U.S. Department of Health and Human Services
State Long Term Care Reform: Development of Community Care Systems in Six States Final Report
Executive Summary
Diane Justice, Lynn Etheredge, John Luehrs and Brian Burwell
National Governors' Association
April 1988
This report was prepared under grant #18-C-97923 between the U.S. Department of Health and Human Services (HHS), Office of Social Services Policy (now DALTCP) and the National Governors' Association. Additional funding was provided by the HHS Health Care Financing Administration (now the Centers for Medicare and Medicaid Services). For additional information about the study, you may visit the DALTCP home page at http://aspe.hhs.gov/_/office_specific/daltcp.cfm 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 Project Officer was Glen Harelson.
Preparation of this document was supported by a grant from the Office of the Assistant Secretary for Planning and Evaluation through an interagency cooperative agreement with the Office of Research and Demonstrations, the Health Care Financing Administration (HCFA No. 18-C-97923), the Department of Health and Human Services. Mr. Glen E. Harelson is the Project Officer. Printing of this document was supported under a contract with the Health Care Financing Administration, Office of Intergovernmental Affairs (HCFA Contract #500-86-0007). Mr. Richard Chambers is the Project Officer. All opinions expressed herein are those of the authors and do not represent those of the Department of Health and Human Services or the National Governors' Association. Copyright 1988 by the National Governors' Association, Washington, D.C. Reproduction of any part of this volume is permitted for any purpose of the United States Government. Printed in the United States of America.
The financing and delivery of long term care services for the elderly is one of the most pressing issues facing the states today. For the past two decades, state governments have made major commitments to expand these services. Those commitments are reflected in the expenditure of state matching funds to support services through Medicaid, in the establishment of long term care programs financed totally with state general revenues, and in the development of detailed policies governing the provision of long term care services.
Over the past several years, most states have been faced with severe fiscal constraints due to recession-induced revenue declines and reductions in federally supported domestic programs. At the same time, there has been significant growth in state Medicaid expenditures devoted to nursing home care. Long term care spending now accounts for almost half of all expenditures in Medicaid, which usually is the largest state-administered program in state budgets. These fiscal pressures are compounded by the dramatic rise in the number of persons over age seventy-five, the population group most likely to need long term care services. Since 1980 this group has grown three times as fast as the overall U.S. population.
Until recently long term care services for the elderly were considered synonymous with nursing home care. Public officials, physicians, insurers, and even the elderly shared this perception. Medicaid became, by default, the primary federal and state funding source for long term care services and practically the only source of third party payment. Regulations and limited community service options under that program reinforced the notion that older people needing long term care services by definition needed nursing home care. This resulted in an institution-based delivery system.
A policy revolution now is underway. When state debates focus on long term care system reform, discussions now are likely to highlight ways to expand the availability of community care services rather than emphasize only the detailed nuances of nursing home reimbursement.
Older people strongly prefer to receive long term care services in the community. To date, these strong preferences have been more frequently and forcefully articulated in state capitols than in Washington, D.C. The Medicare and Social Security programs have been the primary focus of elderly advocacy efforts in the nation's capitol; long term care has been the top priority advanced in state capitols.
Faced with the need for long term care services for a growing elderly population, the preference for community based care, and constrained state resources, many states are seeking more affordable strategies for restructuring long term care financing and delivery systems. There is a sense total long term care costs for the elderly are destined to rise if for no other reason than the rapid growth of this population. Therefore, state policymakers are attempting to channel the growth in expenditures to services provided in the community, as the elderly prefer, instead of to continued expansion of nursing home beds.
Important lessons can be learned from those states which have been particularly successful in developing new systems of care. Their experiences certainly are relevant for other states designing similar community care systems. Private insurers also can benefit from state successes in managing total costs while responding to the preferences of older people for care provided in their homes. Federal policymakers, facing increased demands for a national long term care strategy, may find that the structure and operation of large statewide systems provide more pertinent insights than the experiences of individual community projects.
The NGA study provides an in-depth comparative analysis of six states' approaches to long term care system reform. Arkansas, Illinois, Maine, Maryland, Oregon, and Wisconsin were chosen for analysis because of their successful experiences in integrating multiple long term care financing and delivery systems. The study was not designed to formally evaluate these state systems; instead their characteristics were analyzed and compared to identify for other states a broad range of policy options which already have been tested. The study's findings are presented to highlight the range of decisions states must make in designing new approaches. Individual states can combine various system components to reflect their unique demographic, administrative, and political environments.
Major Features of State LTC Systems
Community care systems for the elderly are not developed in a vacuum, but are designed within the context of human services delivery systems developed to address other concerns. In designing new long term care systems, states must integrate existing services for the aged, including social services and health. They cannot start from scratch. In order to overcome the fragmentation of existing service programs and make better use of the new resources being allocated to long term care, states are reorganizing the administrative responsibilities of state and local agencies.
STATE AGENCY ADMINISTRATION. Three basic models of state agency structures have emerged to manage long term care systems. One consolidates all long term care responsibilities covering both institutional and community based care into a single, sole-purpose agency; this involves major reorganization of state government. The Oregon Senior Services Division manages Medicaid payments to nursing homes, Medicaid home and community based services waivers, the Older Americans Act, and state general revenue funds devoted to community care for the elderly. Interestingly, of the six study states, Oregon also has by far the largest proportion (30.1 percent) of its long term care budget going to community care services. Under this organizational model, all long term care expenditures for the elderly are consolidated into one budget, which makes resource allocations between community based care and institutional care a direct and visible trade-off.
A less radical model uses a human services umbrella agency structure, with some internal shifting of responsibilities and increased interdivision coordination. Arkansas, Maine, and Wisconsin use this model.
The third model retains independent, cabinet-level agencies for managing various programs, but establishes an official interagency long term care committee to at least keep agencies informed of each other's activities and, preferably, to coordinate the development of interagency policies as well. Illinois and Maryland use this model.
In all three models, the state office on aging and the Medicaid agency usually have been assigned primary responsibility for long term care program management. Given their respective traditional approaches, compromises are required. Aging agencies have been forced to accept some of the rigidities of the Medicaid program to have access to its funds. Medicaid agencies have had to adjust to programs which are much less standardized than hospital and nursing home care.
The organizational challenge to state governments is to integrate the resource allocation and policy development activities of the various state offices responsible for some aspect of long term care so that a coordinated system of care can be developed, rather than one reflecting a diffuse constellation of individual programs. Regardless of the organizational approaches adopted, the issues which must be examined across various programs are the same. They include: designing a single delivery system supported by multiple funding sources; developing eligibility criteria for individual programs to ensure equitable treatment of persons with similar needs and resources; and examining the mix of community care services supported by each funding stream. Ultimately, the goal of these coordinated efforts is to create the continuum of care which each individual program rhetorically has embraced but cannot by itself achieve.
LONG TERM CARE DELIVERY SYSTEMS. How programs are organized at the local level is even more important than how state responsibilities are organized. Older people come in direct contact with local agencies and their differing eligibility criteria, service packages, and funding sources. If state policies are successful, the elderly will have access to appropriate care without having to contact multiple agencies to receive services for which they are eligible. Therefore, most of the study states have designated a single local agency in each part of the state to serve as the client access point for receipt of all publicly financed community care programs. Centralizing entry helps make the system less fragmented from the perspective of older people in need of assistance, while helping states gain better control of total program costs. Client assessments, pre-admission screening programs, and case management are the key components of access systems for community based care programs. Each are present in the six study states.
Client assessments for community based care focus on an older person's ability to conduct activities of daily living. The results are used by case managers to initially determine if an individual is sufficiently impaired to qualify for long term care programs. Most of the six states' long term care programs provide services only to those older persons who have impairment levels equivalent to those required for nursing home care.
The scope of pre-admission screening programs in the six study states varies substantially. One key difference is the target population group which must be screened--specifically, whether required participation is limited to Medicaid-eligible nursing home applicants or whether a broader group is included, such as persons who are expected to become eligible for Medicaid within a certain time frame after nursing home placement. Another difference is whether the screening process results in a binding decision on placement or is merely advisory. State officials note that since most older people prefer to stay in the community, simply having a process to discuss community care options helps limit nursing home entry even if it only results in an advisory recommendation. And, locating the screening programs in the same local agency which serves as the entry point for community care services increases the potential that clients will receive advice on all the alternatives.
Case management functions are central to the entire community care system, especially when multiple funding sources with differing eligibility criteria and service providers are involved. As a result, state policies on the designation of case management agencies are among the most hotly debated long term care issues. Arkansas, Maine, and Oregon have selected area agencies on aging, while Wisconsin and Maryland have designated county social services departments. Illinois uses local agencies chosen on a competitive basis.
Specific functions assigned by the six states to case management agencies vary. However, general areas of responsibility include developing cost effective individual care plans, authorizing needed services, and following up to ensure needed services actually are provided. Most importantly, case management and assessment agencies are the only client access point for receipt of services financed through the major community care programs in the study states. States have limited the resources which case managers can spend for program participants; this limit either is applied to each client's care plan or is averaged over the case management agency's entire caseload. Usually the limit is tied to the cost of nursing home care.
The scope of services brokered through case management are fairly similar in the various states' long term care systems. The most commonly provided services are personal care, homemaker, and chore services. The assistance provided often includes light housekeeping, meal preparation, and assistance with dressing, bathing, and other aspects of personal care. By specific design, the states' policies allow substantial flexibility in the types of services which can be supported with public funds, consistent with the philosophy of tailoring programs to individual needs.
FINANCING OPTIONS. The six study states each use a combination of funding sources to support community care systems, even though it would be much easier to use only one funding stream and thereby avoid the multiple of rules and restrictions accompanying each individual program. Due to these restrictions, particularly those associated with Medicaid, however, no single source is flexible or large enough to support a comprehensive long term care system. The three major financing sources are state general revenues, Medicaid home and community based services waivers, and the Medicaid optional state plan services of personal care services and adult day care. Each of the study states uses one of these as its primary funding vehicle supplemented by one or more of the other funding sources, along with smaller amounts of the Older Americans Act and the Social Services Block Grant. Wisconsin, Illinois, and Maryland primarily use state funds. Oregon relies chiefly on the Medicaid home and community based services waiver authority to support most long term care services. Arkansas finances its community care system by exercising the option to cover personal care services under the Medicaid state plan. Maine uses a combination of all major funding sources.
Each of these financing sources has advantages and disadvantages. State general revenues offer maximum flexibility in designing community based care systems. The obvious disadvantage is the lack of federal financial participation. All of the study states use state general revenues to some extent, either as the primary vehicle or as a supplement to expand the scope of available services, or to partially or fully subsidize care for persons who are not financially eligible for Medicaid.
The Medicaid home and community based services waiver, established as part of the Omnibus Budget Reconciliation Act of 1981, can provide a broad range of non-medical long term care services. Four of the study states make some use of the waiver authority for providing services to the elderly, with Oregon using the authority most extensively. This state was the first in the country to be granted such a Medicaid waiver, and as a result, its program is substantially larger than most waivers approved in subsequent years. Waiver programs are viewed as a mixed blessing by the study states. The federal financial participation in community care programs is very appealing. Yet, state officials cite changing federal interpretations of program rules, stringent ceilings placed on the number of persons who can be served, and excessive administrative costs as factors limiting the usefulness of this financing source.
Section 4102 of the Omnibus Reconciliation Act of 1987 provides states with a second home and community based services waiver option that will address some of these problems. States using this new option will be able to increase the number of persons served and expenditures for Medicaid waiver services as long as total Medicaid long term care spending (including nursing home outlays) for the elderly does not increase more than a specified percentage above outlays for the base year. The percentage growth limit until October 1, 1989 is 7 percent per year.1 After this date, the rate of increase is the greater of 7 percent or a formula to be developed measuring: the state's age seventy-five and older population growth, plus appropriate indices of goods and services costs facing long term care providers, plus a 2 percent intensity factor. This new option may be a way for those states with adequate base-year Medicaid outlays for total long term care to meet the needs of a growing population by substantially expanding community care while restraining the growth of institutional services. In March 1988, Oregon submitted the first application for a waiver under this new authority.
Exercising the option to cover personal care and adult day care services under the Medicaid state plan is the third major option for financing state community based care initiatives. In contrast to waiver services, no extraordinary administrative requirements are imposed and no ceilings are placed on the number of persons who can receive services. However, since services are provided under the Medicaid state plan, states cannot limit this service to just the elderly long term care population, limit availability to one geographic area, or increase income eligibility thresholds to make them more comparable to nursing home eligibility levels.
Policy Implications
The experiences of the six study states in designing large statewide community care programs have implications for policy development in other states, for the expansion of federal support for community based care systems, and for private insurers responding to the long term care needs of a rapidly expanding older market. Several observations are relevant for all three audiences.
First, all six states have expanded community based care services without generating runaway costs in total long term care spending. While total costs have risen over a five-year period, the increases are modest, averaging 6.2 percent annually per person age seventy-five and older. (See Appendix I, which analyzes long term care expenditure growth in each of the six states.) Fears over uncontrollable costs and increases in service utilization have led states, the federal government, and private insurers to approach expansion of community based care services with great caution. The experiences of the study states indicate that, even when community care services are a benefit under a public entitlement program, overall costs can be contained. Several factors help make community care programs affordable. limiting program eligibility to persons who have multiple limitations in conducting activities of daily living, using a managed care approach to authorize the amount and scope of services needed by individuals, and establishing cost sharing provisions for moderate-income persons all help keep program costs manageable.
Second, the six states have shown that some aspects of community care systems can be tightly structured and uniform statewide without compromising their ability to flexibly respond to individual service needs. Uniform assessment tools, explicit financial eligibility criteria, and system entry channeled through case management agencies have all made access to community care more predictable from a client's perspective and more standardized as viewed by program administrators. Yet, the actual services provided often are very loosely defined, giving local program managers considerable latitude in tailoring service packages to individual needs.
Third, non-medical supportive services form the core of state long term care programs. State officials note that although some limited skilled home nursing care may at times be provided, community based long term care services usually are needed by older people in response to limitations in functional capacity as opposed to specific medical conditions. The services needed most often are non-medical, in-home supports such as homemaker and personal care. Since federal and state officials and private insurers are much more familiar with skilled home health services than with these other services, there may be a tendency to structure supportive services in a medical context. Officials in the six study states believe that would be a mistake.
Some study findings are particularly relevant for other states. The experiences of the six states indicate that some state general revenues are essential for developing a community care system which meets the needs of low- and moderate-income persons. Despite exemplary state efforts to improve coordination and to strengthen management control and allocate resources wisely, rules tied to each federal funding source limit the categories of persons who can be served and the scope of services which can be funded.
Second, containing the growth of Medicaid nursing home expenditures was an explicit component of state strategies to expand community care in four of the six study states. In each case, certificate of need policy was used to limit the number of new beds constructed. State officials found the notion of "reinvesting" into community based care the savings resulting from a freeze on bed expansion to be a useful concept. This policy not only articulates the end goal of long term care system reform, but also actually reduces the rate of growth in Medicaid nursing home expenditures. Curtailing future institutional expenditures will free state resources to expand community based care.
Third, each of the six states developed their systems incrementally. Three of them (Maryland, Wisconsin, and Oregon) phased in statewide implementation of long term care initiatives by geographic area. All added various program components over a period of several years. For example, pre-admission screening programs often were added after the supply of community care services was expanded, enabling screening program staff to offer persons seeking nursing home placement some viable community service options. However, since the various components of community care systems all interrelate, undertaking a comprehensive planning process before major new initiatives are underway makes it easier to add new elements in the future.
The study states found that a broad planning effort achieves other objectives. It helps get multiple agencies and organizations committed to the success of long term care initiatives and fosters consensus on policy goals and objectives. This lays a positive framework for resolving more difficult operational conflicts in the future. Membership organizations of older people often were active participants in state planning processes. Generally they did not press for overly ambitions proposals but rather understood state fiscal limits and worked within them. A consistent concern of these groups in all states but Wisconsin was designing a system which was not identified as being part of the "welfare system." This orientation affected their preferences for the selection of lead management agencies at the state and local level, but did not preclude support for client cost sharing policies and other mechanisms to maximize allocation of available state resources to persons with the least ability to pay.
Other study findings are especially pertinent for the development of federal financing policies for community based long term care. First, one of the most difficult tasks faced by the six study states was linking together separate systems for social services, aging programs, and health care delivery. Decisions had to be made concerning the best local agencies to perform case management, assessment, and direct service delivery. In addition, states had to decide how to expand the capacity of the delivery system to provide an increased supply of services. Sometimes new provider agencies were created, other times new types of services were developed which previously were not available, and frequently existing agencies took on new responsibilities. State activities to build the capacity of local delivery systems necessarily varied with state circumstances. If federal long term care initiatives are to relate to existing state human services delivery systems, states are in a unique position to design approaches that will best build upon the existing infrastructure.
Second, where possible the six study states preferred to hold local long term care systems accountable for end results rather than trying to control every detail of local administration. This approach recognizes differences among communities in local practices and traditions and avoids emphasizing process requirements. As more states adopt new community care programs, diversity among states will increase. This model of accountability used by the study states will be appropriate for federal/state relationships in any new federal community care initiative.
Finally, the six study states have demonstrated to private insurers and other public payers that it is feasible to provide multiple community care services (not traditionally covered by health insurance) if there is a systematic process for assessing client needs, authorizing a package of services, and coordinating multiple providers. Case management systems can perform such functions and allow private or social insurance plans to expand the services covered under long term care policies to include various social supports which are more affordable than medical services traditionally covered by insurance policies. Insurers have been reluctant to offer these services, which typically have low unit costs, in part because they view the administrative costs to be disproportionately high. In addition, insurers are concerned about uncontrollably high utilization rates since they expect older people to actively seek these services while going to great lengths to avoid nursing home placement. The six study states had similar concerns when their programs began but found that improved assessment techniques can effectively limit the eligible population and that case management structures can allocate services to individual clients within overall budget limits.
NOTES
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This limit could be lower if a special Index, measuring the state's age sixty-five and older population growth plus inflation facing long term care providers plus a 2 percent intensity factor, yields less than 7 percent. This is highly unlikely.
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