ODDC- Long-Term Care: A Profile of Medicaid 1915 9c) Home and Community Based Waivers

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Title: Long-Term Care: A Profile of Medicaid 1915 (c) Home and Community Based Services Waivers, October 2001

Author: Carol O’Shaughnessy and Rachel Kelly, Domestic Social Policy Division, Congressional Research Service (KACW 5/4/03)

Introduction: Medicaid’s Home and Community-Based Services (HCBS) Waiver program, authorized under Section 1915 (c) of the Social Security Act allows the Secretary of the Department of Health and Human Services (DHHS) to waive certain requirements allowing states to cover a wide range of HCBS services to people who would otherwise need institutional care. Enacted in 1981, the program was designed to alter the bias in the Medicaid program favoring care in institutions over home-based settings. In 1997 over three-quarters of waiver spending was for services for people with MR/DD. In 2000 spending for waiver services was estimated at $12 billion, representing 18% of Medicaid long-term spending, from 4% in 1990. Medicaid spending for institutional care declined as a proportion of total Medicaid long-term care spending over the same period, falling from 87% to 73%. In 2001, 49 states and the District of Columbia had Section 1915 (c) waiver programs providing services to 560,000 people. Waivers also allow states to cover a broad range of non-medical services making it possible for people to remain in the community. The Olmstead decision, where the Supreme Court ruled that institutionalization violates the ADA, has focused federal and state attention on HCBS programs. Despite the rapid growth of waivers, waiting lists exist in many states due to restrictions on eligibility and service availability.

Medicaid Long-Term Care and Spending: Medicaid covers long-term care services in a variety of ways; including nursing facility services, intermediate care facility services for the mentally retarded (ICF/MR), personal care services, home health services, and home and community-based services (under Section 1915 (c)). All states are required to provide nursing facility care for eligible individuals age 21 and older. Nursing facilities primarily engage skilled nursing care and related services for residents who require health related care due to a condition that can only be provided in an institution.

States have the option to cover health or rehabilitative care for persons with MR/DD in intermediate care facilities for the mentally retarded, but all states have chosen to provide ICF/MR care under Medicaid.

States have the option to cover personal care services, defined as services provided at home or another location other than a hospital, nursing facility or ICF/MR. Personal care services include assistance with eating, dressing, bathing or toileting.

All states are required to provide home health to people who are entitled to nursing facility services under their state Medicaid plans.

Home and Community-Based Services (HCBS) under Section 1915 (c) waivers can only serve people who would require nursing facility care funded by Medicaid. Waivers must be budget neutral; states cannot spend more under the waiver than they would without one. While spending for institutional care still dominates the Medicaid long-term care budget, spending for HCBS has dramatically increased since 1990 from $3.9 billion to over $18.2 billion- a 367% increase. This increase has been due to the expansion of Section 1915 (c) home and community-based programs and spending on waiver services grew faster than other major Medicaid HCBS such as personal care and home health services. In 2000 HCBS represented 27% of Medicaid’s long-term care spending, compared to 13% in 1990 and it increased from 6% in 1990 to over 9% in 2000 of total care spending.

Profile of HCBS Services Waivers: States may choose to cover an extensive range of HCBS under Section 1915 (c) including case management; homemaker, home health aide; personal care, adult day health, habilitation; respite, and mental health services. The Secretary of DHHS must approve HCBS waiver programs before they are eligible for federal matching funds. There was a concern that home and community supports would be more expensive because some demonstrations comparing HCBS services in the 1970s did not offset the cost of nursing care, therefore Section 1915 (c) requires HCBS services offered through a waiver program do not exceed average per capita expenditures that would be incurred by the state’s Medicaid program for care in a nursing home or ICFR/MR. There are three Medicaid requirements that may be waived:

Waiver of statewideness: Section 1915 (c) allows states to cover services in a portion of a state instead of the whole state.
Waiver of comparability requirements: Section 1915 (c) allows states to cover HCBS services for specific groups, such as seniors or people with disabilities, rather than all people eligible for Medicaid.
Waiver of financial eligibility: Section 1915 (c) allows states to use more liberal income eligibility requirements for HCBS waiver service than would apply to persons living in the community.

Eligibility: Medicaid regulations require services to be limited to people who are eligible for institutional care and fall into one of the following groups: the aged, persons with disabilities, persons with MR/DD, and persons with mental illness. States must apply for separate waivers for each different group and they may define each group of individuals who may be eligible for certain waiver and the services they may receive. Through 1915 (c) HCBS waivers states are required to request a waiver of Medicaid financial eligibility requirements regarding income and resources that would normally apply to people and the community. Finally the law and regulations require states to assure necessary safeguards to protect the health and welfare of recipients.

Recipients, Services and Spending: States have great flexibility when designing their waiver programs; therefore, the population covered by waivers vary from state to state. Of the 211 waivers approved in 1997, 75 (36%) were targeted at people with MR/DD. Sixty waivers (28%) assisted seniors and people with physical disabilities. An additional 27 waivers (13%) helped adults with other disabilities. Twenty waivers (10%) were for children with disabilities; 15 (7%) were for people with AIDS; 12 waivers (6%) were for people with traumatic brain injuries, and two (1%) were for people with mental disabilities. States provide a variety of non-medical, social, and supportive services critical in supporting people in the community. Waivers for seniors and people with disabilities most often cover case management, respite care, and personal care.

Costs: The cost of waivers varies according to the target population. In 1997, over three-quarters of waiver spending went to people with MR/DD, although this group does not represent the largest share of recipients. People with MR/DD are the most expensive groups to serve, with average per capita expenditures of $27,859 in 1997, because the care is provided in residential settings with 24-hour supervision. In 2000, only three states, Oregon, Vermont and Alaska, spent more on HCBS services, while 48 states and D.C. spent half or more on institutional care. Thirty-three states spent from 10-29% of long- term care dollars on waiver services. Only 12 states spent 30-49% of funds on waiver services. Oregon led the nation, allocating 58% to waiver services.

Some states have made significant changes to provider networks by increasing the supply of residential care options, while decreasing the supply and dependence on nursing homes through creative use of Section 1915 (c) waiver funds. One reason why these waivers are as attractive as they are is that officials believe that community-based programs can be less expensive than institutional care.

Issues Related to 1915 (c) Waiver Programs: The most significant issue that effected states’ policy decisions with regard to people remaining in their homes was the Olmstead decision. In the 1999 decision, the Supreme Court placed home and community-based care in the context of civil rights. The federal government has taken steps to implement Olmstead including issuing a series of policy guidance letters from DHHS/CMS to state Medicaid Directors in 2000 and 2001 and through an Executive Order by President Bush in 2001. In January 2000, DHHS issued guidance to states indicating that Olmstead applied to all persons with disabilities, people already in institutions and those being assessed for institutionalization. Moreover, the Office of Civil Rights at DHHS has more than 200 cases of alleged discrimination pending under the Olmstead decision. The Executive Order called for the swift implementation of Olmstead stating that the Attorney General and the Secretaries of DHHS, Education, Labor, and Housing and Urban Development and the Commissioner of Social Security shall work together to accomplish Olmstead goals with DHHS being the lead agency. As of March 2001, thirty-seven states had task forces or workgroups to develop comprehensive Olmstead plans serving as blueprints for state public policy. In many states the Governor, state legislatures and state health and social service agencies have played strong roles with organizations representing people with disabilities in the implementation of Olmstead.

Impact on Section 1915 (c) Waiver Program on Patterns of Care: The most dramatic impact of the waiver program has been on the services for people with MR/DD. In 1982, of the 244,000 people with MR/DD receiving residential services less than a quarter lived in facilities with 15 or fewer residents. By 1999, over three-quarters of the 361,000 persons with MR/DD in residential setting were living in group residences with 15 or fewer residents. The most significant change has come in the care of children and youth with MR/DD. In 1977, 54,000 people aged 21 and younger lived in large state MR/DD facilities. By 1998, only about 2,500 children lived in large facilities. Costs per person for this population living in the community are significantly lower than caring for people in institutions. In 1999, average annual expenditures per resident was $107,536 in large state MR/DD facilities and $78,448 in ICFs/MR, while average annual Medicaid expenditures per home and community-based recipient was $33,324.

Waiting Lists: Despite the growth of waiver programs, many states have waiting lists. The main reason for these lists is a lack of state funding to match federal funds. In 1999, 39 states reported over 66,000 people with MR/DD on waiting lists for residential services funded by services. A 1997 study found that 1,400 in Massachusetts were living in nursing homes while waiting for slots in the state’s waiver program. Texas focuses on providing waiver slots to people at “high” risk of institutionalization, while having a much greater demand for waiver services than the number of slots in the program. In 2001, Virginia had 4,000 persons with disabilities on its waiver waiting list, including those who have been approved for services as well as those waiting to be approved. Between 1998 and 2000, Maryland added $25 million to its budget to reduce its waiting list from more than 6,000 to 2,000 people. A number of states facing class action lawsuits are attempting to move people off waiting lists, including New Mexico, Washington, Pennsylvania and Virginia.

Evaluation of Home and Community-Based Services and Section 1915 (c) Waiver Programs: A demonstration project, conducted by DHHS in the early 1980s, concluded that case management did not lead to overall public cost savings as compared to institutional care. However it stated that these services yielded benefits in in-home care, reduction of unmet need for HCBS, and improved satisfaction for clients and informal caregivers. A recent AARP study of 1915 (c) waiver in Oregon, Colorado, and Washington concluded that waiver services can be a cost-effective alternative if: states focus on seriously-impaired individuals; use alternative funding sources before turning to government funds; keep provider payments low; and screen applicants applying to Medicaid-funded nursing homes to determine if they can remain in the community.

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