Long-Term Care: Federal Oversight of Growing Medicaid Home and	 
Community-Based Waivers Should Be Strengthened (20-JUN-03,	 
GAO-03-576).							 
                                                                 
Home and community-based settings have become a growing part of  
states' Medicaid long-term care programs, serving as an 	 
alternative to care in institutional settings, such as nursing	 
homes. To cover such services, however, states often obtain	 
waivers from certain federal statutory requirements. GAO was	 
asked to review (1) trends in states' use of Medicaid home and	 
community-based service (HCBS) waivers, particularly for the	 
elderly, (2) state quality assurance approaches, including	 
available data on the quality of care provided to elderly	 
individuals through waivers, and (3) the adequacy of federal	 
oversight of state waivers. GAO is recommending that the	 
Administrator of CMS take steps to (1) better ensure that state  
quality assurance efforts are adequate to protect the health and 
welfare of HCBS waiver beneficiaries, and (2) strengthen federal 
oversight of the growing HCBS waiver programs. Although CMS	 
raised certain concerns about aspects of the report, such as the 
respective state and federal roles in quality assurance and the  
potential need for additional federal oversight resources, CMS	 
generally concurred with the recommendations.			 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-576 					        
    ACCNO:   A07309						        
  TITLE:     Long-Term Care: Federal Oversight of Growing Medicaid    
Home and Community-Based Waivers Should Be Strengthened 	 
     DATE:   06/20/2003 
  SUBJECT:   Federal funds					 
	     Health care costs					 
	     Health care programs				 
	     Health care services				 
	     Elder care 					 
	     Long-term care					 
	     Waivers						 
	     Quality assurance					 
	     Federal/state relations				 
	     State-administered programs			 
	     Medicaid Program					 

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GAO-03-576

Report to Congressional Requesters

United States General Accounting Office

GAO

June 2003 LONG- TERM CARE Federal Oversight of Growing Medicaid Home and
Community- Based Waivers Should Be Strengthened

GAO- 03- 576

From 1991 through 2001, Medicaid long- term care spending more than
doubled to over $75 billion, while the proportion spent on institutional
care declined. Over a similar time period, HCBS waivers grew from 5
percent to 19 percent of such expenditures* from $1.6 billion to $14.4
billion* and the number of waivers, participants, and average state per
capita spending also grew significantly. Since 1992, the number of waivers
increased by almost 70 percent to 263 in June 2002, and the number of
beneficiaries, as of 1999, had nearly tripled to almost 700,000, of which
55 percent were elderly. In the absence of specific federal requirements
for HCBS quality assurance

systems, states provide limited information to the Centers for Medicare &
Medicaid Services (CMS), the federal agency that administers the Medicaid
program, on how they assure quality of care in their waiver programs for
the elderly. States* waiver applications and annual reports for waivers
for the elderly often contained little or no information on state
mechanisms for assuring quality in waivers, thus limiting information
available to CMS that should be considered before approving or renewing
waivers. GAO*s analysis of available CMS and state waiver oversight
reports for waivers serving the elderly identified oversight weaknesses
and quality of care problems. More than 70 percent of the waivers for the
elderly that GAO reviewed documented one or more quality- of- care
problems. The most common

problems included failure to provide necessary services, weaknesses in
plans of care, and inadequate case management. The full extent of such
problems is unknown because many state waivers lacked a recent CMS review,
as required, or the annual state waiver report lacked the relevant
information.

CMS has not developed detailed state guidance on appropriate quality
assurance approaches as part of initial waiver approval. Although CMS
oversight has identified some quality problems in waivers, CMS does not
adequately monitor state waivers and the quality of beneficiary care. The
10 CMS regional offices are responsible for ongoing monitoring for HCBS
waivers. However, CMS does not hold these offices accountable for
completing periodic waiver reviews, nor does it hold states accountable
for submitting annual reports on the status of waiver quality.
Consequently, CMS is not fully complying with statutory and regulatory
requirements when it renews waivers. As of June 2002, almost one- fifth of
waivers in place for 3 years or more had either never been reviewed or
were renewed without a

review; for an additional 16 percent of waivers, reports detailing the
review results were never finalized. Regional office personnel explained
that limited staff resources and travel funds often impede the timing and
scope of reviews. While regional office reviews include record reviews for
a sample of waiver beneficiaries, they do not always include beneficiary
interviews.

The reviews also varied considerably in the number of beneficiary records
reviewed and their method of determining the sample. Home and community-
based

settings have become a growing part of states* Medicaid long- term care
programs, serving as an alternative to care in institutional

settings, such as nursing homes. To cover such services, however, states
often obtain waivers from certain federal statutory

requirements. GAO was asked to review (1) trends in states* use of
Medicaid home and communitybased

service (HCBS) waivers, particularly for the elderly, (2) state quality
assurance approaches, including available data on the quality of care
provided to elderly individuals through waivers, and (3) the adequacy of
federal oversight of state waivers. GAO is recommending that the

Administrator of CMS take steps to (1) better ensure that state quality
assurance efforts are adequate to protect the health and welfare of HCBS
waiver beneficiaries, and (2) strengthen federal oversight of the growing
HCBS waiver programs. Although CMS raised certain concerns about aspects
of

the report, such as the respective state and federal roles in quality
assurance and the potential need for additional federal oversight
resources, CMS generally

concurred with the recommendations.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 576. To view the full product,
including the scope and methodology, click on the link above. For more
information, contact Kathryn G. Allen at (202) 512- 7118. Highlights of
GAO- 03- 576, a report to

congressional requesters

June 2003

LONG- TERM CARE

Federal Oversight of Growing Medicaid Home and Community- Based Waivers
Should Be Strengthened

Page i GAO- 03- 576 Medicaid Home and Community- Based Waivers Letter 1
Results in Brief 3 Background 5 Waivers Are Vehicle for Dramatic Growth in
Medicaid Home and

Community- Based Services 10 Information on State Quality Assurance
Approaches for Waivers Serving the Elderly Is Limited, but Quality
Concerns Have Been Identified 14 CMS Guidance to States and Oversight Of
HCBS Waivers Are

Inadequate to Ensure Quality Care 22 Conclusions 34 Recommendations for
Executive Action 35 Agency and State Comments and Our Evaluation 35
Appendix I Scope and Methodology 42

Appendix II Suggested CMS Definitions of Home and Community- Based
Services in Waivers Serving the Elderly 45

Appendix III Medicaid Long- Term Care Expenditures, by Type and State,
Fiscal Year 2001 47

Appendix IV Number of Beneficiaries Served by HCBS Waivers for the Elderly
and in Nursing Homes, by State, 1999 49

Appendix V Number of HCBS Waivers for the Elderly, Beneficiaries,
Expenditures, and per Beneficiary Expenditures by State, 1999 51 Contents

Page ii GAO- 03- 576 Medicaid Home and Community- Based Waivers Appendix
VI CMS HCBS Quality Initiatives 53

Appendix VII Beneficiary Samples for and Duration of Regional Office
Reviews of 15 State Waivers Serving the Elderly 56

Appendix VIII Comments from the Centers for Medicare & Medicaid Services
58

Tables

Table 1: States with Highest and Lowest per Beneficiary Expenditures for
State HCBS Waivers Serving the Elderly, 1999 13 Table 2: Quality Assurance
Mechanisms States Reported Using in

HCBS Waivers Serving the Elderly 15 Table 3: Quality Assurance Mechanisms
Frequently Cited in Waiver Applications and Current Annual State Reports
for HCBS Waivers Serving the Elderly 17 Table 4: Frequently Cited Quality-
of- Care Problems Identified by

CMS Regional Offices or States in HCBS Waivers Serving the Elderly 21
Table 5: HCBS Waivers That Had 10 Years or More Elapse without

Ever Having a Regional Office Review or without a Review Prior to the Last
Waiver Renewal, as of June 2002 25 Table 6: Status of CMS and State
Monitoring for the 15 Largest

HCBS Waivers Serving the Elderly 28 Table 7: Number and Specialty of CMS
Regional Office Staff Assigned to Oversee HCBS Waivers 32 Table 8:
Services States May Include in Their Medicaid Home and Community- Based
Services Waiver 45 Figure

Figure 1: Percentage Distribution of Medicaid Long- Term Care
Expenditures, Fiscal Years 1991 and 2001 11

Page iii GAO- 03- 576 Medicaid Home and Community- Based Waivers
Abbreviations

CMS Centers for Medicare & Medicaid Services FTE full- time equivalent
HCBS home and community- based services HCFA Health Care Financing
Administration HHS Department of Health and Human Services

ICF/ MR intermediate care facility for the mentally retarded

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Page 1 GAO- 03- 576 Medicaid Home and Community- Based Waivers

June 20, 2003 The Honorable Charles E. Grassley Chairman Committee on
Finance United States Senate

The Honorable John B. Breaux Ranking Minority Member Special Committee on
Aging United States Senate

Over the last decade, states have increased their support for long- term
care services in individuals* homes or in other community- based settings*
such as adult day care, adult foster care homes, and assisted living
facilities* as an alternative to care in nursing homes and other
institutions. For many vulnerable elderly and nonelderly individuals with
physical, developmental, or cognitive disabilities, these alternative
settings and services are seen as preferable to institutional care. Most
state funding of long- term care is through Medicaid, the federal- state
health care

program for certain low- income individuals. Medicaid home and community-
based services (HCBS) waivers, authorized under section 1915( c) of the
Social Security Act, are the primary means by which states provide
noninstitutional long- term care. 1 Waivers allow states to limit the
availability of services geographically, target specific populations or
conditions, control the number of individuals served, and cap overall
expenditures* actions not usually allowed under the Medicaid statute.

The Centers for Medicare & Medicaid Services (CMS)* the federal agency
that manages Medicaid* reviews and approves states* requests for these
waivers and also is responsible for ensuring that states have necessary
safeguards to protect the health and welfare of individuals receiving
services through waiver programs. 2 1 42 U. S. C. 1396n( c)( 2000).

2 Until June 2001, CMS was known as the Health Care Financing
Administration (HCFA). In this report, we continue to refer to HCFA when
our findings apply to the organizational structure and operations
associated with that name.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Despite the growing use of HCBS waivers, concerns have been raised about
the quality of care provided through waivers serving both elderly and
nonelderly populations. Newspaper exposes and some state audit reports
have chronicled serious health and welfare concerns in waiver programs
across the country. Because of continued growth in the numbers of people
served through HCBS waiver programs and concerns about the quality of
care, you asked us to review (1) trends in states* use of such waivers,
particularly for the elderly, (2) state quality assurance approaches for
waivers serving the elderly, including available data on the quality of

care provided to beneficiaries, and (3) the adequacy of CMS*s oversight of
state waiver programs for the elderly as well as those for other target
populations. To identify trends in states* use of waivers, we analyzed CMS
and state

reports that contained data on waiver beneficiaries, expenditures, and
services. To identify those waivers that serve the elderly, we compiled a
list of HCBS waivers with *the aged* or *aged and disabled* as their
target populations. Throughout this report, we refer to this universe of
waivers as those *serving the elderly.* To assess state quality assurance
activities for waivers serving the elderly, we analyzed (1) data on
quality assurance approaches from state waiver applications and their most
recent annual reports to CMS, (2) the oversight findings reported by
states in their annual waiver reports, and (3) CMS regional office waiver
reviews and state audits of waivers completed from October 1998 through
May 2002. 3 For a more in- depth perspective on states* quality assurance
approaches

for waivers serving the elderly, we conducted structured interviews with
state officials and staff in South Carolina, Texas, and Washington. We
selected these states because they operate some of the largest HCBS
waivers for the elderly that have been in effect for 5 years or longer. We
did not attempt to assess the effectiveness of their quality assurance
approaches. To determine the adequacy of CMS oversight of state waiver
programs for the elderly as well as those for other target populations, we
obtained relevant data from officials at CMS headquarters and conducted
structured interviews with all 10 CMS regional offices on their waiver

review activities and staffing as of June 2002. See appendix I for a
detailed discussion of our scope and methodology. We conducted our review
from November 2001 through June 2003 in accordance with generally accepted
government auditing standards.

3 Our analysis of regional office waiver reviews is based on final
reports. Reviews that did not have a final report were not included in our
analysis.

Page 3 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Total Medicaid spending for long- term care increased from $33.8 billion
in fiscal year 1991 to $75.3 billion in fiscal year 2001, with a growing
share spent on services through home and community- based waivers as an
alternative to care in institutions such as nursing homes. Expenditures
for services through HCBS waivers increased from $1.6 billion in fiscal
year 1991 to $14.4 billion in fiscal year 2001, growing from 5 percent of
all Medicaid long- term care spending in fiscal year 1991 to 19 percent in
fiscal year 2001. Over roughly the same time period, the number of HCBS
waivers increased from 155 to 263, with 77 serving the elderly as of June
2002. Every state except Arizona operates at least one waiver for the
elderly. From 1992 to 1999, the total number of persons served through
waivers nationwide nearly tripled to 688,152 and the number of
beneficiaries served by waivers for the elderly more than doubled to
377,083. In two states, Oregon and Washington, HCBS waiver services have
replaced nursing homes as the dominant means of providing longterm care to
the elderly under Medicaid. Nationally, average Medicaid expenditures per
beneficiary in waivers serving the elderly increased from $3,622 in 1992
to $5, 567 in 1999; average spending per beneficiary in 1999 ranged from
$1,208 in New York to $15,065 in Hawaii, reflecting

differences in the type and amount of services provided under different
waivers.

No nationwide data are available on states* quality assurance approaches
or the status of quality of care for beneficiaries served by waivers for
the elderly, but concerns have been identified about the quality of care
provided under many of these waivers. Because CMS has not provided
detailed guidance to states on federal requirements for HCBS quality
assurance systems, the information available to CMS that should be

considered before approving or renewing waivers is limited. Thus, state
waiver applications and annual waiver reports that we reviewed for waivers
serving the elderly often contained little or no information on state
quality assurance approaches. For example, 11 applications for the 15
largest waivers serving the elderly identified three or fewer specific
quality assurance approaches, and none mentioned important approaches such
as complaint systems or enforcement tools. Moreover, 18 of 52 state annual
waiver reports that we reviewed contained no information on approaches
used to help ensure quality. Where information was provided, the most
frequently cited quality assurance approaches included (1) audits

or reviews of case management agencies, (2) state agency reviews of waiver
providers or direct- care staff, and (3) state licensure, certification,
or standards for some waiver providers. Although CMS regional office and
state reviews identified few if any specific cases of harm to waiver
beneficiaries, the reviews for the majority of waivers serving the elderly
Results in Brief

Page 4 GAO- 03- 576 Medicaid Home and Community- Based Waivers

with available relevant detail had one or more problems related to quality
of care. Among the most commonly cited problems were (1) failure to
provide authorized or necessary services, (2) inadequate assessment or
documentation of beneficiaries* care needs in the plan of care, and (3)
inadequate case management. For example, one recent CMS regional office
review found that more than one- fourth of a state*s waiver beneficiaries
had received none of their authorized personal care services. However, the
consequences for the beneficiaries were not identified in this review.
Since many state waiver programs did not have a recent CMS

review, as required, or the annual state waiver report lacked the relevant
information, the extent of quality- of- care problems is unknown.

CMS guidance to states and oversight of HCBS waivers is inadequate to
ensure quality of care for waiver beneficiaries. CMS has not developed
detailed guidance for states on appropriate quality assurance mechanisms
as part of the waiver approval process, and initiatives under way to

generate information on state quality assurance approaches do not address
this problem. In addition, the agency has not fully complied with the
statutory and regulatory requirements that condition the renewal of HCBS
waivers on (1) states submitting required annual reports that include
information on state quality assurance approaches and deficiencies
identified through state monitoring and (2) CMS*s conducting and
documenting periodic waiver reviews to determine whether states

satisfied requirements for protecting the health and welfare of waiver
beneficiaries. Many state annual waiver reports submitted to CMS regional
offices for waivers serving the elderly were not timely and lacked
required information on quality assurance and state monitoring. As of June
2002,

228 HCBS waivers for all target populations had been in place for 3 years
or longer and should have been reviewed by CMS regional offices. However,
42 waivers serving approximately 132, 000 beneficiaries either had never
been reviewed or were renewed without a review. For 36 additional waivers,
reviews were conducted, but the reports summarizing the findings were
never finalized, raising a question as to whether any weaknesses were
identified and, if so, had been corrected. CMS regional office personnel
informed us that limited staff and travel resources impeded the timing and
scope of reviews. While regions* reviews included an examination of
beneficiary records, we found that the reviews varied considerably in the
number of beneficiary records reviewed and their method of determining the
sample, raising a question about the extent to which findings could be
generalized. In addition, they did not always

include beneficiary interviews. Although updated in 2001, CMS guidance for
conducting waiver reviews does not address key operational issues

Page 5 GAO- 03- 576 Medicaid Home and Community- Based Waivers

such as an adequate sample size or the sampling methodology to provide a
basis for generalizing review findings.

To better ensure that state quality assurance efforts are adequate to
protect the health and welfare of HCBS waiver beneficiaries and to
strengthen federal oversight, we are recommending that the CMS
Administrator (1) establish more detailed criteria regarding the necessary
components of an HCBS waiver quality assurance system, (2) require states
to submit more specific information about their quality assurance
approaches prior to waiver approval, (3) ensure that states provide
sufficient and timely information in their annual waiver reports on their
efforts to monitor quality, (4) develop guidance on the scope and
methodology for federal reviews of state waiver programs, and (5) ensure
allocation of sufficient resources for conducting thorough and timely
reviews of quality in HCBS waivers and hold regional offices accountable
for completing such reviews. Although CMS raised certain concerns about

aspects of our report, such as the respective state and federal roles in
quality assurance and the potential need for additional federal oversight
resources, the agency generally concurred with our recommendations.

The jointly funded federal- state Medicaid program is the primary source
of financing for long- term care services. 4 About one- third of the total
$228 billion in Medicaid spending in fiscal year 2001 was for long- term
care in both institutional and community- based settings. States
administer this program within broad federal rules and according to a
state plan approved by CMS, the federal agency that oversees and
administers Medicaid. Some services, such as nursing home care and home
health care, are mandatory services that must be covered in any state that
participates in Medicaid. Other services, such as personal care, are
optional, which a state may choose to include in its state Medicaid plan
but which then must be offered to all individuals statewide who meet its

Medicaid eligibility criteria. States may also apply to CMS for a section
1915( c) waiver to provide home and community- based services as an
alternative to institutional care in a hospital, nursing home, or

4 While the purpose of Medicaid is to cover health care and long- term
care for low- income persons, including persons who are aged, blind, or
disabled, it has become a significant means of funding long- term care for
many middle- income persons as well. Many of these persons qualify for
Medicaid benefits after a period of *spend- down,* during which they
deplete their own resources to pay for services. Background

Page 6 GAO- 03- 576 Medicaid Home and Community- Based Waivers

intermediate care facility for the mentally retarded (ICF/ MR). 5 If
approved, HCBS waivers allow states to limit the availability of services
geographically, to target services to specific populations or conditions,
or to limit the number of persons served, actions not generally allowed
for state plan services. States often operate multiple waivers serving
different population groups, such as the elderly, persons with mental
retardation or

developmental disabilities, persons with physical disabilities, and
children with special care needs.

States determine the types of long- term care services they wish to offer
under an HCBS waiver. Waivers may offer a variety of skilled services to
only a few individuals with a particular condition, such as persons with
traumatic brain injury, or they may offer only a few unskilled services to
a large number of people, such as the aged or disabled. 6 The wide variety
of services that may be available under waivers includes home
modification,

such as installing a wheelchair ramp, transportation, chore services,
respite care, nursing services, personal care services, and caregiver
training for family members. CMS*s waiver application form for states
includes a list of home and community- based services with suggested
definitions. States are free to include as many or as few of these as they
wish, to include additional services, or to include different definitions
of services from those supplied with the form. See appendix II for a list
of services provided through the HCBS waivers serving the elderly and
CMS*s suggested definitions of these services.

To be eligible for waiver services, an individual must meet the state*s
criteria for needing the level of care provided in an institution, such as
a nursing home, and be able to receive care in the community at a cost

5 Federal statutory requirements for Medicaid that may be waived include
(1) statewideness, which requires that services be available throughout
the state, (2) comparability, which requires that all services be
available to all eligible individuals, and (3) income and resource rules,
which require states to use a single income and resource standard when
determining eligibility for Medicaid, with the exception of institutional
care. A waiver of this last requirement allows states to use more generous
institutional eligibility criteria when determining financial eligibility
for waiver services, thus extending eligibility to individuals in the
community who would not otherwise qualify

for Medicaid. 6 A recent summary by the National Association of State
Medicaid Directors identified 75 discretely defined services in HCBS
waiver applications as of June 2000. Individual waivers included as few as
one service to as many as 25.

Page 7 GAO- 03- 576 Medicaid Home and Community- Based Waivers

generally not exceeding the cost of institutional care. 7 States are
responsible for determining the specific financial and functional
eligibility criteria used, conducting the necessary screening and
assessment, and arranging for services to be provided. Factors that states
use in assessing functional eligibility for nursing home care and for
waiver services include the individuals* medical condition and their
degree of physical or mental impairment. Other factors that states
generally consider, and which may affect the states* ability to provide
care in the community at a cost not exceeding that of institutional care
or to adequately protect beneficiaries* health and welfare, include the
mix of services needed by the individual, the availability of needed
services, the cost of services, the need for home

modification, and the availability of family members or other caregivers.
8 In order to receive federal funds for waiver services, a state must
submit an application to the Secretary of Health and Human Services (HHS)
that identifies the target population, specifies the number of persons
that will be served, and lists the services to be included. In addition,
states are required to provide certain assurances that necessary
safeguards have been taken to assure financial accountability and to
protect the health and welfare of beneficiaries under the waiver. 9
Federal regulations specify that the state*s safeguards for the health and
welfare of beneficiaries must

include (1) adequate standards for all providers of waiver services and
(2) assurance that any state licensure or certification requirements for
providers of waiver services are met. 10 CMS requires that a state*s
waiver application include documentation regarding the standards
applicable for each service provider. If the only requirement for a
particular provider is

7 The average cost of community care under a waiver cannot exceed the
average cost of care in an institution. 8 For example, a person who
requires 24- hour care and supervision and has no family or other support
in the community may exceed the limits of what the waiver program allows

in terms of personal care services. However, the same person who lives
with a family caregiver might be eligible to receive several hours of
personal care services each day as well as occasional respite care and
caregiver training for the family.

9 A state must provide several additional assurances, including the
following: (1) the state will provide for an evaluation of the need for
services for individuals, (2) beneficiaries will be informed of available
alternatives to the waiver and provided a choice, (3) the average per
capita expenditures for waiver beneficiaries will not exceed the amount
that the state

estimates would have been spent in the absence of the waiver, (4) absent
the waiver, beneficiaries would receive the appropriate institutional care
that they need, and (5) the state will provide information to CMS annually
on the impact of the waiver. 10 See, 42 CFR 441.302( a).

Page 8 GAO- 03- 576 Medicaid Home and Community- Based Waivers

licensure or certification, the state must provide a citation to the
applicable state statute or regulation. If other requirements apply, the
state must specify the applicable standards that providers must meet and
explain how the provider standards will ensure beneficiaries* welfare.
Finally, states must annually report on, among other things, how they
implement, monitor, and enforce their health and welfare standards and the
waiver*s impact on the health and welfare of beneficiaries.

Initial waiver applications and amendments to initial waivers are reviewed
and approved by CMS headquarters. CMS*s 10 regional offices have primary
responsibility for reviewing and approving applications to renew waivers
and amendments to renewed waivers. If CMS determines that a waiver
application meets program requirements, including sufficient documentation
to indicate that necessary safeguards are in place to protect the health
and welfare of waiver beneficiaries, it will approve an initial waiver for
a 3- year period. Subsequently, waivers may be extended for additional 5-
year periods.

Section 1915( c)( 3) of the Social Security Act provides that, upon
request of a state, HCBS waivers may be extended, unless the Secretary of
HHS determines that the assurances provided during the preceding term have
not been met. 11 Among the assurances that the state makes are that
necessary safeguards have been taken to protect the health and welfare of
waiver participants and that the state will submit annual reports on the

impact of the waiver on the type and amount of medical assistance provided
under the state Medicaid plan and on the health and welfare of recipients.
Regulations implementing section 1915( c) provide that an extension of a
waiver will be granted unless (1) CMS*s review of the prior

waiver period shows that the assurances the state made were not met and
(2) the state fails to provide adequate documentation and assurances to
justify an extension. 12 In its explanation of this regulation, HCFA
indicated that a review of the prior period is an indispensable part of
the renewal process. 13 11 42 U. S. C. 1396n( c)( 3). Section 1915( c)( 3)
states "A waiver under this subsection [1915( c)]

shall be for an initial term of three years and, upon the request of a
State, shall be extended for additional five- year periods unless the
Secretary determines that for the previous waiver period the assurances
provided under paragraph (2) have not been met."

12 42 CFR 441.304( a). 13 See, 59 Fed. Reg. 37702, 37712 (1994) and 53
Fed. Reg. 19950 (1988).

Page 9 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Reviews of waiver programs for which a renewal has been requested are,
therefore, expected to occur at some point during the initial 3- year
period, and at least once during each renewal cycle. CMS guidance on the
reviews calls for on- site visits that include an examination of
beneficiary and provider records as well as interviews with state
officials. If a state*s

efforts to protect the health and welfare of waiver beneficiaries are
determined to be inadequate, CMS officials told us that the agency can
either bar the state from enrolling any new waiver beneficiaries until

corrective actions are taken or terminate the waiver. According to a
recent CMS- sponsored review, oversight of waivers is often decentralized
and fragmented among a variety of agencies and levels of government, and
rarely does a single entity have accountability for the overall quality of
care provided to waiver beneficiaries. 14 Some waiver service providers
are regulated by state licensing agencies, some are certified by private
accreditation organizations, and others operate under terms of a contract
or other agreement with a state agency. While the state Medicaid agency is
ultimately accountable to the federal government for compliance with the
requirements of the waivers, it may delegate administration of the waivers
to state units on aging, mental health departments, or other departments
or agencies with jurisdiction over a specific population or service. About
one- third of waivers for the elderly are administered by an agency or
department other than the Medicaid agency, most often the state unit on
aging. 15 These agencies may then contract with local networks, agencies,
or providers to provide or arrange for beneficiary services.

14 Maureen Booth and others, Literature Review: Quality Management and
Improvement Practices for Home and Community- Based Care (Portland, Me.:
University of Southern Maine, Edmund S. Muskie School of Public Service,
Jan. 10, 2002).

15 Data gathered by the National Association of State Medicaid Directors
identified the location of waiver administration for 56 HCBS waivers for
the elderly as of March 18, 2002. Thirty- eight of these were administered
either directly by the Medicaid agency or within the same department that
houses the Medicaid agency.

Page 10 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Medicaid- covered HCBS services have become a growing component of state
long- term care systems, with most of the growth accounted for by
substantial increases in the number of HCBS waivers and the beneficiaries
served through waivers. In a few states, these waivers are beginning to
replace nursing homes as the dominant means for providing long- term care
to the elderly under Medicaid. Over the past 10 years, total Medicaid

long- term care spending has more than doubled* from $33.8 billion in
fiscal year 1991 to $75.3 billion in fiscal year 2001. However, the share
of spending for institutional care declined from 86 to 71 percent, while
the share spent for home and community- based care grew from 14 to 29
percent.

Most of the growth in home and community- based care spending under
Medicaid can be accounted for by HCBS waivers. Total Medicaid home and
community- based care spending grew from $4.8 billion in fiscal year 1991
to $22.2 billion in fiscal year 2001, while spending for waiver services
grew from $1. 6 billion in fiscal year 1991 to $14.4 billion in fiscal
year 2001. As shown in figure 1, waiver spending grew from 5 percent of
all Medicaid long- term care spending in fiscal year 1991 to 19 percent in
fiscal year 2001. In all but two states* California and New York* and the
District of Columbia, over one- half of Medicaid home and community- based
services spending in fiscal year 2001 was through waivers, with a much
smaller portion going to nonwaiver mandatory home health care or state
plan optional personal care services. 16 See appendix III for a summary of
Medicaid long- term care expenditures by type and state.

16 California and New York fund most of their Medicaid home and community-
based services using the state plan personal care services option and home
health benefit. The District of Columbia funds most of its Medicaid home
and community- based care using the home health benefit. Waivers Are
Vehicle for Dramatic Growth

in Medicaid Home and Community- Based Services

Page 11 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Figure 1: Percentage Distribution of Medicaid Long- Term Care
Expenditures, Fiscal Years 1991 and 2001

Note: GAO analysis of HCFA Form 64 data as reported by Brian Burwell,
Steve Eiken, and Kate Sredl in Medicaid Long Term Care Expenditures in FY
2001 (The MEDSTAT Group, May 10, 2002). The figure includes data from 49
states and the District of Columbia.

Both the number and size of HCBS waivers have grown considerably over the
past 20 years. Every state except Arizona operates at least one such
waiver for the elderly. 17 In 1982, the first year of the waiver program,
6 states operated HCBS waivers. By 1992, 48 states operated a total of 155
HCBS waivers. As of June 2002, 49 states and the District of Columbia
operated a total of 263 HCBS waivers, with 77 serving the elderly. The
average waiver for the elderly served 3,305 Medicaid beneficiaries in 1992
17 Arizona operates its Medicaid program as a demonstration project under
a section 1115

waiver, which includes long- term care as well as acute health care
services. Under section 1115 of the Social Security Act, the Secretary of
HHS has broad authority to authorize experimental, pilot, or demonstration
projects that are likely to promote objectives of certain federal
programs, including Medicaid.

Page 12 GAO- 03- 576 Medicaid Home and Community- Based Waivers

and 5,892 beneficiaries in 1999. 18 In 1999, 15 states served more than
10, 000 persons in their waivers for the elderly, an increase from only 4
states in 1992. The total number of HCBS waiver beneficiaries* elderly and
nonelderly* nationwide nearly tripled from 235,580 in 1992 to 688,152 in
1999, the most recent year for which data were available. The number of
beneficiaries served in waivers for the elderly more than doubled from
155,349 in 1992 to 377,083 in 1999. Over this same period, the number of
Medicaid beneficiaries who used some nursing home care during the year
grew by only 2.5 percent from 1.57 million to 1.61 million beneficiaries.
By 1999, waivers for the elderly were serving 19 percent of all Medicaid
beneficiaries served either in a nursing home or through an HCBS waiver
for the elderly, an increase from 9 percent in 1992. 19 In two states,
Oregon and Washington, more elderly and disabled Medicaid beneficiaries
were served in HCBS waivers in 1999 than were served in nursing homes.
Appendix IV includes the number of Medicaid beneficiaries served by HCBS
waivers for the elderly and in nursing homes in each state.

In 1999, the average per beneficiary expenditure in HCBS waivers serving
the elderly was $5,567, an increase from $3,622 in 1992. 20 However, the
average per beneficiary expenditure for such waivers varied widely across

states, reflecting differences in the type, number, and amount of services
provided under waivers in different states. As shown in table 1, among
those states with waivers serving the elderly in 1999, per beneficiary
expenditures ranged from an average of $15,065 in Hawaii to $1,208 in

18 Waiver beneficiary and expenditure data used in this analysis do not
cover the same time periods. Waiver expenditure data are available through
2001. Data on waiver beneficiaries and services are available only through
1999. A CMS contractor recently developed a database for HCBS waivers. It
is scheduled for installation at CMS in 2003, and it will

include waiver beneficiary, service, and expenditure data from annual
state reports. 19 The shift from institutional care to home and community-
based services under Medicaid has been most significant for persons with
mental retardation or developmental disabilities. In 1992, 28 percent of
such beneficiaries who qualified for institutional care were served under
HCBS waivers, and by 1999, that proportion had grown to 68 percent.

20 These average expenditures do not include expenditures for nonwaiver
Medicaid services for these beneficiaries. In addition to waiver services,
waiver beneficiaries are eligible for the full range of regular Medicaid
state plan services. The overall cost to Medicaid for waiver beneficiaries
will be higher than the amounts reported here, which only include those
services provided under the waiver. In addition, Medicaid covers the cost
of room and board for beneficiaries in nursing homes and other
institutions, a benefit not generally

covered for those receiving services under the waiver.

Page 13 GAO- 03- 576 Medicaid Home and Community- Based Waivers

New York. In Hawaii, one such waiver that provided an average of 85 hours
of personal assistance services per month to 91 percent of beneficiaries
of that waiver had an average cost of $10,893 per beneficiary. A second
Hawaii waiver that provided adult foster care, residential care, or
assisted living for waiver beneficiaries had an average cost of $16, 958
per beneficiary. In contrast, New York*s waiver for the elderly did not

include personal care or residential services; the primary benefits
included social work services, personal emergency response systems, and
homedelivered meals. Appendix V provides summary information on states*
HCBS waivers for the elderly, including per beneficiary expenditures.

Table 1: States with Highest and Lowest per Beneficiary Expenditures for
State HCBS Waivers Serving the Elderly, 1999

State Average expenditures per beneficiary Number of

beneficiaries

United States $5,567 377,083

States with highest per beneficiary waiver spending Hawaii 15,065 923 New
Mexico 14,151 1, 404 North Carolina 13,778 11,159 Alaska 12,015 712 West
Virginia 11,213 3, 470

States with lowest per beneficiary waiver spending Michigan 2,632 6,328
Iowa 2,517 3,994 Missouri 2,224 20,821 Massachusetts 1,919 5,132 New York
1,208 19,732

Source: CMS. Notes: GAO analysis of annual state waiver report data (HCFA
Form 372) as reported by Charlene Harrington in Medicaid 1915( c) Home and
Community- Based Waivers: Program Data, 1992- 1999 (San Francisco, Calif.:
University of California, San Francisco, August 2001).

All states in this table except Hawaii operated one waiver serving the
elderly in 1999. Hawaii operated two waivers, one that served 288
beneficiaries at a cost of $10,893 per beneficiary and a second that
served 635 beneficiaries at a cost of $16,958 per beneficiary.

Page 14 GAO- 03- 576 Medicaid Home and Community- Based Waivers

No comprehensive nationwide data are available on states* quality
assurance systems for or the quality of care provided through HCBS
waivers, including those serving the elderly. In the absence of detailed
federal requirements for HCBS quality assurance systems, states* waiver
applications and annual reports often contained little or no information
on the mechanisms used to ensure quality, raising a question as to whether
CMS had adequate information to approve or renew some waivers. More than
half of the waivers serving the elderly for which we were able to obtain a
CMS waiver oversight report, an annual state waiver report, or a

state audit report identified oversight weaknesses and quality- of- care
problems. Frequently cited quality- of- care problems included (1) failure
to provide authorized or necessary services, (2) inadequate assessment or

documentation of beneficiaries* care needs in the plan of care, and (3)
inadequate case management. We were unable to analyze over onethird of
waivers serving the elderly because they lacked a recent regional office
review, the annual state waiver report lacked the relevant

information, or they were too new to have annual state reports. Although
the state waiver applications and annual waiver reports we reviewed for
waivers serving the elderly identified more than a dozen quality assurance
approaches, many contained little or no information about how states
ensure quality. 21 For example, 11 applications for the 15 largest waivers
serving the elderly identified three or fewer quality assurance mechanisms
and none of these 11 waivers mentioned important approaches, including
complaint systems or sanctions. Eighteen of 52 state annual waiver reports
that we reviewed contained no information on the mechanisms used to help
ensure quality. Moreover, when waiver applications and annual waiver
reports did contain some information, the information was often
incomplete. Our work in South Carolina, Texas, and Washington identified
additional quality assurance mechanisms that were not listed in their
waiver applications or annual reports, suggesting that such documents may
understate the nature and extent of their oversight

21 CMS uses the waiver applications, in part, to assess whether the
proposed quality assurance mechanisms are sufficient to warrant waiver
approval. HCFA Form 372, referred to in this report as the annual state
waiver report, is a key source of information on how

states have ensured quality until states renew their waivers. In addition
to service use and spending data, the annual state waiver report includes
information about the state*s process for monitoring waiver standards and
safeguards and the findings of those monitoring processes* specifically,
any deficiencies that were detected during the period covered by the
report. Information on State Quality Assurance

Approaches for Waivers Serving the Elderly Is Limited, but Quality
Concerns Have Been Identified

States Use a Variety of Waiver Quality Assurance Approaches in Waivers
Serving the Elderly, Yet Some States Provide Limited or Incomplete
Information to CMS

Page 15 GAO- 03- 576 Medicaid Home and Community- Based Waivers

approaches. As a result, CMS*s understanding of how these states ensure
quality in the waivers may be incomplete.

Information provided to CMS in state waiver applications and annual
reports identified a variety of mechanisms used to protect the health and
welfare of beneficiaries in waivers serving the elderly. Table 2 describes
14

quality assurance approaches that states reported using in HCBS waivers
for the elderly. Some of these approaches focus on the waiver beneficiary,
such as case management or beneficiary satisfaction surveys. Other

approaches are focused on providers, including licensure and inspections,
corrective action plans, sanctions, and program manuals. States may
require that certain providers be licensed or certified or meet other
requirements contained in state laws or regulations. Such providers are
generally subject to periodic inspections that may include a review of
beneficiary records to determine whether the records meet program
standards. A third set of quality assurance approaches focuses on waiver

program operations, including internal or external evaluations of the
waiver program, supervisory reviews of waiver beneficiary assessments and
plans of care, and audits or reviews of case management agencies.

Table 2: Quality Assurance Mechanisms States Reported Using in HCBS
Waivers Serving the Elderly

Quality assurance mechanism Description Beneficiary- oriented mechanisms

Case management Case management includes assessing the beneficiary*s
needs, developing the plan of care, arranging for the delivery of
services, monitoring the beneficiary, and conducting periodic
reassessments of the beneficiary*s needs and modifying the plan of care as
needed. Beneficiary satisfaction surveys or interviews A survey instrument
or other tool is used to

measure waiver beneficiaries* views about their waiver services and the
extent to which services are meeting their long- term care needs. On- site
visits of beneficiaries On- site visits may be conducted by program
officials other than the beneficiary*s case

manager to observe services being provided and gather information about
the care provided. Complaint systems Systems to accept, investigate, and
track the

status of waiver beneficiaries* or others* complaints regarding the waiver
program.

Provider- oriented mechanisms Licensure, certification, or other state
standards States require that certain providers be licensed, certified, or
meet other requirements

contained in state law or regulation. Providers are generally subject to
periodic inspections that

States Use a Variety of Quality Assurance Mechanisms

Page 16 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Quality assurance mechanism Description

include a review of beneficiary records to determine if they meet program
standards. Provider or direct care staff reviews or audits State program
officials conduct reviews of

waiver providers or individual caregivers to determine whether waiver-
specific requirements were met. Such reviews involve reviews of
beneficiary records and other provider documentation as well as individual
beneficiary interviews. Corrective action plans List of actions that the
provider agrees to take to

return to compliance with federal or state standards. Sanctions and
penalties Depending on the severity of the violation,

actions available to penalize the provider for not complying with federal
or state standards. Training and technical assistance Ongoing, continuing
education for case

managers and waiver providers to ensure competency in delivering and
monitoring the care of waiver beneficiaries. Program manuals Distribution
of rules, policies, procedures, or

standards to waiver providers.

Program- oriented mechanisms Case management agency review or audit
Reviews of agencies responsible for case management of the HCBS waiver,
including a review of a sample of case managers* records

to ensure timeliness and completeness. Supervisory review of beneficiary
assessments or plans of care Review conducted by case managers*

supervisors or at the state level of documents related to waiver
beneficiaries* assessed needs and identified services. Analysis of
automated waiver program data Review or monitoring of electronic version
of

client data, such as assessments, reassessments, and care plans. Internal
or external evaluation of waiver program Program review of the procedures
for waiver beneficiary assessments, development of plans

of care, and delivery of waiver services; review may be conducted by state
agency officials or by contractor. Source: CMS. Note: GAO analysis of the
most recent waiver application for the 15 largest HCBS waivers serving the
elderly and the most recent annual state reports for 52 waivers serving
the elderly submitted to CMS regional offices as of July 2002.

Because CMS has not provided detailed guidance to states on federal
requirements for HCBS quality assurance systems, the waiver applications
and annual reports submitted by states to CMS for waivers serving the

elderly often contained little or no information on state mechanisms for
ensuring quality, raising a question as to whether CMS had adequate
information to approve or renew some waivers. States Provide CMS Limited

Information about Their Quality Assurance Approaches

Page 17 GAO- 03- 576 Medicaid Home and Community- Based Waivers

 Waiver applications. Our review of the most current waiver applications
for the 15 largest waivers serving the elderly found that many states
provided CMS limited information about how they plan to protect the health
and welfare of beneficiaries. 22 Eleven of the 15 states cited three or
fewer quality assurance mechanisms. For example, New York*s application
only contained information about the state licensure and certification
requirements for its waiver services. None of these 11 applications
included well- recognized quality assurance tools such as complaint
systems, corrective action plans, sanctions, or beneficiary satisfaction
surveys. The remaining 4 states each identified six to eight quality
assurance approaches, including at least one of these four important
tools. As shown in table 3, the two mechanisms most frequently cited by
states were (1) licensure for some HCBS waiver providers, such as home
health agencies and residential care providers, and (2) case management.

Table 3: Quality Assurance Mechanisms Frequently Cited in Waiver
Applications and Current Annual State Reports for HCBS Waivers Serving the
Elderly

Quality assurance mechanism Waiver application:

number of states citing mechanism (n= 15

largest state waivers for the elderly)

Annual state report: number of states citing

mechanism a (n= 40 states) Case management agency reviews or

audits 8 30 Waiver provider or direct- care staff reviews or audits 1 24
Licensure, certification, or other state standards 15 22 Waiver
beneficiary satisfaction surveys or interviews 2 21 Case management 12 20
Training and technical assistance 0 20 On- site visits of waiver
beneficiaries 1 16 Complaint systems 1 13 Supervisory review of waiver
beneficiary assessments or plans of care 7 11 Corrective action plans 2 9
Sanctions and penalties 1 7

22 We reviewed waiver applications for the 15 largest state waivers for
the elderly based on the number of beneficiaries. These waivers were from
the following states: Colorado, Florida, Georgia, Illinois, Kentucky,
Missouri, New York, North Carolina, Ohio, Oregon, South Carolina, Texas,
Virginia, Washington, and Wisconsin. In 1999, these waivers ranged in size
from 10, 514 beneficiaries in Virginia to 27,978 beneficiaries in Texas.

Page 18 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Quality assurance mechanism Waiver application:

number of states citing mechanism (n= 15

largest state waivers for the elderly)

Annual state report: number of states citing

mechanism a (n= 40 states) Analysis of automated waiver program

data 1 4 Internal or external evaluations of waiver program 0 4 Waiver
program manuals 0 4

Source: CMS. Note: GAO analysis of the most recent waiver application for
the 15 largest HCBS waivers serving the elderly and the most recent annual
state reports for 52 waivers serving the elderly submitted to CMS regional
offices as of July 2002. a We reviewed 70 annual state waiver reports from
49 states and the District of Columbia. Fifty- two of

these annual reports from 40 states contained some information about
states* monitoring processes for HCBS waivers serving the elderly. States
may have more than one HCBS waiver serving the elderly.

 Annual waiver reports. Compared to waiver applications, annual state
waiver reports identified more quality assurance mechanisms for waivers
serving the elderly. The quality assurance mechanisms states* annual
reports cited most frequently included (1) audits of case management
agencies, (2) reviews of provider or direct- care staff, (3) licensure and
certification of providers, (4) beneficiary satisfaction surveys or
interviews, (5) case management, and (6) training and technical

assistance. As shown in table 3, these six mechanisms were mentioned by at
least half of the 40 states that provided such information. 23 However, as
was the case with most of the 15 waiver applications we reviewed,
complaint systems, corrective action plans, and sanctions were identified
less frequently. For example, only 13 of the 40 states identified
complaint

systems for waivers serving elderly beneficiaries as a monitoring tool in
their annual waiver reports. 24 Responding to beneficiary complaints is a
key element in protecting vulnerable nursing home residents and home

23 As of June 2002, there were 77 waivers serving the elderly. However,
our analysis includes 2 additional waivers for the elderly that had been
terminated or not renewed as of that date because the states were able to
provide us with their most recent annual report.

24 Only 1 of the 15 waiver applications we reviewed indicated that the
state had a complaint system for the providers under its waiver. For a
discussion of the role of complaint systems, see U. S. General Accounting
Office, Nursing Homes: Sustained Efforts Are Essential to Realize
Potential of the Quality Initiatives, GAO/ HEHS- 00- 197 (Washington, D.
C.: Sept. 28, 2000) and U. S. General Accounting Office, Medicare Home
Health Agencies: Weaknesses in Federal and State Oversight Mask Potential
Quality Issues, GAO- 02- 382 (Washington, D. C.: July 19, 2002).

Page 19 GAO- 03- 576 Medicaid Home and Community- Based Waivers

health beneficiaries. Moreover, 18 of the elderly waiver reports (26
percent) from 12 states did not include a description of the process for
monitoring the standards and safeguards under the waiver, as required on
the reporting form.

State officials in South Carolina, Texas, and Washington informed us they
use a wider range of quality assurance mechanisms in their waiver programs
than were described in either their waiver application or their annual
state waiver report. Officials in Washington informed us they use 12 of
the 14 mechanisms identified in table 3, yet they included only 2 of these
on their application and 3 in their most recent annual report. For
example, Washington operates a complaint system for waiver providers but
did not refer to this approach in its waiver application or annual report.
On the other hand, only Washington included reviews or audits of case
managers or case management agencies in its application or annual report,
yet all three states provided information on their use of this quality

assurance tool during our interviews. States* formal reports to CMS on
their quality assurance mechanisms may therefore understate the nature and
extent of their oversight approaches.

Although information on the quality of care provided in the 79 waiver
programs serving the elderly is limited, state oversight problems were
identified by CMS regional offices or states in 15 of 23 waivers and
qualityof- care problems in 36 of 51waivers that we were able to examine.
25 We were unable to analyze findings related to 28 waivers serving the
elderly for various reasons: they lacked a current regional office review
or a

waiver review report was never finalized, 26 the annual state waiver
report lacked the relevant information, or the waivers were too new to
have an annual state report. Because of incomplete information and the
absence of

25 Our analysis of state oversight issues is based on 23 discrete waivers
that had either a regional office review or a state audit. State auditors
are responsible for reviewing state programs and may include Medicaid HCBS
waiver programs as a part of these audits. Annual state waiver reports do
not address state oversight weaknesses. Our analysis of quality- of- care
issues is based on 51 discrete waivers that had either a regional office
review or an annual state report. As of June 2002, there were 77 waivers
serving the elderly. However, our analysis of state oversight and quality-
of- care problems included 2 additional

waivers for the elderly that had been terminated or not renewed as of that
date because they had had a regional office review during the October 1998
through May 2002 time period we examined. 26 Regional office review
reports that did not have a final report were not included in our
analysis. State Oversight and

Quality Issues in Waivers Serving the Elderly Have Been Identified by CMS
Regional Offices and States

Page 20 GAO- 03- 576 Medicaid Home and Community- Based Waivers

current reviews for many of the active waivers, the extent of quality-
ofcare problems is unknown.

CMS regional office reviews or state audits identified weaknesses in state
oversight for waivers serving the elderly in 15 of the 23 waivers we
examined. In some cases, the waiver programs did not have essential
oversight systems or processes in place. For example, in the case of a
Virginia assisted living waiver that had over 1,250 beneficiaries, the
Philadelphia regional office found several state oversight problems,
including (1) no system in place to track the completion of the required
annual resident assessments, (2) insufficient monitoring to ensure that
beneficiaries were cared for in settings able to meet their needs, (3)
insufficient monitoring to ensure that state standards were met for basic
facility safety and hygiene, and (4) failure to inspect medication
administration records sufficiently to ensure that medication was being
dispensed safely and by qualified staff. The regional office identified
serious lapses in Virginia*s oversight of the waiver and the protection of
beneficiaries, resulting in both medical and physical neglect of waiver
beneficiaries. On the basis of the regional office review findings, HCFA
allowed the waiver to expire in March 2000. In other cases, states may
have had an oversight system or process in place, but they were determined
to be inadequate. Five state audit agency reports we reviewed

identified inadequate monitoring systems in state waiver programs. For
example, Connecticut had a policy in place for monitoring and evaluating
its HCBS waiver program, but, from January 2000 through March 2001 it
conducted no quality assurance reviews of the agencies it contracted with
to coordinate and manage services for waiver beneficiaries.

CMS regional office reviews and states* annual waiver reports identified
quality- of- care related problems in 36 of 51 HCBS waiver programs for
the elderly that we were able to examine. Specifically, they found
weaknesses in the delivery of key elements of home and community- based
services that could affect waiver beneficiaries* health and welfare (see
table 4). Typically, the reports did not provide sufficient detail to
demonstrate the impact of these weaknesses on waiver beneficiaries.
Consequently, few, if any, specific cases of beneficiary harm were
identified. State Oversight Weaknesses

Quality- of- Care Related Problems

Page 21 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Table 4: Frequently Cited Quality- of- Care Problems Identified by CMS
Regional Offices or States in HCBS Waivers Serving the Elderly

Problem area Example Number of 51

waivers in which problem was identified

Provision of authorized or necessary services Beneficiary not receiving
services identified as being needed. 20 Plan of care Beneficiary*s care
needs not addressed in plan of care. 20 Case management Case manager for
HCBS waiver program not providing ongoing

assessment and monitoring of waiver beneficiaries or inadequate follow- up
of changes in beneficiaries* care needs.

20 Staffing Insufficient number of staff to provide adequate care or staff
not

having appropriate credentials or training to provide care. 12 Assessment
Beneficiary*s needs not assessed or reassessment not

completed in a timely manner. 11 Documentation of service delivery
Incomplete record of waiver services provided to beneficiary. 8 Training
Case managers identified as needing additional training on

Medicaid eligibility. 8 Quality assurance or quality of care HCBS waiver
program lacked a formal quality assurance

system; poor quality of care or services were identified. 7 Medication
Unable to document that facilities providing care to waiver

beneficiaries dispensed medication safely and by qualified staff. 4
Source: CMS.

Notes: GAO analysis of CMS regional office final waiver review reports for
HCBS waivers serving the elderly issued from October 1998 to May 2002 and
the most recent annual state waiver reports for 51 waivers serving the
elderly.

Fifteen waivers serving the elderly had no problems identified in their
regional office reviews or annual state reports; the remaining 36 waivers
had problems related to quality of care. When both the CMS regional office
and the state identified a waiver as having the same type of problem, we
counted that problem only once.

The most frequently identified quality- of- care problems in waivers
serving the elderly involved failure to provide authorized or necessary
services, inadequate assessment or documentation of beneficiaries* care
needs in the plan of care, and inadequate case management.

 Provision of authorized or necessary services. Identified problems
included (1) services identified in plans of care not rendered, (2)
inadequate nutrition provided to waiver beneficiaries, and

(3) discontinuation of services without adequate notice to beneficiaries.
For example, CMS*s Dallas regional office found that significant numbers
of Oklahoma waiver beneficiaries did not receive personal care services
from their direct- care provider* 4,303 beneficiaries (27 percent)
received none of their authorized personal care services and 7,773
beneficiaries (49

percent) received only half of their authorized services. While the
consequences for beneficiaries were not identified in this review, failure
to

Page 22 GAO- 03- 576 Medicaid Home and Community- Based Waivers

provide authorized needed services may result in harm and could affect the
continued ability of beneficiaries to be cared for at home.  Plan of
care. Issues included plans of care that (1) insufficiently addressed

the needs of waiver beneficiaries, (2) were not completed or updated
appropriately, and (3) were missing from beneficiaries* files. In the
review of one of the Florida waivers, CMS*s Atlanta regional office staff
found several instances where needs identified through individual
assessments, including significant changes in waiver beneficiaries*
conditions, were not addressed in the plan of care, a situation that could
lead to beneficiaries not receiving the necessary services. Without an
appropriate plan of care to direct the type and amount of services to be
delivered, the waiver beneficiary may not receive an adequate level of
care.  Case management. Examples of case management problems included
case

managers who (1) were unaware of beneficiaries having lapses in delivery
of care, (2) were not always aware of procedures or protocols for
reporting abuse, neglect, or exploitation, (3) failed to complete resident
assessments* service plans were either incomplete or inappropriate, and
updates to plans of care were late, or (4) did not always appear to have a
clear understanding of service definitions or requirements of the waiver
or Medicaid program.

CMS has not developed detailed guidance for states on appropriate quality
assurance approaches as part of the initial waiver approval process.
Moreover, although CMS oversight has identified some quality problems, it
does not adequately monitor HCBS waiver programs or the quality of care
provided to waiver beneficiaries for waivers serving the elderly as well
as those serving other target populations. 27 CMS does not hold its
regional offices accountable for conducting and documenting periodic
waiver reviews, nor does CMS hold states accountable for submitting annual
reports on the status of quality in their waivers. As of June 2002, about
one- fifth of the 228 waivers in place for 3 years or more had either
never been reviewed or were renewed without a review. 28 We found that the
reviews varied considerably in the number of beneficiary records

27 Because CMS regional offices have responsibility for oversight of all
HCBS waivers, including those serving the elderly, our analysis included
all HCBS waivers as of June 2002. 28 As of June 2002, CMS regional offices
had oversight responsibility for 263 HCBS waivers. These waivers included
other population groups as well as those serving the elderly. Of this
total, 228 had been in place for 3 years or more and should have had a
regional office review; 70 of these 228 waivers served the elderly. Nine
waivers serving the elderly had not been in place for 3 years or more and
therefore were not included in this analysis. CMS Guidance to

States and Oversight Of HCBS Waivers Are Inadequate to Ensure Quality Care

Page 23 GAO- 03- 576 Medicaid Home and Community- Based Waivers

examined and the method of determining the sample, potentially limiting
the generalizability of findings. According to CMS regional office staff,
the allocation of staff resources and travel funding levels have at times
impeded the scope and timing of their reviews. In addition, some regional
office staff told us that limited travel funds have resulted in the
substitution of more limited desk reviews for on- site visits and in the
conduct of reviews with one staff member when two would have been
preferable.

CMS has a number of initiatives under way to generate information and
dialogue on quality assurance approaches, but the agency*s initiatives
stop short of (1) requiring states to submit detailed information on their
quality

assurance approaches when applying for a waiver or (2) stipulating the
necessary components for an acceptable quality assurance system. CMS
recognizes that insufficient attention has been given to the various
mechanisms that states could and should use to monitor quality in their
waiver programs. As described in appendix VI, the initiatives CMS has
under way include identification of strategies that states are currently
using to monitor and improve quality in home and community- based care,
distribution of a guide on quality improvement and assessment mechanisms
for states and regional offices, and provision of a variety of technical
assistance and resources to states. The agency also has implemented a new
HCBS waiver quality review protocol for use by regional offices in
assessing whether state waivers should be renewed. 29 Regional office
staff told us that some states have begun to modify their

approaches to quality assurance in HCBS waivers based on the use of the
new waiver review protocol. For example, Washington officials established
a new quality assurance unit within the agency that oversees its waiver
for the elderly. In May 2002, CMS also introduced a voluntary application
template for its new consumer- directed HCBS waiver that asks for a
detailed description of states* quality assurance and improvement

programs, including (1) the frequency of quality assurance activities, (2)
the dimensions monitored, (3) the qualifications of quality assurance
staff, (4) the process for identifying problems, including sampling

29 This protocol was developed to provide a standardized and comprehensive
set of procedures for regional office staff to follow when conducting
periodic waiver reviews. See Department of Health and Human Services,
HCFA, HCFA Regional Office Protocol for Conducting Full Reviews of State
Medicaid Home and Community- Based Services Waiver Programs (Washington,
D. C.: Department of Health and Human Services, Dec. 20, 2000). CMS Lacks
Detailed

Guidance for States on the Necessary Components of a Quality Assurance
System

Page 24 GAO- 03- 576 Medicaid Home and Community- Based Waivers

methodologies, (5) provisions for addressing problems in a timely manner,
and (6) the system for handling critical incidents or events. While these
CMS activities are intended to facilitate the development of HCBS- related
quality assurance approaches, they do not constitute a consistent set of
minimum requirements and guidance for states* use to obtain approval for
their HCBS programs.

In addition to the lack of detailed guidance for states, CMS is not
holding its own regional offices or states accountable for oversight of
the quality of care provided to individuals served under HCBS waivers. CMS
regional offices are expected to conduct periodic waiver reviews to
determine whether states are protecting the health and welfare of waiver
beneficiaries. Annual state reports are required by statute, and CMS
regulations indicate that they are intended to play a key role in
determining whether a waiver should be renewed. 30 We found that regional
offices are neither conducting waiver reviews prior to renewal nor

obtaining complete annual state reports in a timely manner. As a result,
CMS has not fully complied with the statutory and regulatory requirements
that condition the renewal of HCBS waivers on states fulfilling their
assurances that necessary safeguards are in place to protect the health
and welfare of waiver beneficiaries.

Most CMS regional offices have not conducted timely reviews of the state
agencies administering waivers serving the elderly and other target
populations or completed reports to document the results of their reviews.
Periodic on- site reviews are used to determine, among other things,
whether a state is ensuring the health and welfare of waiver
beneficiaries. Guidance from CMS headquarters instructs the regional
offices to conduct reviews before the first renewal of a waiver at the end
of 3 years and within 5 years for subsequent waiver renewals.

Eighteen percent of all HCBS waivers (42 of 228) that have been in place
for 3 years or more as of June 2002 either have never been reviewed by the
regional offices or had not been reviewed prior to their last waiver

renewal. Approximately 132,000 beneficiaries were served by these 42
waivers in 1999. Fourteen of the 42 waivers* serving approximately 37,000
waiver beneficiaries in 1999* have had 10 or more years elapse without a
regional office review (see table 5). CMS*s Dallas regional office was

30 See, 50 Fed. Reg. 10013, 10016- 17 (1985). CMS Is Not Holding

Regional Offices or States Accountable for Oversight of HCBS Waiver
Quality

CMS Regional Offices Often Are Not Conducting Timely Reviews of State HCBS
Waivers

Page 25 GAO- 03- 576 Medicaid Home and Community- Based Waivers

responsible for 9 of these 14 waivers. Over a 10- year period, a regional
office should have conducted at least two reviews for each waiver. The New
Mexico AIDS Waiver, initially approved in June 1987, has been in place the
longest without ever being reviewed* 15 years. CMS officials were aware
that regional offices had not reviewed some waivers but were unaware of
the extent of the problem.

Table 5: HCBS Waivers That Had 10 Years or More Elapse without Ever Having
a Regional Office Review or without a Review Prior to the Last Waiver
Renewal, as of June 2002

State Target population Number of

waiver beneficiaries a Number of

years without a CMS regional

office review No regional office waiver review ever conducted Dallas
regional office

New Mexico Persons with AIDS 60 15 Oklahoma Persons with mental
retardation 2,550 b 14 Texas Medically dependent children 895 b 14
Louisiana Elderly and persons with disabilities 393 12 New Mexico
Medically fragile children 152 11 Texas Persons with mental retardation
and

related conditions 1,047 11 Texas Persons with mental retardation 4,956 b
10 Texas Persons with mental retardation 224 b 10 Louisiana Elderly and
persons with disabilities 113 10

Seattle regional office

Idaho Elderly and persons with disabilities 1,000 12 Idaho Persons with
mental retardation and

developmental disabilities 512 12

No regional office waiver review conducted prior to last waiver renewal
Kansas City regional office

Iowa Elderly 3,994 11 Missouri Elderly 20,821 10

San Francisco regional office

Hawaii Persons with AIDS 66 12 Source: CMS.

Note: GAO analysis of data provided by CMS, June 2002. a The number of
HCBS waiver beneficiaries is based on 1999 HCFA Form 372 data. See
Harrington, Aug. 2001.

b Author*s estimate. See Harrington, Aug. 2001.

Page 26 GAO- 03- 576 Medicaid Home and Community- Based Waivers

As of June 2002, based on an analysis of the most recent regional office
review that occurred prior to October 2001 for each of the waivers, we
found that 23 percent of the review reports (36 of 158) in over half of
the regional offices had not been finalized. 31 CMS requires its regional
offices to prepare a final report on each HCBS review to document their
findings, recommendations, and the state response. Without such a final
report, there is no formal document to indicate whether a state has
fulfilled the required assurances, including those related to the health
and welfare of waiver beneficiaries. The New York regional office did not
finalize 11 of its 12 reviews, dating back to 1998, and the San Francisco
regional office did not finalize 7 of its 13 reviews, 1 of which was for a
review that occurred in 1990. Without a final report documenting the
review results, CMS cannot be assured that, if problems were identified,
they were appropriately addressed.

Many state annual waiver reports submitted to CMS regional offices are
neither timely nor complete. During the interval between regional office
reviews, the required annual state waiver reports provide key information
on how states monitor beneficiaries* quality of care and on any quality-
ofcare related problems. According to regional office officials, states
routinely fail to submit these annual reports within the required time
frame* within 6 months after the period covered. In August 2000, officials
in CMS*s Philadelphia regional office reported that they had current

annual state reports for less than half (11 of 28) of the waiver programs
in their region. Our review of the most recent annual state reports for 70
of 79 HCBS waivers serving the elderly confirmed that producing these
reports remains a problem: (1) reports for more than a third of the
waivers were at least 1 year late* the most recent report from one of
Louisiana*s HCBS waivers was for calendar year 1997, (2) reports for
approximately one- fourth of the waivers provided no information on
whether deficiencies had been identified through the monitoring processes,
32 and (3) five reports indicated that deficiencies had been identified
but provided no

31 In our analysis, we included only those reviews that had taken place
prior to October 2001, allowing 9 months from the time the regional office
conducted the waiver review to final report issuance* from October 2001 to
June 2002. CMS allows up to 4 months from the time the regional office
completes all waiver review activities to issuance of a final

report documenting the review findings. 32 As noted earlier, about one-
quarter of annual state reports for waivers serving the elderly did not
include information requested concerning the approaches used to monitor
quality assurance. CMS Does Not Obtain Timely

and Complete State Annual Waiver Reports

Page 27 GAO- 03- 576 Medicaid Home and Community- Based Waivers

additional information about the nature of or response to the problems. 33
CMS headquarters has no central repository for annual state reports but is
in the process of establishing a centralized database for state report
information sometime in 2003, a development that could facilitate ongoing
monitoring of the timeliness and completeness of these reports.

Our analysis of CMS*s oversight activities for the 15 largest HCBS waivers
serving the elderly demonstrates the extent of oversight weaknesses.
Overall, 8 of the 10 CMS regional offices provided inadequate oversight
for 13 of these 15 largest state waivers for the elderly, which, in 1999,
served about 215,000 beneficiaries* over half (57 percent) of the total
elderly

waiver beneficiary population at that time (see table 6). We found that 
Four of the 15 HCBS waivers were not reviewed in a timely manner by the

CMS regional office* none of the 4 had reviews for 8 or more years and yet
were renewed. 34  Four of the 15 waivers had no waiver review final
report completed by the

regional office. Two of the reviews occurred in 1999, and for the
remaining 2 waivers the regional office could not tell us the date of the
reviews or whether a final report was available.  Four of the 15 waivers
lacked a timely annual state report to the regional office. As of April
2002, the most recent annual report for these 4 waivers

was either for the waiver period ending August 1999 (1 waiver) or
September 2000 (3 waivers).  Seven of the 15 waivers had annual state
reports that were incomplete

because they either lacked information on their quality assurance
mechanisms or on whether deficiencies had been identified.

33 Eight of the remaining 9 waivers were new and had not yet had an annual
report submitted. The CMS Atlanta regional office did not provide a
current annual report for 1 waiver. As of June 2002, there were 77 waivers
serving the elderly. However, our analysis includes 2 additional waivers
for the elderly that had been terminated or not renewed as of that date
because the state was able to provide us with their most recent annual
report. 34 These 4 waivers are a subset of the 42 HCBS waivers in place
for 3 years or more that

either were never reviewed by the regional offices or were not reviewed
prior to their last renewal. Extent of Oversight Weaknesses Evident in 15

Largest Waivers Serving the Elderly

Page 28 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Table 6: Status of CMS and State Monitoring for the 15 Largest HCBS
Waivers Serving the Elderly State Number of waiver

beneficiaries a CMS waiver review not

timely or report not finalized

Annual state report not timely or documentation

insufficient b New York regional office New York 19,732 X X

Philadelphia regional office Virginia 10,514 X

Atlanta regional office South Carolina 14,361 X c X Georgia 14,018 X
Florida 13,762 X Kentucky 13,339 X North Carolina 11,159 X c X

Chicago regional office Ohio 26,135 Illinois 17,396 d X X Wisconsin 13,900
X Dallas regional office Texas 27,978 X X

Kansas City regional office Missouri 20,821 X Denver regional office
Colorado 11,481 X Seattle regional office Oregon 26,410 X Washington
25,718 Source: CMS.

Note: GAO analysis of data provided by CMS, June 2002 and the most recent
annual state waiver reports. The 15 largest HCBS waivers serving the
elderly are based on the number of beneficiaries. a The number of HCBS
waiver beneficiaries is based on 1999 HCFA Form 372 data. See Harrington,
Aug. 2001.

b The annual report is required by statute and CMS directs states to (1)
submit such reports within 6 months after the period covered, and (2)
include information on how the state implements, monitors, and enforces
its health and welfare standards and the waiver*s impact on the health and
welfare of beneficiaries. c The CMS regional office could not provide the
date that the last waiver review was conducted or

specify whether a report had been finalized.

d Author*s estimate. See Harrington, Aug, 2001.

Page 29 GAO- 03- 576 Medicaid Home and Community- Based Waivers

The limited scope and duration of periodic regional office waiver reviews
raise a question about the confidence that can be placed in findings about
the health and welfare of waiver beneficiaries. CMS regional offices
conduct reviews using guidance provided by headquarters. The guidance
instructs regional office staff to review beneficiary records; interview
waiver beneficiaries, primary direct- care staff of waiver providers, and
case managers; and observe waiver beneficiaries and the interaction
between the beneficiary and direct- care staff. This guidance was updated
in January 2001 when use of the new HCBS waiver quality review protocol
became mandatory. However, the new protocol does not address important
operational issues such as

 an adequate sample size or sampling methodology for the beneficiary
record reviews and interviews to provide a basis for generalizing the
review findings;  whether the sample should be stratified according to
the different groups

served under the waiver (i. e., for a waiver serving both the elderly and
the disabled, selecting a stratified sample based on the proportion of
persons aged 65 and over and those aged 18 to 64 with disabilities); and 
the appropriate duration of an on- site review, taking into consideration
the

number of sites and beneficiaries covered in the waiver. Our analysis of
regional office review reports for 21 HCBS waivers serving the elderly
found that the reviews varied considerably in the number of beneficiary
records evaluated and their method of determining the sample, potentially
limiting their ability to generalize findings from the sample to the
universe of waiver beneficiaries. 35 Specifically, we found a wide range
of sample sizes in 15 of the 21 regional office reviews that included such
information. The sample sizes for record reviews ranged from 14
beneficiaries (of 73 served) in the Boston regional office review of the
Vermont waiver to 100 beneficiaries (of 24,000 served) in the Seattle
regional office review of the Washington waiver. (See app. VII for a
summary of the sample sizes in the regional office reviews.) Eleven of the
15 CMS waiver review reports included information on the specific number
of beneficiaries interviewed or observed during the review; however, we
could not determine whether beneficiary interviews or observations had
been conducted in other waiver reviews. The method by which the
beneficiary record review samples were selected varied, with

35 We requested that regional offices provide us with final reports for
HCBS waivers serving the elderly issued from October 1998 to May 2002.
Eight of the 21 reviews we analyzed were completed after CMS*s new HCBS
waiver quality review protocol was implemented. Scope and Duration of
Regional Office Waiver

Reviews Are Limited

Page 30 GAO- 03- 576 Medicaid Home and Community- Based Waivers

some regional offices using randomized sampling methods, some basing their
sample on geographic location, and others reporting no method of sample
selection.

For most of these same 15 waivers serving the elderly, we found that the
regional staff typically spent 5 days conducting the waiver review*
regardless of the number of waiver beneficiary records sampled or the
overall size of the waiver. However, the Seattle regional office staff
conducted only three reviews in the past 4 years, targeting its largest
HCBS waivers. For example, the regional office has spent 3 to 4 weeks per
waiver for the on- site portion of the review and another week for state

agency interviews and review of documents. Generally, the number of
beneficiary records reviewed and beneficiaries interviewed is dependent on
(1) the number of days allocated to the waiver review by a regional office
and (2) the number of regional office staff members available.

The limited number of assigned staff and available clinical specialists,
coupled with insufficient travel funds allocated to regional office
oversight of HCBS waivers, have contributed to the timeliness and scope
problems we identified. According to regional offices, the level of
attention given to HCBS waiver oversight, including periodic reviews when
waivers come up

for renewal, is at the discretion of regional office management and
competes with other workload priorities. 36 In August 2000, some regional
office officials formally communicated to HCFA headquarters their

concern that the agency was not devoting sufficient resources to properly
monitor the quality of HCBS waiver programs. Regional office officials
responsible for waiver oversight told us that the number of staff
available for waiver oversight has not kept pace with the growth in the
number of waivers and beneficiaries served and that resource issues remain
a key challenge for waiver oversight.

36 Headquarters officials are responsible for establishing waiver policy
and the 10 regional offices have responsibility for waiver oversight. Both
headquarters and the regional offices answer separately to the
Administrator without any formal reporting links. In earlier work, we
reported that these organizational reporting lines complicated
coordination and communication, weakened oversight, and blurred
accountability when problems arose. See U. S. General Accounting Office,
Medicare Contractors: Further Improvement Needed in Headquarters and
Regional Office Oversight, GAO/ HEHS- 00- 46 (Washington, D. C.: Mar. 23,
2000) and U. S. General Accounting Office, Nursing Homes: Sustained
Efforts Are Essential to Realize Potential of the Quality Initiatives,
GAO/ HEHS- 00- 197 (Washington, D. C.: Sept. 28, 2000). Limited Regional
Office

Resources Available for Oversight of HCBS Waivers

Page 31 GAO- 03- 576 Medicaid Home and Community- Based Waivers

We found that CMS regional offices differed substantially in the number of
staff assigned to waiver oversight and the extent to which staff with
clinical or program expertise were assigned to waiver oversight. According
to Dallas, Denver, and Philadelphia regional office staff, the level of
resources allocated by the regional offices for such reviews dictated the
number of waiver beneficiary records reviewed or beneficiary interviews
conducted. Six of the 10 regional offices had two or fewer fulltime-

equivalent (FTE) staff assigned to monitoring HCBS waivers (see table 7).
37 Moreover, we found that the number of regional office staff assigned to
monitoring HCBS waivers bore little relationship to the waiver workload.
For example, the Chicago regional office had six FTE staff to monitor 34
HCBS waivers with 131,902 waiver beneficiaries, while the Dallas regional
office had one- and- a- half FTE staff for 28 HCBS waivers with 63,614
waiver beneficiaries. Until a few years ago, one person in the
Philadelphia regional office was assigned to oversee HCBS waivers* despite
growth in the number and size of the region*s HCBS waivers over the past
decade. 38 37 We asked the regional offices to distinguish between staff
assigned to HCBS waiver

oversight and staff who may be temporarily assigned, such as those
borrowed from another division for their specific expertise.

38 In 1992, the Philadelphia regional office was responsible for oversight
of 16 waivers serving approximately 17,000 waiver beneficiaries. By 1999,
the regional office had responsibility for 23 waivers serving over 48, 500
waiver beneficiaries. As of 2002, the regional office*s total number of
waivers had grown to 33. Since early 2000, this regional office has hired
or reassigned approximately three additional staff to focus on waiver
oversight.

Page 32 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Table 7: Number and Specialty of CMS Regional Office Staff Assigned to
Oversee HCBS Waivers CMS regional office

Number of HCBS waivers (number of waivers for the elderly )

Number of HCBS waiver beneficiaries a (number of elderly

waiver beneficiaries) Number of FTE

staff assigned to oversee waivers

Specialist staff assigned to

oversee waivers

Boston 26 (9) 45,390 (20,190) 1 No New York 15 (3) 69,390 (24,319) <2 b No
Philadelphia 33 (8) 48,537 (18,554) 4.1 No Atlanta 43 (15) 122,120
(78,669) <3. 5 b Yes c Chicago 34 (10) 131,902 (73,935) 6 No

Dallas 28 (9) 63,614 (47,454) 1.5 No Kansas City 23 (4) 59,253 (33,873)
1.4 Yes d Denver 29 (7) 32,866 (15,420) 4 Yes e San Francisco 15 (6)
51,068 (10,829) 2 No

Seattle 17 (6) 64,012 (53,840) .4 No Source: CMS.

Note: GAO analysis of data provided by CMS, June 2002. a The number of
HCBS waiver beneficiaries is based on 1999 HCFA form 372 data. See
Harrington,

Aug. 2001. b Staff are not working full- time on HCBS waivers.

c One qualified mental retardation professional and one qualified mental
health professional. d One individual who is both a registered nurse and a
qualified mental retardation professional. e One registered nurse and one
part- time qualified mental retardation professional.

As shown in table 7, 3 of the 10 regional offices had specialists assigned
to waiver oversight, such as registered nurses or qualified mental
retardation professionals. 39 When asked to identify one of the greatest
improvements that could be made in federal waiver oversight, 3 of the 10
regional offices identified the direct assignment of specialist staff.
CMS*s waiver review

protocol specifies that the participation of clinical and other specialist
staff is important to assessing issues related to beneficiaries* health
and welfare. However, many regional offices indicated that they had to

*borrow* specialist staff from other departments within the region in
order to conduct their waiver reviews. The Seattle and Boston regional
offices provide contrasting examples of the role played by regional office
management in obtaining clinical staff to conduct reviews. According to
Seattle regional office staff, it has been a challenge to obtain
specialist

39 Two of these three regions indicated that they had intentionally hired
someone with a clinical specialty for waiver reviews.

Page 33 GAO- 03- 576 Medicaid Home and Community- Based Waivers

staff on the waiver review teams. For 4 to 5 years, the region did not
conduct any HCBS waiver reviews. In the past 4 years, it has only
conducted three reviews* regardless of the number of waivers due for
review. The region has four waivers that have never been reviewed, two
dating back to 1989. According to the staff, the prior regional
administrator did not target resources for HCBS waiver reviews, and it

was difficult to obtain clinical and other specialist staff from other
departments to assist in conducting reviews. Although it has no specialist
staff assigned to waivers, Boston regional office officials informed us
that

conducting HCBS waiver reviews has been a management priority, as
evidenced by the fact that the region always includes a registered nurse
or other relevant specialist on the review team. We noted that the Boston

regional office has conducted timely reviews of all of its waivers. When
asked to identify the greatest challenges related to HCBS waiver
oversight, 4 of the 10 CMS regional offices identified insufficient travel
funding. Regional office staff indicated that there appears to be no
correlation between the amount of travel dollars made available by the
regional offices for the reviews and the review schedule set forth by CMS
headquarters. Moreover, they told us that they had to compete for limited
travel resources with the regional office staff responsible for overseeing
nursing homes. Regional office responses to inadequate travel funds have
included (1) conducting a *desk review* without visiting state agency
officials, providers, and waiver beneficiaries, (2) limiting the number of
days allotted for the review, (3) reducing the number of staff assigned to
conduct the review, or (4) not reviewing a particular waiver at all. In
the

New York regional office, a lack of travel funds led to desk reviews for 9
of 15 waivers. According to the Philadelphia regional office*s final
report for a Virginia HCBS waiver, some cases that should have been
pursued were not reviewed because only 1 week had been allotted for
fieldwork, and 2 of the 18 cases selected for field review were dropped
because there was insufficient time to conduct the review. In 2001, the
Chicago regional office conducted a limited on- site review of a Michigan
HCBS waiver serving over 6,000 beneficiaries. During the review, three
case files were examined and one beneficiary was interviewed. According to
Denver regional office officials, travel budget problems have meant that
the reviews are conducted by one staff member when two would be
preferable.

Page 34 GAO- 03- 576 Medicaid Home and Community- Based Waivers

HCBS waivers give states considerable flexibility to establish customized
programs offering long- term care services for specific populations, such
as elderly persons, persons with mental retardation, or children with
special needs. While maintaining this flexibility is important,
insufficient emphasis has been placed on balancing flexibility with
measures to ensure accountability. At present, states may obtain a waiver
serving the elderly with a limited explanation of how they plan to monitor
quality, and CMS has not held states accountable for submitting complete
and timely annual waiver reports detailing their quality assurance
activities. Moreover, CMS has not fully complied with the statutory and
regulatory requirements that condition the renewal of HCBS waivers on
whether the state has fulfilled its assurances that necessary safeguards
are in place to protect the health and welfare of waiver beneficiaries.
The current size and likely future

growth in HCBS waiver programs that serve a vulnerable population*
particularly elderly individuals eligible for nursing home placement* make
it even more essential for states to have appropriate mechanisms in place
to monitor the quality of care.

While CMS requires periodic reviews of state waiver programs to help
ensure that beneficiaries* health and welfare are adequately protected,
many have been renewed without such a review. In addition, guidance on how
these waiver reviews should be conducted does not address important
operational issues such as sample size and sampling methodology.
Consequently, there is little relationship among the amount of time spent
on- site conducting waiver reviews, the number of beneficiary records
reviewed, and the number of beneficiaries served. CMS expects its regional
offices to interview and observe waiver beneficiaries to obtain a first-
hand perspective on care delivery and the adequacy of case

management, but beneficiary interviews are not a component of all regional
office reviews. Moreover, staff resources and travel funds currently
allocated to conduct waiver reviews are insufficient. Without necessary
attention from CMS, these guidance and resource issues will only be
exacerbated by the expected future growth in the number of persons served
through HCBS waiver programs. CMS has a number of initiatives directed
towards improving quality and quality assurance for home and community-
based waiver programs. They do not, however, address the specific
oversight weaknesses we have identified in this report, such as the lack
of detailed criteria or guidance for states regarding the necessary
components of a quality assurance system to help ensure

the health and welfare of waiver beneficiaries. Conclusions

Page 35 GAO- 03- 576 Medicaid Home and Community- Based Waivers

To ensure that state quality assurance efforts are adequate to protect the
health and welfare of HCBS waiver beneficiaries, we recommend that the
Administrator of CMS

 develop and provide states with more detailed criteria regarding the
necessary components of an HCBS waiver quality assurance system,  require
states to submit more specific information about their quality

assurance approaches prior to waiver approval, and  ensure that states
provide sufficient and timely information in their annual

waiver reports on their efforts to monitor quality. To strengthen federal
oversight of the growing HCBS waiver programs and to ensure the health and
welfare of HCBS waiver beneficiaries, we recommend that the Administrator

 ensure allocation of sufficient resources and hold regional offices
accountable for conducting thorough and timely reviews of the status of
quality in HCBS waiver programs, and  develop guidance on the scope and
methodology for federal reviews of

state waiver programs, including a sampling methodology that provides
confidence in the generalizability of the review results.

We provided a draft of this report to CMS and South Carolina, Texas, and
Washington, the three states in which we obtained a more in- depth
perspective on states* quality assurance approaches. (CMS*s comments are
reproduced in app. VIII.) CMS affirmed its commitment to its ongoing
responsibility, in partnership with the states, to ensure and improve
quality in HCBS waivers. The agency stated that the federal focus should
be on assisting states in the design of HCBS programs, respecting the
assurances made by states, improving the ability of states to remedy
identified problems, providing assistance to states to improve the quality
of services, and thereby assisting people to live in their own homes in
communities of their choice. CMS generally concurred with our
recommendations to improve state and federal accountability for quality
assurance in HCBS waivers but raised concerns about our definition of
quality, how best to ensure quality in state waiver programs, the
appropriate state and federal oversight roles, and the resources and
guidance required to carry out federal quality oversight. Recommendations
for

Executive Action Agency and State Comments and Our Evaluation

Page 36 GAO- 03- 576 Medicaid Home and Community- Based Waivers

CMS stated that the draft report*s definition of quality in waivers was
too narrow because it ignored a wide variety of activities used to promote
quality. Furthermore, CMS cited the availability of a broad array of
waiver services with choice over how, where, and by whom services are
delivered as important to beneficiaries* quality of life. According to
CMS, growth in the number of persons served by HCBS waivers was evidence
of beneficiary satisfaction. (See CMS*s *General Comments,* 2 and 3.)

Rather than defining quality ourselves, we reported the approaches states
used to assure quality in their waiver programs. By analyzing state
applications for waivers serving the elderly and state annual waiver
reports, we identified a broad array of state quality assurance
activities, including licensing and certification of providers and
beneficiary satisfaction surveys (see tables 2 and 3). We disagree with
CMS*s assertion that beneficiaries* preference for services that allow
them to remain in the community can be equated with satisfaction for the
services delivered. Even assuming that beneficiary satisfaction alone is a
reliable indicator of

quality, CMS offered no empirical evidence to support its position. Only
about half of the state annual waiver reports we reviewed indicated that
states measured beneficiary satisfaction with services. Moreover, our
review of quality- of- care problems identified in waiver programs serving
the elderly demonstrated that failure to provide needed or authorized
services was a frequently cited problem. For example, as we noted in the
draft report, a CMS review found that 27 percent of beneficiaries served
by one state*s HCBS waiver for the elderly did not receive any of their

authorized personal care services, and 49 percent received only half. CMS
commented that the draft report failed to recognize that HCBS programs
require a different approach to quality than their institutional
alternatives and *leaves the distinct impression that the most effective
way to assure and improve quality is through the process of inspection and
monitoring.* CMS asserted that design of an HCBS waiver, as opposed to
monitoring its implementation, is the most important contributor to
quality, and the agency*s recent efforts have focused on working with
states to improve design decisions and design options. (See CMS*s *General
Comments,* 4 and 7.)

We disagree with CMS*s characterization of our findings. Our report
recognizes the importance of maintaining states* considerable flexibility
in ensuring quality in HCBS waivers but concludes that insufficient
emphasis

has been placed on balancing this flexibility with measures to ensure the
accountability called for by both statute and regulations. Contrary to
Definition of Quality

Quality Assurance Approaches

Page 37 GAO- 03- 576 Medicaid Home and Community- Based Waivers

CMS*s comments, we did not recommend an additional or increased federal
oversight role or the adoption of oversight systems such as those used for
institutional providers. Our analysis and conclusions were based on the
criteria established in both statute and regulations that entail federal
oversight of waivers and that condition federal approval and renewal of
waivers on states* demonstrating to CMS that they have established and are
fulfilling assurances to protect the health and welfare of waiver
beneficiaries. We found that CMS currently receives too little information
from states about their quality assurance approaches to hold them
accountable, raising a question as to whether the agency has adequate
information to approve or renew some waivers. While we agree that waiver
design is important to ensuring quality, a state*s

implementation of its quality assurance approaches is equally, if not
more, important. In its protocol for reviewing states* HCBS waivers, CMS
gives equal emphasis to both the design and implementation of quality
assurance mechanisms. Despite its concerns, CMS generally concurred with
our recommendation to develop and provide states with more detailed
criteria regarding the necessary components of an HCBS waiver quality
assurance system. CMS cited its current effort to provide such guidance
and indicated that it would work to more clearly define its criteria and
expectations for quality. CMS commented that *the report lends itself to
the conclusion that the

federal government ought to be the primary source of quality monitoring
and improvement, and fails to recognize that the federal statutes convey
respect for state authority and competence in the administration of HCBS

programs.* (See CMS*s *General Comments,* 6.) We agree that the states and
the federal government have distinct quality monitoring roles but believe
that CMS has mischaracterized our description of those roles as defined in
statute and regulations. In addition, we believe that CMS has understated
the importance of federal oversight. The report describes states*
statutory and regulatory responsibility to

(1) include information in their waiver applications on their approaches
for protecting the health and welfare of HCBS beneficiaries and (2) report
annually on state quality assurance approaches and deficiencies identified
through state monitoring. We reported that waiver applications contained
limited information on state quality assurance approaches and that many
state annual waiver reports were neither timely nor complete. Eleven of
the 15 applications for the largest waivers serving the elderly included
none of the following well- recognized quality assurance tools: complaint
systems, corrective action plans, sanctions, or beneficiary satisfaction
State and Federal Roles in

Ensuring Quality

Page 38 GAO- 03- 576 Medicaid Home and Community- Based Waivers

surveys. Annual reports for more than a third of 70 waivers serving the
elderly were at least 1 year late, and one- quarter of such reports did
not indicate whether deficiencies had been identified, as required. CMS
acknowledged the need for more comprehensive information from states at
the time of application and at subsequent renewals. Consistent with our
recommendation, CMS agreed to revise and improve the application process
and annual state waiver report to include more information on states*
quality approaches and activities.

The report also describes CMS*s statutory responsibility for ensuring that
states adequately implement their quality assurance approaches* a
responsibility operationalized in policy guidance to the agency*s regional
offices. Waiver reviews are expected to occur at least once during the
initial 3- year waiver period and during each 5- year renewal cycle. We
did not propose an expanded federal quality assurance role. We reported
that, in some cases, CMS had an insufficient basis for determining that
states had met the required assurances for protecting beneficiaries*
health and welfare. As of June 2002, almost one- fifth of all HCBS waivers
in place for

3 years or more had either never been reviewed or were renewed without a
review; 14 of these waivers had 10 or more years elapse without a regional
office review. Some CMS waiver reviews have uncovered serious state
oversight weaknesses as well as quality- of- care problems. For example,
the review of one state*s waiver found both medical and physical neglect
of beneficiaries because of serious lapses in state oversight, resulting
in a decision to let the waiver expire. The full extent of such problems
is unknown because many state waivers lacked a recent CMS review. CMS did
not comment directly on our conclusion that the agency is not fully
complying with statutory and regulatory requirements when it renews
waivers. The agency suggested it would be far more efficient and equally
effective for federal waiver reviews to focus on only one waiver in cases
where there are multiple waivers in a state serving subsets of the

same target group and using the same quality assurance system; however,
CMS*s own guidance to its regional offices calls for each waiver to
receive at least one full review during a given waiver cycle, with each
waiver

receiving at least some level of review. 40 40 The only exceptions
mentioned in CMS guidance apply to model waivers and those waivers serving
fewer than 200 participants when the regional office determines there is a
high probability that no significant quality problems exist by (1)
combining the review of a smaller waiver with a larger waiver in the same
state or (2) conducting an initial minireview with the understanding that
a more extensive review could follow if quality assurance problems are
detected during the mini- review.

Page 39 GAO- 03- 576 Medicaid Home and Community- Based Waivers

CMS commented that the draft report*s recommendations to hold regional
offices accountable for conducting thorough and timely reviews of quality
in HCBS waiver programs, including a sampling methodology that provides
confidence in the generalizability of the review results, would require a
huge new investment or redirection of federal resources. Specifically, CMS
commented that the report *does not address the significant resources that
would need to be found or redirected to implement its recommendations* and
*fails to acknowledge the lack of appropriated funds for HCBS quality.*
The agency stated that such funds would have to come from CMS*s operating
budget. CMS also pointed out that it had already taken steps
organizationally to ensure that enough resources are devoted to quality
and that they are appropriately positioned within CMS. (See CMS*s *General
Comments,* 5, 8, and 9.)

CMS*s existing waiver review protocol directs regional offices to select a
sample of waiver beneficiaries for activities such as interviews and
observations, but it does not adequately address sampling methodology. We
found that sample selection methods varied with some regional offices
selecting random samples, some basing their sample on geographic

location, and others reporting no methodology for sample selection. Given
that the regional offices are already generalizing their findings to the
waiver program as a whole, we believe explicit and uniform sample
selection guidance is imperative. At the same time, we believe that, as
CMS suggested, samples may appropriately be targeted to certain types of
participants or services so that, over time, greater assurances are
provided about the quality of care. In response to our recommendation to
develop guidance on the scope and methodology for federal reviews of state
waiver programs, CMS said it is committed to developing additional policy
guidance.

We did not recommend significant increases in appropriated funds for
conducting waiver reviews. Rather, our draft report recommended that CMS
ensure allocation of sufficient resources and hold regional offices

accountable for conducting thorough and timely reviews of the status of
quality in HCBS waiver programs. The CMS Administrator is responsible for
assessing whether existing funding levels are adequate to satisfy
statutory and regulatory requirements, including periodic regional office
review of the states* assurances. The Administrator may indeed conclude
that, to carry out these oversight responsibilities for the growing
numbers

of frail beneficiaries who prefer and rely on these services, there may be
a need to reallocate existing funds or to request additional funds. CMS
also noted that it had recently redeployed and reorganized headquarters
staff to incorporate the quality function into each program area,
including the Resources and Guidance for Federal Oversight

Page 40 GAO- 03- 576 Medicaid Home and Community- Based Waivers

operational unit that oversees HCBS waivers. Despite CMS*s concerns about
the need for significant funding increases, the agency noted the
importance of further investments to advance both state and federal
capability to assure quality in waiver programs.

CMS commented that the draft report had numerous technical inaccuracies,
but cited only one and provided no additional examples or technical
comments to accompany its written response (CMS*s *General Comments,* 1).
Although CMS stated that our characterization of federal requirements
concerning waiver renewals was inaccurate, its suggested

changes and our report language were essentially the same. To avoid any
confusion, however, we have added the statute*s specific language to the
background section of the report. CMS further commented that our report
should recognize that the Congress created an enforcement mechanism that
places great reliance on a system of assurances. Our draft report made
that point while also describing CMS*s responsibility, as specified in its
implementing regulations, to determine that each state has met all the
assurances set forth in its waiver application before renewing a waiver.

CMS stated that the draft report failed to acknowledge the steps it has
already taken to ensure quality. (CMS*s *General Comments,* 10.) To the
contrary, the draft report described each of the efforts CMS referred to
as under way to monitor and improve HCBS quality and addressed each

activity: the waiver review protocol, the HCBS quality framework, the
development of tools to assist states, development of the Independence
Plus template, and the national technical assistance contractor. However,
we found that CMS*s waiver review protocol does not address key issues
relating to the scope and methodology of federal oversight reviews.
Moreover, the use of the Independence Plus template, which requires more
specific information on states* quality assurance approaches, is voluntary
rather than mandatory.

In its written comments, Texas stated that it supports proper federal
oversight of HCBS waivers but stressed the need to maintain flexibility in
designing waivers to meet the unique needs of residents requiring
community care. The state believes that such flexibility should not be
lost in establishing more specific quality assurance criteria. Additional
CMS Comments

State Comments

Page 41 GAO- 03- 576 Medicaid Home and Community- Based Waivers

As arranged with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its issue date. At that time, we will send copies of this report to
the Administrator of the Centers for Medicare & Medicaid Services and
appropriate congressional committees. We also will make copies available
to others upon request. In addition, the report will be available at no
charge on the GAO Web site at http:// www. gao. gov.

Please contact me at (202) 512- 7118 or Walter Ochinko at (202) 512- 7157
if you have questions about this report. Other contributors to this report
included Eric Anderson, Connie Peebles Barrow, and Kevin Milne.

Kathryn G. Allen Director, Health Care* Medicaid

and Private Health Insurance Issues

Appendix I: Scope and Methodology Page 42 GAO- 03- 576 Medicaid Home and
Community- Based Waivers

This appendix describes our scope and methodology, following the order
that our results are presented in the report.

Data on HCBS Waivers. To identify the universe of state HCBS waivers as of
June 2002, we asked the CMS regional offices to identify each waiver,
including the target population and the waiver start date. The regional
offices identified a total of 263 waivers. Using this information and
other data, we identified 77 waivers serving the elderly. To identify
trends in Medicaid long- term care and Medicaid waiver spending, we
analyzed data covering fiscal years 1991 through 2001 from HCFA reports
(HCFA Form 64) compiled by The MEDSTAT Group. To identify trends in the
overall number of Medicaid waiver beneficiaries, number of elderly waiver

beneficiaries, average waiver size, and average per beneficiary
expenditures for waivers serving the elderly, we analyzed data from state
annual waiver reports (HCFA Form 372) covering fiscal years 1992 through
1999 in a database compiled by researchers at the University of
California, San Francisco. 1 State Quality Assurance Mechanisms. In the
absence of comprehensive,

readily available information on HCBS quality assurance mechanisms that
states use, we analyzed the information available in a subset of state
waiver applications and annual state waiver reports for waivers serving
the elderly. Specifically, we analyzed (1) initial and/ or renewal
applications for the 15 largest waivers serving the elderly as of 1999 and
(2) annual state waiver reports from 70 of the 79 waivers serving the

1 See Harrington, Aug. 2001. Researchers collected HCFA Form 372 reports
for most HCBS waivers from 1992 through 1999. In some cases, where the
annual reports were not available, state officials provided estimates of
the relevant data. In other cases, where annual reports were not available
and where state officials were unable to provide an estimate, University
researchers developed their own estimates for the missing data on the
basis of trend information for the particular waiver. For 1992,
participant and expenditure data were estimated for 21 of 155 HCBS
waivers; 8 of these were waivers serving the elderly. For 1999,
participant and expenditure data were estimated for 20 of 214 HCBS
waivers; 3 of these were waivers serving the elderly. Where participant or
expenditure data for individual states are based on such estimates, we
have indicated so in the text. In

addition, based on information provided by CMS, we identified 7 of the 238
waivers in this database that had been misclassified. Four waivers listed
as serving the aged or aged and disabled actually served other population
groups; and 3 waivers listed as serving other population groups served
either the aged or aged and disabled. Our analyses reflect the actual
target populations for these 7 waivers. Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 43 GAO- 03- 576 Medicaid Home and
Community- Based Waivers

elderly. 2 The waiver applications are used by CMS, in part, to assess
whether the quality assurance mechanisms in place warrant waiver approval.
The annual waiver reports are required to provide a description of the
process for monitoring the standards and safeguards under the waiver and
the results of state monitoring. Of the 70 state annual waiver reports
that we analyzed, 52 contained some information about states* monitoring
processes. Eight of the remaining 9 annual waiver reports were new waivers
for which the state had not yet submitted an annual report, and for 1
waiver, a regional office did not provide a copy of the annual state
report.

State Oversight and Quality of Care. To assess state oversight issues in
waivers serving the elderly, we examined regional office waiver review
reports for 21 waivers and state audit reports related to 5 waivers, the
only reports we were able to analyze, for a total of 23 discrete waivers.
3 To assess quality- of- care problems in waivers serving the elderly, we
reviewed 51 waivers for which we were able to analyze regional office
final reports and annual state reports. Regional office waiver review
reports identified

problems in 19 waivers, and annual state reports identified problems in 22
waivers, for a total of 36 discrete waivers. 4 These reports identified no
quality- of- care problems in the remaining 15 waivers. We were unable to
analyze findings from 28 additional waivers because they either (1) lacked
a recent regional office waiver review completed during the period of
October 1998 through May 2002 or an annual state waiver report, (2) the
annual state waiver report did not address whether deficiencies had been
identified, or provided no information on the deficiencies found, or (3)
the

2 As of June 2002, there were 77 waivers serving the elderly. However, our
analysis of quality- of- care problems includes 2 additional waivers
serving the elderly that had been terminated or not renewed as of that
date because they had had a regional office review during the October 1998
through May 2002 time period we examined.

3 Five state audit agencies* Connecticut, Delaware, Kansas, Louisiana, and
Montana* provided audit reports of waiver programs serving the elderly.
Three of the regional office reviews and three of the state audit reports
covered the same waivers.

4 Five of the regional office reviews and five of the annual state reports
in which problems were identified covered the same waivers.

Appendix I: Scope and Methodology Page 44 GAO- 03- 576 Medicaid Home and
Community- Based Waivers

waivers were too new to have had a regional office review or to provide an
annual state report. 5 CMS Oversight. To determine the adequacy of CMS
regional office oversight of states* waiver programs, we asked all 10 CMS
regional offices to provide the following information for each of the
waivers for which they were responsible, including both waivers for the
elderly as well as those serving other target populations: (1) the waiver
start date, (2) the current waiver time period, (3) the fiscal year the
waiver was last reviewed, and (4) whether or not the waiver review report
was finalized. Of the 263 waivers, 228 had been in place for 3 years or
more and therefore should have had a regional office review. The other 35
waivers were less than 3 years old and would not have yet qualified for a
review as of June 2002. For information on sample sizes and duration of
the reviews, we analyzed CMS*s HCBS waiver review final reports for
waivers serving the elderly that were issued during the period of October
1998 through May 2002. Fifteen of the 21 waiver review reports that we
received included information on the number of waiver beneficiary records
reviewed and on the duration of the reviews. Some review reports also
provided the number of beneficiaries that were interviewed or observed. We
also discussed regional office oversight activities with CMS headquarters*
staff.

5 As of June 2002, there were 77 waivers serving the elderly. However, our
analysis of state oversight and quality- of- care problems includes 2
additional waivers for the elderly that had been terminated or not renewed
as of that date because they had had a regional office review during the
October 1998 through May 2002 time period we examined.

Appendix II: Suggested CMS Definitions of Home and Community- Based
Services in Waivers Serving the Elderly Page 45 GAO- 03- 576 Medicaid Home
and Community- Based Waivers

Table 8 contains a list of services provided through the HCBS waivers
serving the elderly and the suggested CMS definitions. However, states may
provide alternative definitions in their waiver applications.

Table 8: Services States May Include in Their Medicaid Home and Community-
Based Services Waiver HCBS waiver service Suggested CMS definition

Case management Services that will assist individuals who receive waiver
services in gaining access to needed waiver and other state plan services,
as well as needed medical, social, educational, and other services,
regardless of the funding source for the services to which access is
gained. Homemaker services Services consisting of general household
activities (e. g., meal preparation and

routine household care) provided by a trained homemaker, when the
individual regularly responsible for these activities is temporarily
absent or unable to manage the home and care for him- or herself or others
in the home. Personal care services Assistance with activities of daily
living, such as eating, bathing, dressing, or

personal hygiene. This service may include assistance with preparation of
meals, but does not include the cost of the meals themselves. Respite care
services Services provided to individuals unable to care for themselves;
furnished on a

short- term basis because of the absence of or need for relief for those
persons normally providing the care. These services may be provided in
such locations as a nursing home, hospital, or waiver beneficiary*s home.
Adult day health services Services furnished 4 or more hours per day on a
regularly scheduled basis, for 1 or

more days per week, in an outpatient setting, encompassing both health and
social services needed to ensure the optimal functioning of the
individual. Meals provided as part of these services do not constitute a
*full nutritional regimen* (three meals

per day). Physical, occupational, and speech therapies indicated in the
individual*s plan of care will be furnished as component parts of this
service. Environmental accessibility adaptations Those physical
adaptations to the home, required by the individual*s plan of care,

that are necessary to ensure the health, welfare, and safety of the
individual or that enable the individual to function with greater
independence in the home, and without which the individual would require
institutionalization. Adaptations may include installation of ramps and
grab- bars, widening of doorways, modification of bathroom facilities, or
installation of specialized electric and plumbing systems necessary to
accommodate the medical equipment and supplies that are necessary for the
welfare of the individual. Skilled nursing services Services listed in the
plan of care that are within the scope of the state*s Nurse

Practice Act and are provided by a registered professional nurse or
licensed practical or vocational nurse under the supervision of a
registered nurse licensed to practice in the state. Transportation Service
offered to enable individuals served on the waiver to gain access to
waiver

and other community services, activities, and resources specified by the
plan of care. Specialized medical equipment and supplies Specialized
medical equipment and supplies include devices, controls, or

appliances, specified in the plan of care, that enable individuals to
increase their abilities to perform activities of daily living or to
perceive, control, or communicate with the environment in which they live.

Chore services Services needed to maintain the home in a clean, sanitary,
and safe environment. These services include heavy household chores such
as washing floors, windows, and walls, tacking down loose rugs and tiles,
and moving heavy items of furniture in order to provide safe entry and
exit.

Appendix II: Suggested CMS Definitions of Home and Community- Based
Services in Waivers Serving the Elderly

Appendix II: Suggested CMS Definitions of Home and Community- Based
Services in Waivers Serving the Elderly Page 46 GAO- 03- 576 Medicaid Home
and Community- Based Waivers

HCBS waiver service Suggested CMS definition

Personal emergency response systems Electronic devices that enable certain
individuals at high risk of institutionalization to secure help in an
emergency. The individual may also wear a portable *help* button to allow
for mobility. The system is connected to the person*s telephone and, once
a *help* button is activated, the telephone is programmed to signal a
response center staffed by trained professionals. Adult companion services
Nonmedical care, supervision, and socialization provided to a functionally
impaired

adult. Companions may assist or supervise the individual with such tasks
as meal preparation, laundry, and shopping but do not perform these
activities as discrete services. Attendant care services Hands- on care,
of both a supportive and health- related nature, specific to the needs

of a medically stable, physically handicapped individual. Supportive
services are those that substitute for the absence, loss, diminution, or
impairment of a physical or cognitive function. Adult foster care services
Personal care and services; homemaker, chore, attendant care, and
companion

services; and medication oversight (to the extent permitted under state
law) provided in a licensed (where applicable) private home by a principal
care provider who lives in the home. Adult foster care is furnished to
adults who receive these services in conjunction with residing in the
home. Typically, there is a limit to the total number of individuals
living in the home. Assisted living services Personal care and services,
homemaker, chore, attendant care, and companion

services; medication oversight (to the extent permitted under state law);
and therapeutic social and recreational programming, provided in a home-
like environment in a licensed (where applicable) community care facility,
in conjunction with residing in the facility. This service includes 24-
hour on- site response staff to meet scheduled or unpredictable needs in a
way that promotes maximum dignity and independence, and to provide
supervision, safety, and security. Private duty nursing Individual and
continuous care (in contrast to part- time or intermittent care)

provided by licensed nurses within the scope of state law. These services
are provided to an individual at home. Extended state plan services
Includes physician services, home health care services, physical therapy
services,

occupational therapy services, speech, hearing and language services, and
prescribed drugs* services available through the approved state plan but
without limitations on amount, duration, and scope.

Source: CMS. Note: Definitions contained in current streamlined Medicaid
1915( c) waiver application format, OMB form 0938 0449.

Appendix III: Medicaid Long- Term Care Expenditures, by Type and State,
Fiscal Year 2001

Page 47 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Percent of expenditures by service or setting Institution a care Home and
community- based care State

Medicaid longterm care expenditures (in

millions) Nursing homes ICF/ MR HCBS waivers Personal care a Home health b

Alabama $927 73% 7% 17% 0% 4% Alaska 156 46 0 48 5 0 Arizona 15 n. a. n.
a. n. a. n. a. n. a. Arkansas 647 57 15 15 10 4 California 5,066 51 8 10
27 3 Colorado 768 47 2 42 0 10 Connecticut 1,842 56 13 23 0 8 Delaware 195
57 16 24 0 3 District of Columbia 253 63 31 1 0 6 Florida 2,648 64 11 21 1
3 Georgia 1,099 69 10 16 0 4 Hawaii 210 71 4 25 0 1 Idaho 258 46 24 23 5 3
Illinois 2,533 59 26 14 0 1 Indiana 1,307 63 23 11 0 4 Iowa 756 49 27 17 0
6 Kansas 887 54 8 34 1 3 Kentucky 935 60 10 17 0 13 Louisiana 1,677 69 21
8 0 1 Maine 411 49 11 37 1 2 Maryland 1,061 66 6 20 3 6 Massachusetts
2,450 58 9 21 10 3 Michigan 2,385 73 1 17 8 1 Minnesota 1,916 47 11 32 7 3
Mississippi 646 64 26 8 0 2 Missouri 1,677 62 11 18 9 0 Montana 215 52 10
27 11 0 Nebraska 579 64 8 23 1 3 Nevada 162 57 18 17 4 4 New Hampshire 358
59 1 38 1 1 New Jersey 3,192 69 13 10 6 2 New Mexico 410 40 4 39 16 0 New
York 13,469 47 16 15 14 8 North Carolina 2,037 43 20 22 11 4 North Dakota
251 60 19 20 0 1 Ohio 3,643 64 22 13 0 2 Oklahoma 811 53 14 29 5 0 Oregon
1,058 51 1 45 3 0

Appendix III: Medicaid Long- Term Care Expenditures, by Type and State,
Fiscal Year 2001

Appendix III: Medicaid Long- Term Care Expenditures, by Type and State,
Fiscal Year 2001

Page 48 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Percent of expenditures by service or setting Institution a care Home and
community- based care State

Medicaid longterm care expenditures (in

millions) Nursing homes ICF/ MR HCBS waivers Personal care a Home health b

Pennsylvania 5,114 72 10 17 0 1 Rhode Island 420 58 2 39 0 1 South
Carolina 789 47 21 28 0 3 South Dakota 237 66 8 25 0 1 Tennessee 1,203 65
19 15 0 0 Texas 3,288 49 22 21 8 0 Utah 241 38 23 37 0 1 Vermont 191 44 1
49 2 3 Virginia 1,010 52 19 29 0 0 Washington 1,427 43 9 36 11 1 West
Virginia 531 55 9 28 5 4 Wisconsin 1,813 53 11 27 6 3 Wyoming 113 35 13 48
0 4

U. S. Total 75,288 57 14 19 7 3

Source: CMS. Notes: GAO analysis of HCFA Form 64 data as reported by Brian
Burwell, Steve Eiken, and Kate Sredl in Medicaid Long Term Care
Expenditures in FY 2001, The MEDSTAT Group, May 10, 2002. Arizona does not
have any HCBS waivers as it operates its Medicaid program as a
demonstration project under a section 1115 waiver. Percentages in table
may not add to 100 due to rounding. a Personal care is an optional
Medicaid state plan service.

b Home health care is a mandatory Medicaid state plan service.

Appendix IV: Number of Beneficiaries Served by HCBS Waivers for the
Elderly and in Nursing Homes, by State, 1999

Page 49 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Number of Medicaid beneficiaries State Served by HCBS waivers for the
elderly Served in nursing homes

Percent of beneficiaries served by waivers

for the elderly

Alabama 5,826 24,576 19.2% Alaska 712 929 43.4 Arizona a not applicable
not applicable not applicable Arkansas 8,158 20,699 28.3 California 8,671
b 117,843 6. 9 Colorado 11,481 18,918 37.8 Connecticut 8,978 38,862 18.8
Delaware 734 3,109 19.1 District of Columbia c not applicable 4,359 not
applicable Florida 16,915 91,985 15.5 Georgia 14,018 39,720 26.1 Hawaii
923 4,274 17.8 Idaho 1,000 5,014 16.6 Illinois 17,396 81,791 17.5 Indiana
2,338 47,988 4. 6 Iowa 3,994 21,882 15.4 Kansas 6,701 17,644 27.5 Kentucky
13,339 27,739 32.5 Louisiana 872 35,508 2. 4 Maine 1,395 9,236 13.1
Maryland 132 27,920 0. 5 Massachusetts 5,132 60,044 7. 9 Michigan 6,328
44,180 12.5 Minnesota 7,838 38,925 16.8 Mississippi 2,540 23,909 9. 6
Missouri 20,821 39,762 34.4 Montana 1,514 5,549 21.4 Nebraska 2,357 16,487
12.5 New Hampshire 1,367 7,147 16.1 New Jersey 4,587 b 51,747 8. 1 New
Mexico 1,404 7,074 16.6 Nevada 1,235 3,821 24.4 New York 19,732 139,509
12.4 North Carolina 11,159 42,382 20.8 North Dakota 347 5,570 5.9 Ohio
26,135 b 92,133 22.1 Oklahoma 9,042 25,758 26.0

Appendix IV: Number of Beneficiaries Served by HCBS Waivers for the
Elderly and in Nursing Homes, by State, 1999

Appendix IV: Number of Beneficiaries Served by HCBS Waivers for the
Elderly and in Nursing Homes, by State, 1999

Page 50 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Number of Medicaid beneficiaries State Served by HCBS waivers for the
elderly Served in nursing homes

Percent of beneficiaries served by waivers

for the elderly

Oregon 26,410 12,031 68.7 Pennsylvania 2,383 72,481 3. 2 Rhode Island
2,304 13,297 14.8 South Carolina 14,361 17,458 45.1 South Dakota 522 5,950
8.1 Tennessee 511 37,311 1. 4 Texas 27,978 95,812 22.6 Utah 574 5,513 9.4
Vermont 1,014 3,745 21.3 Virginia 11,835 27,746 29.9 Washington 25,718
24,620 51.1 West Virginia 3,470 11,788 22.7 Wisconsin 13,900 41,341 25.2
Wyoming 982 2,609 27.3

Total U. S. 377,083 1,616,663 18.9%

Source: CMS. Notes: GAO analysis of (1) annual state waiver report data
(HCFA Form 372) as reported by Harrington, Aug. 2001, and (2) data on
beneficiaries in nursing homes from Centers for Medicare & Medicaid
Services, MSIS Statistical Report for Fiscal Year 1999.

a Arizona does not have any HCBS waivers for the elderly as it operates
its Medicaid program as a demonstration project under a section 1115
waiver. b Author*s estimate. See Harrington, Aug. 2001.

c In 1999, the District of Columbia did not have any HCBS waivers for the
elderly in operation.

Appendix V: Number of HCBS Waivers for the Elderly, Beneficiaries,
Expenditures, and per Beneficiary Expenditures by State, 1999

Page 51 GAO- 03- 576 Medicaid Home and Community- Based Waivers

State Number of HCBS waivers for the elderly

Number of beneficiaries served by waivers for the

elderly Total expenditures Average expenditures per beneficiary

Alabama 1 5,826 $37,488,861 $6,435 Alaska 1 712 8,554,566 12,015 Arizona a
0 not applicable not applicable not applicable Arkansas 1 8,158 24,788,949
3,039 California b 3 8,671 26,128,332 3,013 Colorado 1 11,481 57,968,202
5,049 Connecticut 1 8,978 54,432,244 6,063 Delaware 1 734 6,528,330 8,894
District of Columbia c 0 not applicable not applicable not applicable
Florida 4 16,915 80,073,234 4,734 Georgia 1 14,018 48,483,972 3,459 Hawaii
2 923 13,905,438 15,065 Idaho 1 1,000 6,300,645 6,301 Illinois 1 17,396
46,272,565 2,660 Indiana 1 2,338 15,477,320 6,620 Iowa 1 3,994 10,052,900
2,517 Kansas 1 6,701 40,359,505 6,023 Kentucky 1 13,339 44,471,778 3,334
Louisiana 3 872 8,402,786 9,636 Maine 1 1,395 14,751,242 10,574 Maryland 1
132 678,589 5,141 Massachusetts 1 5,132 9,849,893 1,919 Michigan 1 6,328
16,655,463 2,632 Minnesota 1 7,838 34,845,022 4,446 Mississippi 1 2,540
11,645,303 4,585 Missouri 1 20,821 46,311,315 2,224 Montana 1 1,514
14,454,089 9,547 Nebraska 1 2,357 13,813,410 5,861 New Hampshire 1 1,367
11,977,955 8,762 New Jersey b 2 4,587 46,294,225 10,092 New Mexico 1 1,404
19,868,387 14,151 Nevada 2 1,235 5,179,673 4,194 New York 1 19,732
23,845,013 1,208 North Carolina 1 11,159 153,752,548 13,778 North Dakota 1
347 3,328,323 9,592 Ohio b 1 26,135 134,200,340 5,135 Oklahoma 1 9,042
34,905,750 3,860 Oregon 1 26,410 168,138,603 6,366

Appendix V: Number of HCBS Waivers for the Elderly, Beneficiaries,
Expenditures, and per Beneficiary Expenditures by State, 1999

Appendix V: Number of HCBS Waivers for the Elderly, Beneficiaries,
Expenditures, and per Beneficiary Expenditures by State, 1999

Page 52 GAO- 03- 576 Medicaid Home and Community- Based Waivers

State Number of HCBS waivers for the elderly

Number of beneficiaries served by waivers for the

elderly Total expenditures Average expenditures per beneficiary

Pennsylvania 1 2,383 13,752,684 5,771 Rhode Island 2 2,304 11,650,696
5,057 South Carolina 1 14,361 63,652,223 4,432 South Dakota 1 522
1,376,800 2,638 Tennessee 2 511 4,536,477 8,878 Texas 1 27,978 266,376,586
9,521 Utah 1 574 1,672,476 2,914 Vermont 2 1,014 8,988,080 8,864 Virginia
3 11,835 80,772,354 6,825 Washington 1 25,718 194,129,285 7,548 West
Virginia 1 3,470 38,908,487 11,213 Wisconsin 1 13,900 114,878,732 8,265
Wyoming 1 982 4,420,108 4,501

U. S. Total 64 377,083 $2,099,299,758 $5,567

Source: CMS. Note: GAO analysis of annual state waiver report data (HCFA
Form 372). See Harrington, Aug. 2001. a Arizona does not have any HCBS
waivers for the elderly as it operates its Medicaid program as a

demonstration project under a section 1115 waiver. b With the exception of
the number of waivers for the elderly, the data for this state are based
on author*s estimates. See Harrington, Aug. 2001. c In 1999, the District
of Columbia did not have any HCBS waivers for the elderly in operation.

Appendix VI: CMS HCBS Quality Initiatives Page 53 GAO- 03- 576 Medicaid
Home and Community- Based Waivers

CMS has undertaken a series of initiatives to generate information and
dialogue on existing systems of quality assurance in HCBS waivers and to
provide a range of assistance to states in this area. Approximately $1
million was budgeted for these HCBS quality initiatives in fiscal year
2001 and $3.4 million in fiscal year 2002. Through its HCBS quality
initiatives, CMS intends to more closely assess the status of quality
assurance efforts currently in place and to provide direct assistance to
states in this area. CMS*s initiatives include (1) developing a conceptual
framework for defining and measuring quality, (2) creating tools for
states to adapt and use in assessing quality, such as model consumer
experience surveys, and (3) providing technical assistance and resources
for quality assurance and

improvement. These initiatives, while important, do not address the lack
of detailed requirements for states on the necessary components of an
acceptable quality assurance system or the weaknesses in regional office
oversight of state HCBS waivers that we identified elsewhere in this

report.

Quality Framework and Expectations. CMS sponsored the development of a
framework for quality in home and community- based services that focuses
on outcomes in several key areas including beneficiary access to care,
safety, satisfaction, and meeting beneficiary needs and preferences. 1 The
next phase involves identifying strategies that states are currently

using to monitor and improve quality within these key areas. While the
expectations contained in the quality framework have not been specified in
CMS regulations, they are reflected in the application template for CMS*s
new consumer- directed HCBS waiver, Independence Plus. 2 States* use of
the template for the Independence Plus waiver is voluntary. The template
asks states for a detailed description of their quality assurance and
improvement programs* something not currently required as part of the
general HCBS waiver application. Guidance for using the template notes
that the description should include (1) information on the frequency of
quality assurance activities, (2) the dimensions that will be monitored,
(3) the qualifications of persons conducting quality assurance activities,
1 The quality framework was developed with input from a variety of
organizations and individuals including national aging and developmental
disabilities organizations, CMS

officials from headquarters and regional offices, and state directors for
Medicaid, aging and developmental disabilities. 2 Independence Plus is
CMS*s new demonstration program for family or individual- directed

community- based services. Under this consumer- directed care model,
beneficiaries are provided greater decision- making authority regarding
their service needs, their provider of services, and how quality of care
will be assessed. Appendix VI: CMS HCBS Quality Initiatives

Appendix VI: CMS HCBS Quality Initiatives Page 54 GAO- 03- 576 Medicaid
Home and Community- Based Waivers

(4) the process for identifying problems, including sampling
methodologies, (5) provisions for assuring that problems are addressed in
a timely manner, and (6) the system to receive, review, and act on
critical incidents or events.

Quality Assurance Mechanisms. CMS is also developing quality assessment
and improvement mechanisms for states. For example, to develop a guide for
states and CMS regional offices, a contractor reviewed the literature on
quality measurement and improvement in home and community- based care,
convened an expert panel, and conducted interviews with state officials.
As of April 2003, the guide was undergoing final clearance within CMS. It
is expected to include (1) benchmarks for

effective quality assurance programs in home and community- based care,
(2) a discussion of the knowledge and mechanisms needed to design,
implement, and assess quality activities in home and community- based
care, and (3) suggestions for addressing limitations and problems in
assuring quality in home and community- based care. Another contractor has
developed and field- tested consumer experience surveys for use in waiver
programs for the elderly and for persons with developmental disabilities.
This contractor is also developing a set of performance indicators for
states to use in guiding development and assessing quality in new self-
directed HCBS waivers.

Technical Assistance and Resources. Other CMS efforts focus on providing
technical assistance and resources to states. One contractor has assembled
a team of professionals with expertise in home and communitybased services
that can serve as a resource for both states and the CMS regional offices.
3 Services available from these teams are expected to include conducting
targeted reviews of waiver programs; providing suggestions to states
regarding their quality assurance activities; consulting with CMS staff
regarding quality aspects of specific waivers; and providing resource
materials on quality assurance monitoring and improvement tools. This
contractor is also assessing the types of data currently gathered by a
sample of states that is, or could be, used for quality measurement and
improvement; compiling information on selected data- driven state quality
efforts; and providing technical assistance to the states. Finally, CMS
sponsored a national conference on HCBS quality

3 The MEDSTAT Group is managing the overall contract with CMS.

Appendix VI: CMS HCBS Quality Initiatives Page 55 GAO- 03- 576 Medicaid
Home and Community- Based Waivers

measurement and improvement in May 2002. This day- and- a- half- long
conference* attended by state officials, CMS staff, and others* offered
training and information on strategies and techniques for quality
assurance and improvement in home and community- based care.

Appendix VII: Beneficiary Samples for and Duration of Regional Office
Reviews of 15 State Waivers Serving the Elderly

Page 56 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Beneficiary samples a State Target population Number of

waiver beneficiaries Record

reviews Interviews or observation Duration of on- site

review (days) Boston regional office Connecticut Elderly 7,300 21 21 5

Vermont Residential care 73 14 14 5

Philadelphia regional office Virginia Consumer- directed personal
attendant services

99 15 b C Virginia Elderly and persons with disabilities

9,000 20 b 5 Virginia Assisted living

waiver 1,166 39 20 5

Dallas regional office Oklahoma Elderly and persons with disabilities

10,000 40 5 5

Kansas City regional office Kansas Frail elderly 4,500 17 11 4 Nebraska
Elderly and adults

and children with disabilities

2,357 25 14 4

Denver regional office Montana Elderly and persons with physical
disabilities

1,514 36 18 5 North Dakota Elderly and persons with disabilities

390 36 17 5 South Dakota Elderly 638 28 17 5 Wyoming Elderly and

persons with physical disabilities

850 38 22 5

San Francisco regional office California Disabled, frail, and elderly
16,335 19 10 10 Seattle regional office Oregon Elderly and

persons with disabilities

36,000 52 b 22.5 Washington Elderly and

persons with disabilities

24,000 100 b 22.5

Average 7,615 33 15 8 Source: CMS.

Appendix VII: Beneficiary Samples for and Duration of Regional Office
Reviews of 15 State Waivers Serving the Elderly

Appendix VII: Beneficiary Samples for and Duration of Regional Office
Reviews of 15 State Waivers Serving the Elderly

Page 57 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Note: GAO analysis of CMS regional office final waiver review reports for
HCBS waivers serving the elderly that included information on sample size
for beneficiary record reviews or interviews, issued from October 1998 to
May 2002. a Fifteen of the 21 CMS regional office waiver review reports
for HCBS waivers serving the elderly

included information on sample size of the regional office reviews of
waiver beneficiary records. This appendix provides a summary of the 15
waiver review reports that included this information. The number of waiver
beneficiaries is based on those reported in the regional offices* waiver
review reports. To the extent that the information was included in the
waiver review reports, we have provided details on the number of
beneficiaries interviewed or observed during the reviews. b The regional
office review contained no information on beneficiary interviews or
observations.

c This waiver review was conducted at the regional office rather than on-
site at the relevant state agencies.

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services
Page 58 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services
Page 59 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services
Page 60 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services
Page 61 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services
Page 62 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services
Page 63 GAO- 03- 576 Medicaid Home and Community- Based Waivers

Appendix VIII: Comments from the Centers for Medicare & Medicaid Services
Page 64 GAO- 03- 576 Medicaid Home and Community- Based Waivers (290105)

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