Michigan home finance

INTRODUCTION

Home and community-based services, such as home health care, personal care, adult day care, respite care, and assisted living facilities, have grown in importance to the long-term care (LTC) system over the past two decades. In 2000, Medicaid non-institutional LTC services constituted 25 percent of total Medicaid LTC expenditures, up from about 10 percent in 1988 (Figure 1) (The Lewin Group, 2000). Among the older population, home and community-based services were estimated to constitute about 30 percent of total LTC expenditures in that same year (U.S. Congressional Budget Office, 1999). Despite rapidly growing expenditures for these services, there is a dearth of research documenting the effects of these services on cost, quality of care, or quality of life of both recipients and their families (Lutzky et al., 2000).

In the coming years, it is likely that expenditures and utilization of home and community-based services will increase substantially for both demographic and policy reasons. Demographically, largely because of the aging of the population, the number of people with disabilities will increase substantially. Using the 1994 National Health Interview Survey, Rice (1996) projected that the number of people age 65 or over with activity limitations will increase from 12 million in 1994 to 28 million in 2030.

From a policy perspective, creation of a more balanced delivery system by expanding home and community-based services is a major policy goal in almost all States. States' rationales for this shift are that people want to remain in their own homes rather than enter institutions, that the quality of care at home is better than in nursing homes and other institutions, and the belief that these services will save money. In addition, consumer groups for both older people and younger adults with physical disabilities, have pushed for more non-institutional services. The U.S. Supreme Court's Olmstead decision (Olmstead v. L.C. ex. rel. Rimring, 119 S. Ct. 2176 [1999]) found that inappropriate institutionalization was illegal under the Americans with Disabilities Act and established a limited right to home and community-based services, thus providing additional impetus for this policy choice (Rosenbaum, 2000).

States have considerable flexibility in designing their systems of home and community-based services. The aim of this article is to describe and analyze how States address the major issues in the supply, administration, organization, and financing of home and community-based care for older people and younger adults with physical disabilities. After discussing the methodology and providing some basic background information on the seven States, six issues are addressed:

1. What are the roles of Medicaid and State-funded programs in the financing of home and community-based services; and within Medicaid, what are the roles of mandatory, optional, and waiver services? Although Medicaid provides States with Federal funds, these funds come with a set of requirements with which States must comply.

2. How are States administratively coordinating the numerous funding streams that finance services, and what is the role of local entities in designing and administering services? The fragmentation of financing may have consequences for the ability of persons with disabilities to access the services they need.

3. How do States use financial and functional eligibility criteria and the assessment and case management processes to allocate resources? Given the large number of disabled people in the community, States must find ways to decide who will receive services and how much.

4. What services do States provide under Medicaid and other programs? A major policy issue has been whether and how to broaden the array of services beyond those that have traditionally been covered. States have been particularly interested in exploring consumer-directed home care and non-medical residential settings, such as assisted living facilities.

5. How do States control expenditures for home and community-based services? Fear of runaway spending has been a major constraint on service expansion, especially at the national level.

6. Given the chronic problems of quality in LTC, how do States make sure that home and community-based services are adequate? Although the Federal Government overwhelmingly dominates quality assurance in nursing homes, States have enormous flexibility in how they regulate home and community-based services.

METHODOLOGY

As part of a research project funded by CMS, The Lewin Group and its subcontractors, the; University of Minnesota Research and Training Center on Community Living, The Urban Institute, Mathematica Policy Research, and The MEDSTAT Group, are studying Medicaid financing and delivery of services to older people and younger adults with physical disabilities, as well as to individuals with mental retardation and developmental disabilities.

The study seeks to examine a broad range of State systems of home and community-based services, concentrating on the role of Medicaid. States chosen for inclusion in the study include ones with well-developed systems and States that are still in the process of developing their non-institutional services. The overall goal of the project is to study selected programs to assess their effects on quality of care, quality of life, and cost. CMS seeks to better understand how States organize their LTC systems, their use of Federal Medicaid financing for home and community-based services, and their supplementation with State programs. CMS also hopes to identify features of programs that are associated with favorable outcomes in an ongoing effort to improve service delivery. In addition, information about the effect of individual characteristics and care patterns on outcomes will assist States in targeting and designing their programs.

The first portion of the project involved case studies of the broad range of the supply, administration, organization, financing, and quality assurance of home and community-based services in seven States. In-person site visits were conducted during 1999 and 2000 in States chosen for the study of home and community-based services programs targeted to aged individuals and younger individuals with physical disabilities; visits were also conducted in six States chosen for study of programs targeted to individuals with mental retardation and/or developmental disabilities. Interviews were conducted with State officials, advocacy groups, provider representatives, and other key stakeholders.

This information was supplemented by Web site review, public documents, and newspaper articles. In this article, we present the major case-study findings for the seven States with programs for the aged and physically disabled included in the study. These States were Michigan, Wisconsin, Washington, Indiana, Maryland, Kentucky, and Alabama. Separate reports were written on the home and community-based services system for each State (Wiener and Goldenson, 2001; Wiener and Lutzky, 2001a,b; Tilly and Goldenson, 2001; Tilly, 2001; Tilly and Kasten, 2001a,b). (1) The second portion of the project, which is not reported in this article, will survey Medicaid beneficiaries receiving home and community-based services.

BACKGROUND ON STATE LTC SYSTEMS

The publicly funded LTC systems in all of the case-study States spent the substantial majority of their funds on institutions. Although the extent to which States relied on home and community-based services varied greatly, nursing facilities remained the dominant source of care for older persons and younger adults with physical disabilities in all of the States. In recent years, some States have taken aggressive steps to change the balance of care. States expanded home and community services in response to advocates' pressure to provide alternatives to institutionalization, the Supreme Court's Olmstead decision, and as a result of States' efforts to cope with increasing nursing home costs.

The case-study States fell into two broad camps in terms of per capita Medicaid expenditures for home and community services (Table 1). Including Medicaid LTC expenditures for people of all ages, Alabama, Indiana, Kentucky, and Maryland spent less than $55 per capita on these services, while Washington, Wisconsin, and Michigan spent more per capita on non-institutional LTC services. Examining only Medicaid expenditures for older people, Alabama, Indiana, Kentucky, and Maryland spent less than $85 per elderly resident on home and community-based services, while Washington, Wisconsin, and Michigan spent more than $85 per elderly resident on these services.