U.S. Department of Health and Human Services

Channeling Effects on Formal Community Based Services and Housing

Executive Summary

Walter Corson, Thomas Grannemann, Nancy Holden and Craig Thornton

Mathematica Policy Research, Inc.

May 1986

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This report was prepared under contract #HHS-100-80-0157 between the U.S. Department of Health and Human Services (HHS), Office of Social Services Policy (now the Office of Disability, Aging and Long-Term Care Policy) and Mathematica Policy Research, Inc. For additional information about the study, you may visit the DALTCP home page at http://aspe.hhs.gov/daltcp/home.shtml or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. The e-mail address is: webmaster.DALTCP@hhs.gov. The DALTCP Project Officer was Robert Clark.

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In September 1980 the National Long Term Care Demonstration--known as "channeling"--was initiated by three units of the U.S. Department of Health and Human Services. It was to be a rigorous test of comprehensive case management of community case as a way to contain the rapidly increasing costs of long term case for the elderly while both providing adequate care to those in need and improving the quality of their lives.

A. INTERVENTION

Channeling was designed to use comprehensive case management to allocate community services appropriately to the frail elderly who needed long term care. The specific goal was to enable elderly persons, whenever appropriate, to remain in their own homes rather than enter nursing homes. Channeling had no direct control over medical or nursing home care expenditures. It financed direct community services, to a lesser or greater degree, according to the channeling model, but always as part of a comprehensive plan of care in the community. Channeling was implemented through local channeling projects.

Channeling consisted of seven core features:

• Outreach to identify and attract potential clients who were at high risk of entering a long term care institution

• Standardized eligibility screening to determine whether an applicant met the following pre-established criteria: (a) Age: must be 65 years or older. (b) Functional disability: must have two moderate disabilities in performing activities of daily living (ADL), or three severe impairments in ability to perform instrumental activities of daily living (IADL), or two severe IADL impairments and one severe ADL disability. Cognitive or behavioral difficulties affecting the ability to perform ADL can count as one of the severe IADL impairments. (c) Unmet needs: must have an unmet need (expected to last for at least six months) for two or more services or an informal support system in danger of collapse. (d) Residence: must be living in the community or (if institutionalized) certified as likely to be discharged into the community within three months.

• Comprehensive in-person assessment to identify the problems, resources, and service needs of individual clients in preparation for developing a care plan

• Initial care planning to specify the types and amount of care required to meet the identified needs of clients

• Service arrangement to implement the care plan through the provision of both formal and informal in-home and community services

• Ongoing monitoring to ensure that services are appropriately delivered and continue to meet the needs of clients

• Periodic reassessment to adjust care plans to the changing needs of clients

Two models of channeling were tested. The basic case management model relied primarily on the seven core features. The channeling project assumed responsibility for helping clients gain access to the necessary services and for coordinating the services of multiple providers. This model provided a small amount of additional funding to fill gaps in existing programs. But it relied primarily on what was already available in each community, thus testing the premise that the major shortcomings of the current system were problems associated with information and coordination which could be resolved largely by client-centered case management.

The financial control model differed from the basic model in several ways:

• It expanded service coverage to include a broader range of community services.

• It established a funds pool to ensure that services could be allocated on the basis of need and appropriateness rather than on the eligibility requirements of specific categorical programs (though it required participants to have Medicare Part A coverage).

• It empowered case managers to authorize the amount, duration, and scope of services paid from the funds pool, making them accountable for the full package of community services.

• It imposed two limits on expenditures from the funds pool. First, average client expenditures could not exceed 60 percent of the average nursing home rate in the area. Second, expenditures for an individual client could not exceed 85 percent of that rate without special approval.

• It required clients to share in the cost of services if their income exceeded 200 percent of the state's Supplemental Security Income (SSI) eligibility level plus the food stamp bonus amount.

B. THE DEMONSTRATION AND EVALUATION

Ten sites across the country participated in the demonstration:

Basic Case Management Model	Financial Control Model
Baltimore, Maryland	Miami, Florida
Houston, Texas	Greater Lynn, Massachusetts
Middlesex County, New Jersey	Rensselaer County, New York
Eastern Kentucky	Cleveland, Ohio
Southern Maine	Philadelphia, Pennsylvania

In September of 1980, the 10 participating states, a technical assistance contractor, and a national evaluation contractor were awarded contracts and began planning. A local project in each state was then selected. These projects were already well-established departments within existing human service organizations (typically area agencies on aging or private nonprofit service providers). The 10 local projects opened their doors to clients between February and June of 1982, and were fully operational through June of 1984. The local projects were phased out of the federal program in March of 1985, although most still continue to operate under state or other auspices.

The goal of the evaluation was to identify its impact of the demonstration on the following services and costs:

• The use of formal health and long term care services, particularly hospital and nursing home care and community services

• Public and private expenditures for health and long term care services

• Individual outcomes including mortality, physical functioning, unmet service needs, and social/psychological well-being

• Caregiving by family and friends, including the amount of care provided, the amount of financial support provided, and stress, satisfaction, and well-being of caregivers.

The evaluation relied on an experimental design to compare the outcomes of channeling with what would have happened in the absence of channeling. Elderly persons who were referred to each channeling project were interviewed to determine their eligibility for channeling. If found eligible, they were randomly assigned either to a treatment group, whose members had the opportunity to participate in channeling, or to a control group, whose members continued to rely on whatever services were otherwise available in their community. In all, 6,341 persons were randomly assigned. Given both the substantial death rate among this population and interview noncompletions, the random assignment process yielded research samples of 3,372-6,326 elderly persons, depending on the analysis.

Several data sources formed the basis for the research. An extensive in-person survey was administered to the elderly members of the research sample (both treatment and controls) at baseline and at 6, 12, and (for half the sample) 18 months thereafter. Another survey was administered (usually by telephone) to the primary informal caregivers of a subset of the sample members at baseline, and at 6 and 12 months thereafter. Service and cost data were collected from Medicare, and Medicaid, and channeling records, and, where necessary, from providers directly; participant tracking data and project cost records were collected from the channeling projects; official death records were obtained from state agencies. Finally, state, local, and project staff were interviewed about the implementation and operation of the demonstration.

C. EXPECTED EFFECTS OF CHANNELING ON FORMAL COMMUNITY SERVICES AND HOUSING

The two models of channeling were expected to have a direct effect on the use and cost of community-based services as a vehicle for enabling elderly persons to remain in the community. The following were the primary expectations about these services:

• Channeling was expected to increase the use of community-based services both by keeping clients in the community who would otherwise be institutionalized and by increasing the use of these services by those clients who were already in the community and who had unmet needs.

• Increases in the use of formal community services were expected to be greater in the financial control model than in the basic case management model.

• Total public expenditures for community services were expected to increase, both from the increased use of services and from the substitution of public for private purchases of services.

• Increased public expenditures were expected to be mitigated by some substitution of lower-cost caregivers for both nurses and home health aides and potentially by some reduction in the unit costs of purchased services.

• Channeling was expected to increase the use of community housing by enabling clients to remain in the community. It could also alter the pattern of housing to move to better housing or by helping clients who needed more intensive service to enter supportive housing facilities or personal care homes rather than nursing homes.

D. FINDINGS AND CONCLUSIONS

The channeling demonstration, as it was implemented in ten settings that represented a variety of community service environments, provides a great deal of information on community service use and expenditures among an impaired elderly population. More importantly, it also demonstrates how service use and expenditures are affected by two forms of case-managed community care programs.

Service Use. The most clear-cut finding of this report is that both treatment and control groups used community services extensively, and that channeling increased use of community-based services. The expectations at the outset of the demonstration were that such increases would be due to the fact that greater numbers of elderly would remain in the community, as well as to the increased use of services by those already in the community. However, all the observed service use increases were due to the latter effect, because no impact was observed on mortality or institutionalization.

The results for community-based service use are consistent with the design of the channeling intervention in several respects. First, increases in service use were much larger and statistically significant for more types of services in the financial control model of channeling. The availability of extra funding, and perhaps also the flexibility of the waiver funds pool, permitted case managers to make services available the could not have been reimbursed through existing programs. Consequently, the financial control model increased the number of visits by formal caregivers to the elderly in the community by nearly 80 percent (2 visits per week) at both 6 and 12 months after randomization. Increased use was also observed at 18 months. The comparable figure for the basic model was a 22 percent increase at 6 months and somewhat less in subsequent periods. This estimated increase in service use under the basic model is not totally consistent with the estimated impacts on expenditures based on claims and provider records. These impacts suggest that expenditures may have declined under channeling in the first six months, although estimates over the entire 18-month observation period suggest a modest increase in expenditures under the basic model.

Expectations were also confirmed about the types of services for which impacts were observed. For both channeling models, the largest increases in service use were observed for personal care and housekeeping services. These services are not usually covered by existing public programs or private insurance and, it has been argued, are the services that the impaired elderly in the community need most often.

Targeting of Services. We also looked for evidence that channeling was targeted toward specific types of individuals as it augmented the quantity of delivered services. We found little evidence that the impacts of channeling were related to any of the subgroup classifications that we investigated; the number of significant differences among subgroups was not much more than would have been expected by chance. However, there was some evidence (see Grannemann et al., 1986) that the financial control model increased to a greater extent the use of services from visiting caregivers for those who were in a nursing home prior to baseline, which is consistent with the objective of channeling to target those most at risk of institutional placement. But we found no indication that the impacts of channeling on services were concentrated on those with high unmet needs, those who lived alone, or those at any particular level of ADL disability. In both models, the impacts of channeling on service use are best characterized as widespread among channeling clients.

Impacts on Expenditures. The control groups in both basic and financial sites were incurring substantial expenses for community-based services. For a person who remained in the community for a full year, these expenditures would amount to between $3,000 and $4,000. Nearly half of these expenditures were for services that were identified by sample members as entailing personal care and housekeeping. Medicare paid the largest share of control group expenditures for community services--55 percent in the basic sites and 74 percent in the financial control sites--in the first six months.

In the basic model sites, in which Medicare expenditures for community services tended to be relatively low and channeling dollars were limited, channeling case managers appear to have worked within the existing system to increase slightly the use of services and expenditures under the Medicare program. No significant impact on Medicaid or other public program expenditures was observed. Under basic modeling channeling the net increase in public expenditures over the 18-month observation period was $458.

Under the basic model, private payments were reduced. However, the magnitude of these reductions is unclear. In the first six months, we estimate a substantial reduction in private payments of $201 per sample member, which implies a small reduction in community service expenditures overall for that time period. Alternative estimation methods suggested even larger reductions. These estimated private savings represent some substitution of public for private dollars, but they may also be due to reductions in the use of unnecessary services or to shifts in care for high-use clients to a more appropriate setting. It seems unlikely, however, that if the demonstration were replicated, the reduction in private payments would be as large as was measured with our relatively small provider records sample. Indeed, smaller reductions were estimated for the 7-12 month period. The overall impact on public and private expenditures was estimated to be a $186 increase over the 18-month observation period.

The impacts of channeling on total expenditures are much larger under the financial control model. The direct community service expenditures of that model were $4,466 per client in the first 18 months following randomization. But because baseline channeling replaced Medicare, Medicaid, and some other public programs as designed, and also appeared to replace private expenditures to some degree, the net impact on expenditures was $2,604 per client in the 18-month period. For an impaired elderly person who resided in the community for the full 18-month period, financial control channeling would be expected to increase the cost of community services from the $5,247 incurred under the existing system to $9,258 under financial control channeling.

Mitigating the Effects on Expenditures. Despite the strong evidence of increases in public and total costs, there is some evidence that the financial control model projects were able to use their purchasing power to reduce the per unit cost of some services. We estimate that the price that channeling paid for nursing, therapy, and home health aide visits was, respectively, 13, 4, and 9 percent lower than the average price that the control group paid for such services.

Another expectation was the channeling would substitute less skilled and hence less expensive services for the more skilled and hence more expensive services used by the current system, which is built around the Medicare and Medicaid programs which are oriented toward skilled care. Substitution would also mitigate the impacts of channeling on expenditures. Here the evidence is limited. We did find evidence in the financial control model that some reduction in spending for traditional home health services (nursing, therapy, and home health aide) accompanied the expansion of personal care and homemaking services. This result was found only in the program records data, and was statistically significant only in the first six months. The fact that the interviews did not show reductions in the frequency or number of visits in which sample members reported receiving medical treatments or therapy suggests that any substitution of less skilled caregivers was for the nonmedical activities performed by nurses, therapists, and home health aides. Thus, there is some evidence that the financial control model contributed to the substitution of less skilled caregivers.

Impacts on Housing. Given that channeling appeared to have no impacts on community residence or mortality, it is not surprising to find essentially no impacts on the aggregate use of and expenditures for community housing. Under the basic model, our analysis found no evidence of a shift either in the pattern of housing types used or the level of expenditures for community housing. In the financial control model sites, there was also no evidence of a change in total community housing expenditures, although there was some evidence of a small shift in expenditures away from personal care housing and toward public housing. These expenditure changes offset each other almost exactly and reflect a net change of residences only for a few individuals in the sample.