1600 a month is the minimum for good residential care, but most elderly who need it have only $500 a month to spend.
Respondents in two states felt that some providers did not participate in the Medicaid program due to what was perceived as excessive paperwork. In Florida, one noted that quarterly inspections of Extended Congregate Care Facilities were a barrier to getting more providers into the program because of the substantial paperwork required.
In Texas, a few respondents said that the amount of paperwork involved in accepting waiver clients and the difficulties of dealing with a state agency keep some providers from serving these clients. For example, when a waiver client is involved in an incident in an ALF, the facility has to go through two different report processes, one with the regulatory agency and the other with the waiver program agency. Another said that the waiver program's audit process and the potential fines for what are essentially "clerical errors" are a disincentive for some providers to take waiver clients.
In some states, particularly North Carolina and Texas, respondents noted that residential care providers had to deal with too many agencies, which increased operation costs through the duplication of effort on both the part of the provider and the state.
A few respondents in Wisconsin commented that access can be limited in those parts of the state that have few residential care facilities and service providers. One noted that the state does not have a planning process to determine where residential care settings and nursing homes should be built, leading to overbuilding in some areas and inadequate supply in others. In some counties there may not be a facility within 100 miles of a person's home.
In Minnesota, where assisted living is a service model that can be provided in multiple housing types, only one person said that geographic maldistribution was a problem. A recent survey on the availability of housing with service settings in Minnesota reported variations of one facility per 5,000 persons to one facility per 10,000 persons.
Minnesota. Room and board or rental rates are not defined or controlled directly by Medicaid. However, Medicaid's financial eligibility rules do limit the amount of income that Elderly Waiver or Personal Care clients will have available to pay rent or room and board. If the client has inadequate income for room and board, the client may be eligible for the state's Group Residential Housing (GRH) program, which can be paid to a licensed or registered setting with which a county human service agency has negotiated a monthly rate. The amount of the GRH payment is based on a federal/state standard of what an individual would need, at a minimum, to live in the community. The maximum GRH room and board payment limit in 2003 is $680.
However, a few respondents noted that if private pay residents spend down to Medicaid waiver eligibility in a facility that does not accept Medicaid clients, they will have to move. Others may spend down to waiver eligibility in a facility that accepts Medicaid, but they may not be able to afford the rent, and have to move to other subsidized housing with lower rents. One said that many providers don't take Medicaid payment because they are concerned about having to continue serving people who spend down.
A few respondents said there are anecdotal reports that people are having to move when they spend down, but no data are available on how frequently this occurs. The state plans to start looking at the number of people applying for the waiver while in residential care to get some idea of the extent of spend down. One noted that most people who leave purpose-built assisted living go on to nursing homes and that it is not clear whether it is due to increased frailty or spend down.
Wisconsin. Wisconsin also does not limit the amount that Medicaid clients can be charged for room and board. There was general agreement among respondents that room and board costs in both RCACs and CBRFs were unaffordable for waiver clients. Some noted that the SSI payment does not cover the cost of room and board and said they didn't know any CBRFs that accepted the SSI benefit as the full rate. An industry survey in 2000 found that the average room charge without meals was $841 per month, but the typical waiver client's income is in the $545-$725 range.
There was disagreement about whether Wisconsin should limit the amount that can be charged to Medicaid clients for room and board. One noted that the issue had been discussed but rejected by the state's legislators, who wanted the market alone to decide the rates.
Another noted that while room and board costs are a barrier, there is no way to supplement these costs without cost shifting to other public funding sources, such as the Community Options Program (COP) -- the state's general revenue funded HCBS program. Some counties opt to use COP funding to pay for room and board for a few waiver clients in smaller CBRFs. Others felt it was a good idea to have facilities cross subsidize the Medicaid population -- have a small percentage of Medicaid residents with the majority private pay. They noted that each facility should be able to afford to take a few Medicaid residents and that a mix of clients also helps to assure quality.
A number of respondents felt that using state dollars with no federal match to pay for room and board gives too large a proportion of the state's HCBS funds to the residential care industry. Several respondents discussed the need for a greater supply of affordable residential care and stated that state and federal policy needs to create incentives to build more affordable units.
Only respondents in Wisconsin felt that a philosophy favoring home care presented a barrier to serving Medicaid beneficiaries in residential care settings. They noted that many of the counties did not want to use public funding in residential care settings because they favored home care. One stated that many counties thought some CBRFs, particularly larger ones, were more like institutions. Given that the intent of the waiver program is to provide alternatives to institutions, some counties do not want to use limited funds in what they view as quasi-institutional settings. Others disagreed, saying that people living in residential care settings view that setting as their home and should be able to receive waiver services there if eligible.
When asked about each state's future plans with regard to Medicaid funding of services in residential care, most respondents discussed efforts to address problems with the current systems. A few discussed efforts to address barriers to increasing the number of people served.
Florida. A few respondents noted that Medicaid funded residential care could only expand if nursing home use was reduced and mentioned that a task force was meeting to study ways to reduce the nursing home bed base.
Minnesota. Most respondents agreed that the state is likely to continue the model of assisted living that is currently in place. However, they noted that while the budget is not having an impact on the availability of waiver service in the short term, it is not clear what will happen in the longer term, particularly if the Assisted Living Plus service continues to grow at its current rate.
Minnesota is developing ways to help the counties that administer the waiver program to set accurate service rates. One respondent stated that consumer advocacy was needed in the future to advocate for a bill of rights and to develop requirements for staffing and supervision.
North Carolina. The state is planning to move from a tiered rate for Medicaid personal care in adult care homes to a case mix reimbursement system to better match payment rates to residents' needs. It is developing a computerized system to enable them to perform the data analysis needed to support a case mix reimbursement methodology. In another area, a number of stakeholders are working with the legislature on a bill to allow family supplementation of room and board costs for people who spend down in assisted living facilities, as is currently allowed in nursing homes.
Oregon. One respondent stated that in the absence of a budget crisis, Oregon would probably want to expand and improve the current HCBS system, noting that the state is pretty close to a balanced system. Another said that the state's program has changed since its inception and will continue to change, noting that it is important for the state to continually assess the strengths and weaknesses of its program and make necessary changes. For example, the state is currently updating its residential care facility rules and is examining the role of community nurses in all residential care settings. It is also working on initiatives related to person-centered planning.
Another noted that the state's system for determining eligibility for nursing home and waiver services has been helpful in times of budget cuts because it provides a mechanism for the state to reduce the number of people being served based on level of need. However, this respondent said that the system is not perfect and the state wants to revise the criteria to incorporate more risk factors, such as chronic health care needs and medical acuity.
Texas. A number of respondents mentioned ongoing activities related to the Olmstead decision, with several advisory boards working on a range of issues. They noted that the state is asking for more waiver slots in the next legislative session, and that the state is conducting a pilot study using Olmstead relocation specialists to provide individuals in nursing homes with information on the full range of community options. The state is also developing a standardized care assessment process.
A number of respondents mentioned regulatory issues that the state is planning to address, including the 120 day bed hold rule that many providers oppose. The state is also tracking individuals transitioning out of nursing facilities into the waiver program. Because their funding is supported by the nursing home budget, the state wants to see if there are cost savings or whether those leaving the nursing facilities are simply replaced by new Medicaid clients.
Wisconsin. Wisconsin is developing a rate setting methodology and a model contract for counties and facilities to use for waiver clients in Residential Care Apartment Complexes, and is exploring ways to bill the Medicaid fee-for-service system for coverable services provided in residential care as a way to make optimal use of limited waiver funds. To do this, the facility would have to partner with a home health agency or county agency that is certified to bill Medicaid.
Several respondents noted that Wisconsin is also attempting to address the shortage of affordable residential care for low income persons in rural areas through a grant from the Robert Wood Johnson Foundation's Coming Home Program. They noted that the state was very interested in identifying new ways to combine housing and services that would be affordable for low income and Medicaid-eligible persons, such as maximizing the use of HUD Section 8 housing vouchers. However, others noted that these vouchers were not the solution because the amount of the voucher is not sufficient to pay rent in some areas. Additionally, they said that there are too few vouchers and many locales keep them for families with children because there is a real housing crisis for low income families and seniors have more housing subsidies. Given this, they felt it would be difficult to get housing authorities to designate money for residential care for elderly persons.
One respondent mentioned a legislative proposal under development that would enable persons leaving nursing homes to have the nursing home funds follow them to the community instead of having the money stay in the nursing home budget. This respondent noted that this measure is particularly important given that future Medicaid expansions are unlikely.
Those we interviewed had numerous suggestions for improving the Medicaid funded residential care system. Across the six states, there was general agreement about the most important areas to address. We present respondents' suggestions for these areas first, followed by suggestions specific to each state's system.
Respondents agreed that additional revenue was needed to fund all components of the states' long term care system and that states needed to make more extensive use of the Medicaid program. However, given the current budget crisis in the states, virtually all realized that increased state funding was highly unlikely. Since many of the specific suggestions for improving the residential care system require funding, most were not optimistic that suggested changes would happen. However, several respondents in Florida felt that Medicaid coverage of services in residential care lowered nursing home utilization, and so saved the state money.
To expand the availability of affordable residential care, several suggested using other resources, such as HUD subsidies, social service block grant funding, food stamps, and any other public benefits for which elderly persons might be eligible. Some noted the difficulty of doing this when responsibility for the waiver program was in a separate agency that had few, if any, connections with the agencies handling other benefits.
Because Wisconsin does not limit the amount that residential care providers can charge for room and board, several respondents felt that the state needed to address this barrier in order to increase the availability of residential care for the Medicaid population.
Several respondents felt that states should allow long term care funding to "follow the person." Texas is using this approach by allowing money from its nursing home budget to pay for waiver services for people transitioned to home and community settings. State staff in Wisconsin are working on a similar "money follows the person" measure, which they plan to submit to the General Assembly for consideration.
Another area of consensus across all six states was the need to pay more attention to quality of care issues generally, and staffing issues specifically. To increase the recruitment and retention of direct care staff, many respondents noted a need for better pay and benefits, more training, career ladders, improved management, and better work environments.
In light of the older ages, higher levels of impairment, and chronic health conditions characteristic of residential care residents, several noted the need to increase both the quantity and quality of health and nursing services provided in residential care settings. However, one person in Oregon cautioned that what was needed was not more direct nursing services, but more nursing being taught and appropriately delegated.
Two respondents noted that more research is needed to help develop systems that assure quality in residential care settings that do not have nursing services available 24 hours a day. In particular, more information is needed to develop effective training for medication administration and management, and to identify methods to teach unlicensed personnel about disease management.
Several said that more outcome-oriented regulations would better assure quality, and that comprehensive standardized assessment instruments tied to quality indicators would help providers identify areas where improvement was needed. A number suggested a quality assurance approach that focused on identifying and fixing problems.
In Wisconsin, many said that the state needed to do a much better job of overseeing residential care settings, particularly Residential Care Apartment Complexes, and that greater enforcement of the state's regulations were needed. At the same time, they acknowledged that scarce resources were responsible for the state's falling short on enforcement.
In Texas and North Carolina, some felt that physicians and hospital discharge planners needed to be educated about the differences between residential care settings and nursing homes. At least one person in each state felt that the state needed to help consumers better understand the long term care system generally, and the differences between different services options. Several said that consumers and their families needed a method to help them compare residential care options and choose those that were best suited to their needs and preferences.
One person suggested that providers needed incentives to keep residents longer and disincentives for discharging them too soon. One respondent suggested denying additional Medicaid admissions to providers who "creamed" by discharging Medicaid residents too soon.
Rates were a major concern among respondents in all states, with agreement among state staff, providers, and consumer advocates that service rates must reflect actual costs. In states with relatively high rates, such as Wisconsin, some were concerned that providers are making too much of a profit. In states with relatively low rates, such as Florida and North Carolina, there are concerns about inadequate care.
In North Carolina, many said that the state needed to move to a case mix system, which the state hopes to do when it gets sufficient cost data and automated assessment data, sometime in 2004. In Florida, many said that the rates were insufficient to cover costs, and that the state needed to use tiered or case mix rates that were tied to nursing home rates and adjusted annually to account for increases over which providers had no control, such as liability insurance.
One respondent in North Carolina said that adequate rates for dementia care were a particular concern. The state recently enacted new regulations for dementia special care units in residential care settings, but did not authorize funding for it. As a result, few Medicaid clients with dementia are served in these units.
Oregon prohibits family supplementation and North Carolina allows it only in nursing homes. Florida, Minnesota, Texas, and Wisconsin allow it in residential care settings. Some respondents in Oregon and North Carolina recommended that families be allowed to subsidize the cost of a private room for people who spend down in residential care because it can improve the quality of life for Medicaid clients who otherwise would have to move from private to shared living quarters.
In addition to the general areas discussed above, respondents in each state also made suggestions for improving various aspects of the residential care system specific to their state.
Nearly every respondent believed that unless the liability insurance crisis was addressed, there was little possibility of expanding the waiver program, because facilities accepting waiver clients were getting increases in their insurance premiums in the 500 percent and higher range. Agreement on the solution was lacking. Some felt that the state should increase reimbursement rates to cover the additional insurance costs, while others felt the issue could not be resolved without major tort reform.
Several felt that the state should require all residential care settings to provide 24 hour oversight and supervision. Others believe that a home care bill of rights is needed for residential care residents, who are considered by the state to be living in their own homes.
Several respondents said the state should require adult care homes to serve distinct populations (e.g., frail elderly, persons with developmental disabilities, working age adults with serious mental illness), and should develop separate licensing standards and regulations to assure the quality of specialized services to address distinct population needs. Some said that the physical plant of the state's large stock of adult care homes needs to be upgraded.
One respondent said that assisted living facilities built with low interest loans obtained from state bond financing should be required to serve a certain percentage of Medicaid residents for the duration of the loan. Another felt that the state should permit family supplementation for private or larger rooms in adult foster homes and residential care facilities. (Assisted living facilities have only private apartments.)
One respondent said that the state needs to use an aggregate rather than a per capita cap for waiver expenditures. Another said that the state needs to market the waiver program to residential care providers because some do not understand how the program operates, and others feel there is a stigma in taking Medicaid residents. Another felt that Texas needs to continue authorizing its "money follows the person" initiative, which allows funding from the state's nursing home budget to pay for waiver services for people who transition from nursing homes to the community.
One said that the use of the term "assisted living" should be restricted to RCACs, which provide only private apartments. Several said the state should authorize the operation of the ombudsman program in RCACs. Several also said that the state should expand the pilot Family Care program statewide, recognizing that it may be difficult during the current budget crisis.
We asked our respondents, particularly those who worked for the state, if they had recommendations for other states seeking to use or expand Medicaid funding in residential care settings. Most of the recommendations came from Oregon state staff, in large part because their program has been in effect for a long time. Oregon's system is often held up as an ideal because over 80 percent of Medicaid clients receiving long term care services are served in home and residential care settings.
The recommendations provide guidance for other states who want to offer a range of residential care options for both the low income private pay market as well as the Medicaid population. Virtually all of these recommendations assume that a state will be using a waiver program to pay for services in residential care settings. Key points made in all the recommendations are summarized below.
Determine how Medicaid-funded services in residential care settings will fit within the overall publicly funded long term care system. Decide what target population to serve at what level of care, and be sure that all the pieces of the long term care system work together.
Secure buy-in from providers, including nursing home providers, and consumer advocates. Don't sell assisted living as saving money by taking people out of nursing homes or diverting them from nursing homes. Even if there are no cost savings, it is still better to have more options than just the home and the nursing home.
It is not possible to provide residential care options for the Medicaid population unless the room and board component is affordable. States need to figure out a method to make room and board costs affordable for the Medicaid population and low income persons.
Services must address not only functional limitations but the health and nursing needs of an increasingly older population with chronic health problems. If the program is going to allow people to age in place, a "light care" model is not going to work for waiver clients.
A good case management system is essential, as is a system of nurse consultation and teaching, nurse supervision, and nurse delegation.
Build in an adequate quality assurance system from the outset. Start with a well-defined idea of what the service package will be and what quality outcomes are expected.
Assure that the state's regulatory agency subscribes to the planned service philosophy.
Recognize that different licensing and regulatory provisions may be needed to serve the Medicaid population, particularly those who meet the criteria for a nursing home level of care.
Special training requirements and other rules may be needed for facilities that market themselves as special care units for people with dementia.
Residential care settings providing services to waiver clients need to be surveyed on a regular basis with a similar but different focus than nursing homes. Residential care needs a different model of quality, one focused on protection, service needs being met, and livability.
Provide flexible oversight and quality improvement activities that are designed to take more of a teaching role rather than an inspection and sanction role.
If at all possible, have the responsibility for policy in one administrative agency that designs programs, pays for Medicaid, regulates the entire long term care system, and encourages development of the residential care sector. Having a single administrative agency can help to ensure that licensing rules will be effective for both private pay and Medicaid clients.
Good lines of communication between the program and licensing staff are essential when developing the licensing requirements and establishing program operating procedures.
Given the budget crises facing most states, if a state is planning to start covering services in residential care settings through Medicaid, they should consider using a separate waiver program for assisted living only and limiting the number of slots. This approach will enable the state to fine tune the program and keep spending under control. Additionally, if funding is limited, home care will not wind up competing with residential care for the same funds.
Assure that individuals and their families have sufficient information about the different types and levels of care provided in different types of residential care settings. Both private pay and Medicaid clients need to understand the limits. States need to set strong disclosure requirements so that prospective residents understand they may have to move if the setting cannot meet all their needs.
This report is the first to examine in depth the issues with which states are dealing when using Medicaid to cover services in residential care settings. In each of the six states, there is very strong interest in developing affordable residential alternatives to nursing homes that will provide quality care. All of the respondents we interviewed believed that their states' decision to use Medicaid to provide services in residential care settings was the right one. In states using the personal care option in their state plan, respondents felt that Medicaid had brought much needed revenues to a residential care sector that historically had been under-funded for SSI recipients. In states using the waiver program, respondents felt that by providing an alternative to nursing homes for waiver clients who cannot be served at home, Medicaid funding had both afforded consumers additional long term care options and had saved the states money.
The individuals interviewed for this report were typically quite candid in their comments, which frequently reflected their frustration in coping with the challenges of developing affordable residential care. State staff, in particular, find themselves grappling with a number of issues that require the reconciliation of what appear to be inherently contradictory goals. These issues are:
finding ways to cover the actual costs of serving frail older individuals with chronic care needs in residential care settings, when Medicaid is not permitted to pay for room and board and the payment sources available to cover room and board are insufficient;
finding ways to meet expectations for privacy, amenities, and quality services that have been set by the private pay dominated model of "assisted living" when Medicaid cannot afford to pay private pay rates;
finding ways to make it possible for individuals to "age in place" without making residential care settings into de facto nursing homes by virtue of having to meet the needs of ever older and more impaired residents;
finding ways to give consumers a sense of what they should reasonably be able to expect from a setting that calls itself "assisted living" or "adult foster care" or some other name, without imposing uniform definitions through state regulation; and
finding ways to assure a minimally acceptable quality of care without imposing rules that stifle improvements and without the regulated "floor" becoming the "ceiling."
The appropriate balance point between these goals will vary depending on the unique characteristics of each state's long term care system and residential care systems. While the states may face the same challenges, the tradeoffs in attempting to reach the balance will also differ based on the states' characteristics. However, states can gain valuable insights by examining the experiences of other states as they work to develop affordable residential care alternatives to nursing homes for low income and Medicaid-eligible elderly persons.
Newcomer, R. and Maynard, R. (2002). Residential Care for the Elderly: Supply, Demand, and Quality Assurance. The California HealthCare Foundation.
Kane, R.A. and Wilson, K.B. (2001). Assisted living at the crossroads: Principles for its future. Portland, Oregon: Jessie F. Richardson Foundation. (Discussion Paper).
Hawes, C., Lux, L., Wildfire, J., Green, R., Packer, L. E., Iannacchione, V., and Phillips, C. (1995). Study of North Carolina domiciliary care home residents. Report submitted to the North Carolina Department of Human Resources.
Kane, R.L. and Kane, R.A. (2002). Re-thinking housing with services in Minnesota: Interim evaluation report on demonstration projects on affordable housing with services for older people. A program conducted by the Minnesota Department of Human Services.
Facilities can have either a single rate or multiple rates. Facilities with multiple rates have a base rate which includes a limited amount of services, and charge more for additional service. Hawes, C., Rose, M., and Phillips, C. D. (1999). A National Study of Assisted Living for the Frail Elderly: Results of a National Survey of Facilities. Prepared for the Office of Disability, Aging, and Long Term Care Policy, Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services. [Full HTML Report]
A compendium prepared by Robert Mollica -- State Assisted Living Policy: 2002. Portland, Maine: National Academy for State Health Policy -- is the only source of descriptive information about Medicaid coverage of services in residential care facilities.
Smith, G., O'Keeffe, J. , Carpenter, L., Doty, P., and Kennedy, G. (October 2000). Understanding Medicaid Home and Community Services: A Primer. U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging, and Long Term Care Policy. [Full HTML Report, Full PDF Report]
A description of the study methodology, including site selection criteria, is presented in Appendix A.
The information in this section is summarized from Chapter 5 of Understanding Medicaid Home and Community Services: A Primer. [Full HTML Report, Full PDF Report] Op. cit. The complete text of Chapter 5 can be found in Appendix H.
Mollica, 2002. Op. cit.
Formerly known as the Health Care Financing Administration (HCFA).
The information in this section is drawn from the state descriptions in Appendices B through G.
Some comments are paraphrased to assure the anonymity of the respondent and edited for brevity.
Florida calls social services "personal services." The term "social" is used here to distinguish them from personal care services.
Assistive Care Services are also available to residents of mental health residential treatment facilities, which serve primarily younger adults with mental illness.
In 2003, the state approved a measure which will allow 800 persons with disabilities living in their own homes to receive the state supplement.
Bolda, E. (1991). Initial Report on North Carolina Domiciliary Care Policy. The Long Term Care Resources Program, Duke University Center for the Study of Aging and Human Development.
Hawes, C. et. al. (1995). Op. cit.
There are a few changes in the regulations for correctional clients, e.g., provisions related to residents' rights do not apply.
Oregon also serves waiver clients in adult foster care and residential care facilities, which may not have private rooms and bathrooms.
Of the six study states, only Minnesota and Wisconsin do not restrict the amount that Medicaid residents can be charged for room and board.
The Keys amendment is virtually unused to address quality issues. General Accounting Office. (1989) Board and Care: Insufficient Assurances that Residents' Needs are Identified and Met. Washington, D.C.
Mollica, R.L., State Assisted Living Policy: 1998 [Full HTML Report]; State Assisted Living Policy: 2000; State Assisted Living Policy: 2002. All published by the National Academy for State Health Policy, Portland Maine.
The state has projects under way to address both issues.
We used a number of criteria to determine which six states to include in the study:
Diversity in state options for covering Medicaid services in residential care settings: through the waiver, the state plan, or both;
Length of experience using Medicaid to pay for services in residential care settings;
A significant number of people served;
Geographic/regional diversity; and
Program diversity.
To inform the final selection, we also reviewed published information about each state's residential care systems and consulted several experts. Based on their input and our review of the literature, we selected Florida, Minnesota, North Carolina, Oregon, Texas, and Wisconsin.
Key features of the six states that were considered in making our selection are listed below.
| Florida Southeast region |
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| Minnesota Midwest region |
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| North
Carolina Mid-Atlantic region |
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| Oregon Northwest region |
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| Texas Southern region |
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| Wisconsin Midwest region |
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We reviewed information about each state's Medicaid program and residential care systems that we obtained from the states' websites and from documents sent to us by state staff. We also reviewed published sources of information about each state from standard references. Sources of information for each state are included at the end of each state's description in Appendices B through G.
We consulted with Medicaid program staff and policy makers and other key staff to obtain information not otherwise available and to clarify information obtained through the Internet and other sources. We asked the most knowledgeable staff person in each state to review the state description for accuracy. In some states, more than one person reviewed particular sections of the report, depending on their expertise.
We consulted with experts to obtain the names of knowledgeable people in each state to interview. We also identified individuals from each state's website, for example, directors of state provider associations. We then used a "snowball" approach to identify other individuals to interview. To obtain a range of views, we conducted interviews with several types of stakeholders: (1) current and former state Medicaid staff and policy makers as well as key state staff in relevant areas such as housing and licensing, (2) residential care providers and representatives of professional associations that represent providers, (3) representatives of consumer interests, including ombudsman and consumer advocacy groups, and (4) academic experts and independent policy analysts.
It has long been recognized that, in order to reduce institutionalization, it is necessary to develop a range of residential options that provide supportive services. Given a choice, most people with long-term care needs would prefer to receive services in their own homes. However, some people prefer to live in residential settings other than their homes for a variety of reasons--such as the desire to have someone available 24 hours a day to meet unscheduled or emergency needs because they feel safer in such a setting. This preference is reflected in the recent private-sector growth in various forms of supported housing arrangements (called assisted living or residential care) for persons age 65 and older.
Services covered by or in an assisted living facility are governed by state law and regulations. There are no applicable Federal statutes, other than the Keys Amendment to the Social Security Act, which is applicable to board and care facilities in which a "substantial number of SSI recipients" are likely to reside. State rules vary widely, and many are currently being updated because assisted living is a relatively new concept, not envisioned by many state legislatures or rulemaking bodies in the past.
Using Medicaid to pay for services in assisted living settings for elderly persons is of increasing interest to states looking to offer a full array of home and community services and to reduce nursing home use. By 2000, 35 states were using Medicaid to reimburse services to support assisted living for people with long-term service and support needs. Twenty-four states cover services in assisted living settings under 1915(c) waivers; six cover it in their state plans through the personal care option; three cover it in both the waiver and the personal care option; one covers it through an 1115 waiver; and one covers it under a 1915(a) waiver.
Assisted living may refer to a generic concept that covers a wide array of settings and services, or to a very specific model--or both--depending on who is using the term. Twenty-nine states have a licensing category called assisted living, each with its own definition. Assisted living is also often used as a marketing term for facilities that may be licensed under another category, such as residential care facilities and personal care homes. The term is even used by facilities that are not licensed to provide services but whose residents receive services provided by outside agencies. CMS includes a definition of assisted living in the standard HCBS waiver application, but states have the option to use a different definition.
Assisted living is used here to mean care that combines housing and supportive services in a homelike environment and seeks to promote maximal functioning and autonomy. Medicaid will pay for services provided in assisted living facilities as long as the "homelike environment" is preserved. Thus, Medicaid will not pay for assisted living services if the assisted living facility is located in the wing of a nursing home (or ICF/MR). Emergence of assisted living as a residential rather than an institutional model--combined with changes in state licensing regulations--has provided many people who need supportive and health services with an important alternative to the nursing home. This type of living arrangement is very popular among private-pay older persons and their families. Covering assisted living through Medicaid provides safety net funding for this group, many of whom may one day be unable to afford it out of their own resources.
The logistics of setting up an assisted living program can be quite complex. Most important is the recognition that assisted living is more than just a setting for potentially cost-effective service delivery. It represents a philosophical approach to residential services that supports independent living, autonomy, and consumer choice--a philosophy that should guide decision making for regulations and payment policy. In making such decisions, states must address a number of key issues, each of which is discussed in turn.
Determining what population will be served will depend in large part on the state's current long-term care system and its policy goals. Is assisted living intended to fill a gap in the current set of options? Will the target population be different from the population usually served in board and care facilities? Is assisted living intended to enable people who cannot be served in their homes to avoid institutionalization? Once these questions are answered, the state must decide which age groups will be served, and whether services will be designed to address the specialized needs of specific populations (e.g., persons with dementia). It is also crucial to make certain that licensing and other facility regulations in a given state match the target population. For example, if the state wants to target nursing home-eligible beneficiaries, the assisted living facilities will need to be able to serve a population with a nursing home level of need.
The definition of assisted living varies from state to state and sometimes from residence to residence. Some states have used regulations or licensing requirements to define assisted living services. States using Medicaid HCBS waivers define the service to suit the purpose of their particular program. A variety of service delivery models are possible. The assisted living residence may be the provider of services, for example, or the service provider may be a separate agency. Yet a third alternative is to consider the assisted living setting a person's home; this permits a state to provide home and community services to persons in assisted living through the existing delivery system. Whatever the model chosen, it is important to note that assisted living in no way compromises a person's right to receive other Medicaid services. The overriding criterion for receipt of services under any model is medical necessity.
States can cover assisted living services through either a waiver program or the personal care option under the state plan or both. The waiver approach is advantageous in that states can broaden eligibility by using the 300 percent of SSI rule to reach persons in the community who would not ordinarily meet the financial qualifications for Medicaid. However, since waiver services are available only to beneficiaries who meet the state's nursing home level-of-care criteria, serving people through a waiver will target a more severely impaired population than is generally served through the personal care option. The waiver program also offers the advantage of predictable costs for states concerned about utilization of a new benefit. The combination of nursing facility level-of-care eligibility criteria, a set number of slots (as is permitted in a waiver program), and expenditure caps will limit the number of people potentially eligible.
The personal care option is advantageous in that it will broaden eligibility by allowing a less severely impaired population to be served. This is because states may impose reasonable medical necessity criteria but may not restrict the benefit to persons who require a nursing home level of care. One disadvantage of using the personal care option is that it lacks the higher income eligibility standard used for waiver programs. When deciding which approach to use--or whether to use both--states may want to estimate how many people would be served under the different options in order to judge both the reach of the potential service and its likely cost.
When using the waiver program approach, should states add assisted living as a new service to an existing waiver program or implement it under a separate waiver program? From one perspective, adding to an existing waiver program is simple and minimizes reporting and tracking requirements. However, advocates for home and community services may perceive the addition of assisted living to the list of waiver services already covered as increased competition for a limited number of slots available for home services more generally. Coverage under a separate waiver program may be a better approach, not only for this reason but also because it enables a state to test the demand for and cost-effectiveness of assisted living per se. Separate waiver programs designed by a state to expand the total number of people served under waiver programs may also make it easier to reassure facilities in that state that they will have access to a sufficient number of consumers. Since providers receive Medicaid payments based on the number of beneficiaries they serve, facilities may be reluctant to participate in the Medicaid program at all if they are unsure they will have a reliable source of potential residents.
HCBS waiver regulations require that any facility in which waiver services are furnished must meet applicable state standards. When services are furnished by the assisted living facility, the facility must meet the standards for service provision that are set forth in the approved waiver documents. Thus, states planning to cover assisted living through a waiver program need to be sure that the admission/retention provisions of state licensing requirements permit assisted living facilities to serve individuals who meet Medicaid's nursing home level-of-care criteria. Licensing must also address a facility's qualifications to provide assisted living services. In a few states, the facilities do not themselves provide these services. Instead, outside agencies come into the facility to provide them. For example, Minnesota covers assisted living provided by outside agencies to residents of facilities that provide only room and board and limited supervision. In such cases, the facility may need to meet only minimal housing standards, while the outside agency may be held to state licensing and program standards for home care providers. Residents in such settings may be personally responsible for making arrangements with an outside agency for service delivery, or, more typically, the state may provide case management services to assist the resident in doing so.
States that use a waiver program to provide assisted living need to contract with facilities that are willing and able to provide the services needed by someone who meets the state's Medicaid nursing facility level-of-care criteria. The assisted living industry is perceived as generally serving people with lighter needs. For example, about one-quarter of assisted living residents need no assistance with ADLs, according to a recent study by the National Center for Assisted Living. The same study found that 43 percent of residents who move out of assisted living enter nursing homes. To the extent that these statistics suggest an orientation toward serving a population that is less impaired than Medicaid waiver clients, facilities may not be capable of or willing to serve residents with greater needs.
State licensing rules set the minimum requirements for Medicaid providers. The Medicaid program may set more stringent standards if desired, however. For example, some states allow facilities to offer rooms shared by two, three, or more residents. But since one of the purposes of assisted living is to foster independence and autonomy, some state Medicaid programs will only contract with facilities that offer private occupancy unless the resident chooses to share a room/unit. Some states also require facilities contracting with Medicaid to offer apartment-style units rather than bedrooms. (These include Oregon, Washington, and North Dakota.) Further, if licensing rules do not include sufficient requirements for facilities serving people with Alzheimer's disease, the Medicaid contracting requirements may specify additional training or other requirements.
Payment for room and board is one of the critical issues for states seeking to expand assisted living for Medicaid beneficiaries. Surveys by national associations have found that care in assisted living facilities may be unaffordable for many low-income individuals. Monthly fees in market rate facilities range from $800 to over $3500--with the majority in the $800-$2000 range. These fees vary by facility design and size of units and encompass amenities in addition to room and board. But assisted living facilities are marketed as a total package and people who are eligible for Medicaid cannot afford these fees.
Medicaid can be used to pay for assisted living services, but cannot pay for room and board. Except in very limited circumstances (such as a weekend stay provided as respite care under an HCBS waiver), the Medicaid beneficiary is responsible for room or board costs, whether paid through pensions, savings, Social Security, or SSI.
States can and do use a number of approaches to ensure that the room and board rate for assisted living does not exceed the income available to Medicaid beneficiaries. These approaches include the following:
States can examine the facility's monthly room and board charges to identify any coverable services--such as laundry assistance, light housekeeping, or food preparation--that can be reimbursed by Medicaid for a beneficiary who requires assistance with these IADLs. Including all coverable services in the state's assisted living service payment reduces the beneficiary's monthly payment solely to room and board and any other charges that Medicaid does not cover.
Some states set only the service rate, leaving determination of the room and board rate to the facility. Florida and Wisconsin are examples of state Medicaid programs that set only the service rate. Beneficiaries choose among the assisted living facilities they can afford. Other states limit the room and board amount that can be charged to Medicaid beneficiaries. One option is to limit these costs to the amount of the Federal SSI payment rate. In the year 2000, that amount is $512 a month, which may be too low to provide a sufficient incentive for assisted living facilities to serve Medicaid beneficiaries.
If the state has a State Supplemental Payment (SSP) program to supplement SSI payments, the assisted living room and board rate can be set at the amount that represents the Federal payment plus state payment. A few states have developed a supplemental payment rate specifically for beneficiaries in assisted living facilities, to provide them with sufficient income to afford the room and board component. Massachusetts has done this, for example, setting a payment standard of $966. The state uses its own funds to raise the Federal SSI payment to an amount sufficient for assisted living residents.
States are also exploring ways to provide assisted living services to residents of subsidized housing. Because subsidized housing is developed with tax credits and other specialized financing mechanisms, the rent component may be much lower than market rate and the resident may receive rental assistance that covers room and board costs. However, housing subsidy programs and Medicaid operate under very different rules. Careful planning and close collaboration is necessary to enable the programs to work together.
Some states cover persons in an HCBS waiver program using the so-called 300 percent of SSI eligibility option (a person's income must be at or below 300 percent of the maximum SSI benefit--roughly $1500 per month.) This option is attractive for waiver programs that include assisted living, because it expands the program to include beneficiaries who are better able to afford the room and board costs of assisted living. To make this option effective, however, states must allow eligible persons to retain enough of their income to pay the room and board charges of an assisted living facility.
Medicaid beneficiaries who qualify under the 300 percent option are required to contribute toward the cost of their services. To determine the beneficiary's share of cost, the state must follow Medicaid rules governing post-eligibility treatment of income. These rules require states to set aside (protect) certain amounts of income for personal use and to assume the remainder is contributed to the cost of services. The state has the option to specify the amount of income that needs to be protected, and can take the costs of assisted living room and board into account when doing so.
Protecting sufficient income for room and board in assisted living, of course, reduces the amount the beneficiary pays toward the costs of services, thus raising service costs to the Medicaid program. When states are considering how much to protect, they need to balance this source of increased costs against the consequence of not protecting sufficient income to pay room and board. In such a case, the beneficiary will not be able to afford room and board and share of service cost, and may be forced to move into a nursing home (where the room and board costs are covered by Medicaid).
Some states may be concerned about the fiscal impact of an across-the-board increase in the maintenance allowance. But states are not required to increase the amount of income protected for all waiver beneficiaries who pay a share of cost in order to address the needs of beneficiaries who reside in assisted living. States have the option to vary the amount of income that is protected based on the circumstances of a particular class of beneficiaries. For example, a beneficiary living alone may need to retain more income than a beneficiary living with a family member. A person living in an assisted living facility may have higher or lower need than a person living alone in a single-family home, or vice versa. Colorado, for example, allows people living in their home or apartment to retain nearly all their income and those living in personal care homes to retain an amount equal to the SSI benefit standard, which is the amount for room and board.
The state can further refine its treatment of income to account for variations in the cost of assisted living. Some states contract with both private (market rate) and subsidized assisted living facilities; the beneficiary's need for income will depend on the type of assisted living facility chosen. The "rent" component of the monthly fee charged by facilities built with low-income housing tax credits, for example, will be lower than the rent charged by privately financed facilities. If the state protects income based on the area's average monthly charge for room and board in private assisted living, the beneficiary living in a subsidized unit may be allowed to keep income that could be applied to service costs. But if income is protected based on the rent in subsidized units, beneficiaries may be allowed too little income to afford private market facilities. Setting a separate maintenance allowance for each setting allows a state to improve access to both private and subsidized assisted living facilities.
When the beneficiary is unable to pay all room and board costs, family members may be willing to help pay them and other expenses not covered by Medicaid. A trust's funds may also be used to help pay for a beneficiary's costs not covered by Medicaid. However, families and trustees need to be aware of how any funds they contribute may affect beneficiaries' eligibility for various benefits (and therefore their net living standard). Any amount paid can reduce the recipient's SSI benefit--and in the worst-case scenario cause the recipient to lose SSI altogether, and with it potentially Medicaid as well. This is because SSI rules consider such supplementation in determining the individual's financial eligibility.
If the contribution is paid directly to the SSI beneficiary, it is counted as unearned income--the same as unearned income from any other source--and will reduce the individual's SSI benefit dollar for dollar. However, if the money is paid instead to the assisted living facility on a beneficiary's behalf, it is treated differently. SSI counts payment to the facility as "in-kind" income to the beneficiary and reduces the monthly Federal SSI benefit by up to one-third. Even if the "in-kind" contribution exceeds one-third of the SSI payment, the payment is only reduced by one-third. (See box.)
Medicaid rules follow SSI rules when families give money directly to an individual. That is, the money counts as income just like any other unearned income. Therefore, if the individual is in a Medicaid eligibility group expected to pay a share of the cost of medical services, all a family cash supplement accomplishes is to increase the individual's share and decrease Medicaid's share of that cost. In some cases, as noted, such supplements can result in the individual losing eligibility altogether.
| Effect of Income Supplementation on SSI Benefit |
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Assume that:
The difference between the SSI benefit and the room and board charge is $288. If the family pays $288 directly to the individual, this amount (minus the $20 disregard) is subtracted from the individual's SSI benefit, leaving only $264. The individual will be even less able to pay room and board costs than without the family's payment. If the family pays $288 to the facility, then the individual's SSI benefit is reduced by one-third to $341. The family would then have to pay the difference between $341 and $800 (the room and board cost), which is $459. The consequence of the one-third reduction, then, is that the family must increase its supplementation from $288 to $459. Because the rule states that the SSI payment will be reduced by up to one third, there is no limit on the amount of money that can be paid to a facility on behalf of the SSI beneficiary. If a family chooses, they can subsidize services other than room and board, as well as pay for room and board costs in more expensive facilities, without jeopardizing an individual's eligibility for SSI. |
Medicaid also follows SSI rules regarding payments made by the family directly to a facility for room and board. These payments are counted as "in-kind" income, the dollar value of which is determined under special SSI rules. Thus, like a family payment made directly to the individual, the family's payment to the facility can affect Medicaid eligibility as well as increase the individual's share of cost.
If families want to provide support to their family member who can cover room and board expenses, they should directly purchase anything other than food, clothing, and shelter. In an assisted living setting, for example, families could pay for any service not included in the facility rate or covered by Medicaid, such as cable television or personal phone service. In no such case may the state require supplementation.
Medically needy beneficiaries are persons who, except for income, would qualify in one of the other Medicaid eligibility categories (such as being over age 65 or meeting the SSI disability criteria). Medicaid payments can begin for this group once they have spent down--that is, incurred expenses for medical care in an amount at least equal to the amount by which their income exceeds the medically needy income levels.
The medically needy eligibility option can allow people who have income greater than 300 percent of SSI to become eligible for Medicaid services. But Federal law imposes two significant constraints on the use of this option: The state must cover medically needy children and pregnant women before it can elect to cover any other medically needy group. Additionally, the state may not place limits on who is eligible for Medicaid by using such characteristics as diagnosis or place of residence. Thus, it cannot use medically needy policies to extend Medicaid services only to HCBS waiver or assisted living beneficiaries.
The maximum income eligibility limit that a state medically needy program may use is based upon its welfare program for families--levels that are typically lower than SSI. The income level must be the same for all medically needy groups in the state (i.e., states are not permitted to establish higher income eligibility levels for selected subsets of the medically needy, such as beneficiaries in assisted living settings).
These rules have several implications that states need to consider when trying to make the medically needy eligibility option work for higher income individuals in assisted living. (1) These individuals may find it more difficult to incur sufficient medical expenses to meet the spend-down requirements while living in the community than they would in a nursing home. The higher their "excess" income, the higher the amount of their spend-down--with the implication that only those with extremely high medical expenses may qualify. (2) Community providers are less willing to deliver services during the spend-down period, since payment cannot be guaranteed and collection may be difficult. (3) Spend-down rules combined with low medically needy income-eligibility levels mean that individuals may not have enough total income to pay both the bills they incur under the spend-down provision and the room and board component of assisted living. This is ironic since they start off with more income relative to other eligibility groups. As of the publication date, HCFA is actively examining this issue to find possible solutions (watch the HCFA website for updates).
Unless the monthly rate is considered reasonable by assisted living facilities, they will not be willing to contract with Medicaid. In some states, rates in the $1500-$2500 a month range may be needed to attract enough facilities to serve Medicaid beneficiaries. When considering what rate might be necessary and reasonable, states might sample the rates charged by facilities (excluding very high end facilities) to assess (a) how they compare with Medicaid nursing home rates and (b) how many facilities might potentially contract with Medicaid at rates the state might be willing to pay.
It is also important for the state to be sensitive to the potential need to set payment levels that vary based on the assisted living residents' current needs. Doing so will enable people whose condition deteriorates to stay in the assisted living facility rather than having to move to a nursing home. A number of states use such tiered rates (including Arizona, Delaware, Oregon, and Washington). Rates set by case mix (as used in Minnesota, Maine, Wisconsin, and New York) also create incentives to accept people with high needs and retain people whose needs increase. Flat rates, in contrast, tend to force facilities to discharge residents whose needs exceed what can be covered under the rate. As a final point, instead of reimbursing facilities on the basis of specific services delivered, states are permitted to develop a bundled monthly rate. A bundled rate is easier to administer for the state under a waiver program, and for providers under any coverage option.
The information in this Appendix is taken verbatim from Chapter 5 of Understanding Medicaid Home and Community Services: A Primer. October 2000. U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation. The complete version of this chapter, with citations and an annotated bibliography can be found at the following website: http://aspe.os.dhhs.gov/daltcp/reports/primer.htm
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