FACTORS TO CONSIDER WHEN CHOOSING COVERAGE OPTIONS: TWO ILLUSTRATIVE SERVICES
As is clear from Chapter 4s discussion, Medicaid provides multiple coverage alternatives for some services. The advantages and disadvantages of each may not be apparent until the state works through their different implications in the context of its own unique long-term care service system. This chapter provides guidance to states as they weigh the tradeoffs among different coverage alternatives for a particular service. To provide enough specificity to be useful, the discussion covers two particular service options: (a) case management/service coordination and (b) services provided to elderly persons in assisted living settings.
When a state is faced with several alternative ways of covering a particular home and community service, the tasks of (a) choosing among different coverage alternatives and (b) defining the precise service require detailed analysis of each alternative in the context of a states home and community systems service needs. This chapter illustrates the types of issues to be considered with two specific services: case management and assisted living.
Case management is chosen as the first illustration because it is the backbone of the formal long-term care delivery system. Its overarching purpose is to facilitate Medicaid beneficiaries access to the direct services they need. Every state offers case management in some form under its Medicaid program and every state has to decide how best to cover it.
Assisted living is chosen as the second specific service example, because it provides an excellent illustration of the complex issues involved in defining a service so as to ensure its maximum usefulness within a particular state system. The focus here is on assisted living services provided under Medicaid to persons age 65 and older. By early 2000, 35 states were serving Medicaid beneficiaries in assisted living settings. Residential care alternatives to institutions have been offered to persons with mental retardation and developmental disabilities for some time. Making them available to elderly persons is a more recent, and less well understood, initiative.
Coverage of Case Management: Illustration #1
Medicaid gives states three ways to cover case management services: (1) targeted case management, (2) HCBS waiver programs, and (3) administrative claiming. This section discusses the advantages and disadvantages of each option in obtaining Federal financial participation (FFP).
Targeted Case Management Services
A state may claim FFP for case management services under its Medicaid plan by offering them to a defined group of recipients, or to multiple groups as long as different provisions apply to each. For example, a state may offer one form of targeted case management services to recipients who have a mental illness and another to persons who are elderly and have physical impairments. The scope of targeted case management services that may be claimed for FFP can include: (a) conducting assessments, (b) assisting individuals and families to identify needed services and supports (whether the direct services are funded through the Medicaid program or otherwise), and (c) helping them obtain such services. (The State Medicaid Manual contains a thorough discussion of these activities.)
Advantages to states of offering targeted case management services:
Drawbacks to states of offering targeted case management services:
HCBS Waiver Coverage
FFP is available for the costs of case management/service coordination when a state covers such services under its HCBS waiver program. This option differs little from targeted case management with respect to types of activities for which FFP may be claimed. The general interchangeability of these options is illustrated by the fact that all states operate HCBS waiver programs for people with developmental disabilities, but states divide about equally between those that use targeted case management coverage and those that cover service coordination as an HCB waiver service.
However, two significant aspects differentiate case management/service coordination covered as an HCB waiver service from targeted case management coverage:
Advantages to states of covering case management/service coordination as an HCBS waiver service:
Drawbacks to states of offering case management/care coordination as an HCBS waiver coverage:
Administrative claiming takes advantage of a provision in Federal law permitting states to claim FFP for administrative expenses they incur in operating their Medicaid programs. Such expenses may include costs of intake, assessment, service planning, arranging Medicaid services for recipients, and overseeing service delivery--many of the activities typically performed by case managers.
Administrative claiming differs from the targeted case management and waiver alternatives in one important aspect: It may not be used in conjunction with assisting recipients to access non-Medicaid services--even though such services might benefit the recipient. Case managers may work to coordinate access to all services in a care plan. But administrative claiming can only be used for the administration of the Medicaid program, as established by a time study or other method to apportion Medicaid and non-Medicaid costs.
Advantages to states of using the administrative claiming option for case management activities:
Drawbacks to states of using administrative claiming for case management services:
Coverage of Assisted Living for Elderly Persons: Illustration #2
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. As discussed in Chapter 4, HCFA 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 states 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.
Service Delivery Models
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 persons 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 persons right to receive other Medicaid services. The overriding criterion for receipt of services under any model is medical necessity.
Personal Care Option or Waiver or Both?
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. (The 300 percent rule is explained briefly below and in detail in Chapter 2.) However, since waiver services are available only to beneficiaries who meet the states 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.
Type of Waiver
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.
Level of Care and Licensing Rules
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 Medicaids nursing home level-of-care criteria. Licensing must also address a facilitys 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 states 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.
Licensing and Contracting Issues
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 Alzheimers disease, the Medicaid contracting requirements may specify additional training or other requirements.
Enabling Beneficiaries to Pay for Room and Board
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:
Assisted living and the special income limit: Post-eligibility treatment of income
Some states cover persons in an HCBS waiver program using the so-called 300 percent of SSI eligibility option (a persons 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 beneficiarys 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. (See Chapter 2 for a detailed discussion of financial issues connected with the 300 percent option.)
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 beneficiarys 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 areas 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.
Income supplementation by family members or trusts for payment of room and board
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 trusts funds may also be used to help pay for a beneficiarys 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 recipients 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 individuals 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 individuals SSI benefit dollar for dollar. However, if the money is paid instead to the assisted living facility on a beneficiarys 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.
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 individuals share and decrease Medicaids share of that cost. In some cases, as noted, such supplements can result in the individual losing eligibility altogether.
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 familys payment to the facility can affect Medicaid eligibility as well as increase the individuals 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.
Assisted Living and the Medically Needy
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. (See Chapter 2 for additional discussion of this group and of medically needy income eligibility 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:
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).
Service Payment Rates: Adequacy Concerns
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.