Medicaid Long-Term Care: Successful State Efforts to Expand Home Services
While Limiting Costs (Letter Report, 08/11/94, GAO/HEHS-94-167).

Because nearly one-third of the nation's Medicaid expenditures are now
spent on long-term care ($42 billion in 1993), GAO was asked to review
the experience of states in expanding government-funded home and
community-based services.  GAO's review focused on Oregon, Washington,
and Wisconsin.  These three states have expanded home and
community-based long-term care in part as a strategy to help control
rapidly increasing Medicaid expenditures for institutional care.  As
they expanded home and community-based care, the three states restricted
how large most of the programs can grow.  Some restrictions were
mandated by the federal government, which approves capacity limits on
programs operated under Medicaid waivers.  Other restrictions result
from constrained state budgets. Despite these deliberate limits on
program size, one impact of the shift to home and community-based care
is that the three states have been able to provide services to more
people with the dollars available, primarily because home and
community-based care is less expensive per person than institutional
care.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-94-167
     TITLE:  Medicaid Long-Term Care: Successful State Efforts to Expand 
             Home Services While Limiting Costs
      DATE:  08/11/94
   SUBJECT:  Health care cost control
             Health care programs
             Health care planning
             Health services administration
             Long-term care
             Home health care services
             State-administered programs
             Community health services
IDENTIFIER:  Oregon
             Washington
             Wisconsin
             Medicaid Program
             Supplemental Security Income Program
             Wisconsin Community Options Program
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce, House of Representatives

August 1994

MEDICAID LONG-TERM CARE -
SUCCESSFUL STATE EFFORTS TO EXPAND
HOME SERVICES WHILE LIMITING COSTS

GAO/HEHS-94-167

Medicaid Home Care Services


Abbreviations
=============================================================== ABBREV

  AIDS - acquired immunodeficiency syndrome
  CAPS - Client Assessment and Planning System
  COP - Community Options Program
  COPES - Community Options Program Entry System
  HCFA - Health Care Financing Administration
  ICF/MR - intermediate care facility for the mentally retarded
  OBRA - Omnibus Budget Reconciliation Act
  SSI - Supplemental Security Income
  SSP - state supplemental payments

Letter
=============================================================== LETTER


B-257826

August 11, 1994

The Honorable John D.  Dingell
Chairman, Subcommittee on Oversight
 and Investigations
Committee on Energy and Commerce
House of Representatives

Dear Mr.  Chairman: 

Nearly one-third of the nation's Medicaid expenditures are now spent
on long-term care, which amounted to about $42 billion in 1993.\1
Both federal and state governments continue to devote an increasing
share of their budget resources to Medicaid long-term care
expenditures.  These budget pressures coupled with a growing elderly
population have induced the federal and state governments to seek new
approaches to restraining long-term care expenditures. 

Care in institutional settings--primarily nursing
facilities--constitutes about 85 percent of Medicaid expenditures for
long-term care.  Shifting long-term care from nursing facilities and
other institutional settings to less expensive home and
community-based settings continues to be a major thrust of
cost-containment efforts.  States are testing new approaches to
ensure that the use of less expensive home and community care
translates into budget savings and control over total long-term care
spending. 

You asked us to review states' experience in expanding
government-funded home and community-based services.  We focused our
review on three states that have made substantial attempts to do
so--Oregon, Washington, and Wisconsin.  Our analysis centered on
determining (1) how far the three states had gone in shifting their
long-term care to home and community-based settings, (2) what
controls they had in place to manage the growth of home and
community-based programs, and (3) what impact the shifts and controls
have had on the ability to deliver long-term care services. 


--------------------
\1 Long-term care includes an array of health, personal care, and
social and supportive services.  The services are delivered to
individuals who are at least partly unable to care for themselves
because of disabilities or impairments resulting from a chronic
illness, injury, or other condition.  This report focuses on
long-term care services for persons aged 65 and older and persons
with physical disabilities. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Oregon, Washington, and Wisconsin have expanded home and
community-based long-term care in part as a strategy to help control
rapidly increasing Medicaid expenditures for institutional care. 
Since the early 1980s, the three states have developed Medicaid and
state-funded home and community-based care programs that have allowed
them to serve more beneficiaries overall and to serve a larger
proportion of them at home and in the community.  For example,
long-term care programs for the aged and persons with physical
disabilities in Oregon grew from about 15,300 beneficiaries in 1983
to almost 24,000 in 1993; during that time, Medicaid nursing facility
use declined slightly while the proportion of beneficiaries using
home and community-based care grew from 49 percent to 68 percent of
the total. 

Even as they expanded home and community-based programs, the three
states have restricted how large most of the programs can grow.  Some
of these restrictions come from the federal government, which
approves capacity limits on programs operated as Medicaid home and
community-based service waivers.  Other restrictions result from
constrained state budgets.  Because the demand for home and
community-based services can exceed budget allocations, state
agencies that administer the programs must determine which persons
should be served within the limited program treatment capacity and
dollars available.  Thus controls on growth in home and
community-based programs, which federal and state governments view as
necessary to managing program expenditures, have at times limited
access to services.  This has resulted in waiting lists for some
programs, particularly the state-funded programs. 

Despite deliberate limits on program size, one impact of the shift to
home and community-based care is that the three states have been able
to provide services to more people with the dollars available.  This
is because home and community-based care is generally less expensive
per person than institutional care, although the gap between the two
narrows when other government expenditures for home and
community-based recipients--such as Supplemental Security Income
(SSI) payments--are added to Medicaid costs.  Home and
community-based services have helped control growth in overall
long-term care expenditures by providing an important alternative to
nursing facility care, thus helping states exercise greater control
over nursing facility capacity and use.  While the total number of
nursing facility beds operated in the United States increased by 20.5
percent between 1982 and 1992, the combined number of beds in Oregon,
Washington, and Wisconsin declined 1.3 percent.  These three states
have accommodated all or most of the growth in their total long-term
care programs in home and community-based care. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Part of the national debate on health care reform has focused on
expanding long-term care in recipients' homes and in community-based
settings, including a proposal by the administration to create a new
home care program supported by $38 billion per year in federal funds
when fully implemented.  Home and community-based care is seen as
generally less expensive than nursing facility and other
institutional care.  Additionally, many who need long-term care would
prefer to receive it at home or in the community.  However, concern
has also been raised that greater availability of such services might
create rapid growth in the number of people seeking to use them,
making it difficult to control total spending. 

Medicaid is a joint federal/state program that pays medical
expenditures for more than 31 million low-income beneficiaries. 
Those who receive long-term care under Medicaid, numbering about 8
million individuals, include the elderly, persons with physical
disabilities, and persons with developmental disabilities.\2 This
report focuses on services for individuals 65 years of age and older
and persons with physical disabilities, because these are the largest
groups of long-term care users, and because persons with
developmental disabilities generally rely on different programs and
service providers. 

For many years, Medicaid has paid for beneficiaries' long-term care
in institutional settings such as nursing facilities and intermediate
care facilities for the mentally retarded (ICF/MR).  Most states did
not provide significant Medicaid home and community-based long-term
care services until after 1981, when the Congress specifically
provided the option of Medicaid waivers to allow greater flexibility
in developing alternatives to institutional care.\3 Figure 1 shows
the growth in Medicaid institutional and home and community-based
expenditures in recent years.  The Congress' action was based in part
on the theory that providing certain kinds of nonmedical social
services (such as housekeeping, personal care, and adult day care) in
residential or community settings can delay or eliminate the need for
more expensive care in nursing facilities. 

   Figure 1:  Medicaid Long-Term
   Care Expenditures for Home and
   Community-Based and
   Institutional Care:  1987,
   1990, and 1993

   (See figure in printed
   edition.)

Note:  Home and community-based care includes expenditures for
personal care, home health, and waiver services.  Institutional care
includes expenditures for nursing facilities and ICFs/MR. 

Source:  SysteMetrics.MEDSTAT, using data from HCFA-64. 

All states now provide at least some home and community-based
services in their Medicaid programs.  Many states choose to offer
some of these services on a nonwaiver basis--that is, the services
are available as part of the regular Medicaid program.  This approach
is basic to most of the services offered under Medicaid, including
long-term care in institutional settings.  Since the early 1980s,
however, much of the innovation at the state level has been in
Medicaid waiver programs.  The 1981 changes made by the Congress
authorize the Secretary of Health and Human Services through the
Health Care Financing Administration (HCFA), the federal agency in
charge of Medicaid, to approve exceptions or waivers to Medicaid
program rules.\4 These waivers allow the states to offer packages of
services, including nonmedical services, that may not be covered by
the states' regular Medicaid programs.  Moreover, states may choose
to provide specific services only to defined groups, instead of to
all eligible beneficiaries, as would be required under Medicaid
absent a waiver.  As of May 1994, states operated 195 approved waiver
programs and had applications pending for 34 more.  The importance of
these waivers in controlling the size of home and community-based
programs is discussed on page 11.  A number of states also provide
home and community-based services funded by state general revenues. 

As states began using waivers to develop home and community-based
programs during the 1980s, concerns surfaced about the potential
effects of such programs on Medicaid costs.  These concerns were
grounded in research showing that while such programs were less
costly on a per-person basis, they generally raised health care costs
overall because limited reductions in institutional use were more
than offset by increased demand for and use of home and
community-based care.  The research suggested that home and
community-based care programs often did not substitute for nursing
facility care, but instead served beneficiaries who might not
necessarily have entered nursing facilities.  The desirability of
home and community-based services has been said to create a "woodwork
effect," attracting new service users who "come out of the woodwork."

Home and community-based waiver programs have evolved over time.  In
the early years, states were optimistic about waivers as a means to
provide alternatives to institutional long-term care, but they built
the programs slowly because of their inexperience with home and
community-based services.  The early waiver programs tended to have
narrow eligibility guidelines and restrictive service programs, and
were available in limited geographic areas within the states.  By the
mid-1980s, as states became more experienced and confident of their
ability to manage the programs, they applied for more and larger
waivers.  Because of concerns about program costs, however, HCFA made
efforts from about 1983 through 1992 to restrain program size.  In
recent years HCFA has become more flexible, and a more cooperative
relationship has developed between HCFA and the states. 

The states we selected for our work reflect the evolution of the
waiver program.  Oregon, Washington, and Wisconsin were early to
apply for home and community-based service waivers, which permitted a
targeted, controlled approach to service delivery.  Over time their
waivers expanded and evolved to conform with federal requirements and
state program and budget needs. 

We focused our work on Oregon, Washington, and Wisconsin mainly
because (1) the three states have made substantial efforts to develop
home and community-based care programs and (2) state Medicaid
specialists indicated that the three states' programs could provide
examples of mechanisms for managing program growth. 


--------------------
\2 Persons with physical disabilities include persons of all ages who
cannot function independently because of a disease or injury.  For
example, they may be paralyzed or have a brain injury or a
debilitating medical problem such as multiple sclerosis.  Most
persons with developmental disabilities have mental retardation, but
the term also encompasses those who have substantial disabilities
from cerebral palsy, epilepsy, or other conditions.  Many persons
with physical or developmental disabilities are relatively young. 

\3 See appendix I for a discussion of the Medicaid home and
community-based waiver program.  Appendix I also provides background
data on long-term care in the United States.  Appendixes II, III, and
IV describe long-term care services in Oregon, Washington, and
Wisconsin, respectively. 

\4 These waiver programs were authorized by the Omnibus Budget
Reconciliation Act of 1981 (P.L.  97-35). 


   STATES HAVE EXPANDED HOME AND
   COMMUNITY-BASED CARE PROGRAMS
------------------------------------------------------------ Letter :3

Oregon, Washington, and Wisconsin have expanded their home and
community-based care programs since the early 1980s as part of
efforts to control institutional long-term care expenditures and
respond to consumer preferences for alternatives to institutional
care.  Growth in the number of beneficiaries who received home and
community-based care in 1983 and 1993 is shown in figure 2 for Oregon
and Washington.\5

   Figure 2:  Aged and Physically
   Disabled Users of Nursing
   Facility and Home and
   Community-Based Care in Oregon
   and Washington, 1983 and 1993

   (See figure in printed
   edition.)

Sources:  Senior and Disabled Services Division, Oregon Department of
Human Resources; and Aging and Adult Services Administration,
Washington Department of Social and Health Services. 

Although they faced very different situations in terms of nursing
facility bed supply--and their bed supplies remain quite
different--the three states have used their expanded capacity for
home and community-based services to help justify limiting the supply
and use of nursing facility beds.\6 This has been accomplished
through the certificate of need process\7 and other restrictions on
adding beds.  The three states have taken different approaches to
structuring the administration of their long-term care programs and
delivering services.  All offer multiple home and community-based
programs for the aged and persons with physical disabilities,
including Medicaid waiver and state-funded programs; but eligibility
for the programs and the specific services they provide are different
in each state.  There are differences, moreover, in the extent to
which the states emphasize in-home services relative to services
provided in a variety of alternative living arrangements, such as
adult foster homes and assisted living facilities.  Table 1 provides
a summary of key characteristics in the three states. 



                           Table 1
           
            Key Characteristics of Long-Term Care
            Services for the Aged and Persons with
               Physical Disabilities in Oregon,
                  Washington, and Wisconsin

                               Washingt
Characteristic         Oregon        on  Wisconsin
-------------------  --------  --------  -------------------
Ratio of nursing           36        49  75
 facility beds per
 1,000 persons aged
 65 and older\a
Number of aged and
 physically
 disabled
 beneficiaries
Home and community-  16,330\b  22,040\b  Home health and
 based care                               personal care\c--
                                          12,577
                                          Waiver--6,129
                                          COP--5,819
Nursing facility        7,631    17,428  30,497
 care
Percentage of aged         68        56  NA
 and physically
 disabled
 beneficiaries
 receiving home and
 community-based
 services
------------------------------------------------------------
NA:  data not available. 

Note:  All of the statistics in the table are for 1993 except for
Wisconsin and the population ratios, which are for 1992. 

\a Nationwide, there were 53 nursing facility beds per 1,000 persons
aged 65 and older in 1992. 

\b In Oregon and Washington, numbers of beneficiaries using nursing
facility and home and community-based programs are reported
differently.  For nursing facilities, the number of beneficiaries is
the average daily census.  For home and community-based programs, the
number of beneficiaries is the average number of persons served
monthly during the year. 

\c Wisconsin beneficiaries generally use more than one home and
community-based program at a time.  Due to this overlap, the numbers
of users reported by the different programs have not been summed. 
The counts of home health and personal care users include the aged
and persons with physical or developmental disabilities.  COP is the
state-funded Community Options Program. 


--------------------
\5 Wisconsin is not included in the figure because comparable data
were not available. 

\6 From 1982 to 1992, the ratio of licensed nursing facility beds per
1,000 persons aged 65 and older remained constant nationwide at 53.1
beds per 1,000.  Over that decade, ratios declined in Wisconsin from
89.0 to 74.5 beds per 1,000, but remained well above the national
average.  In Oregon, ratios declined from 47.2 to 36.0 beds per 1,000
and in Washington, from 59.3 to 48.7. 

\7 The National Health Planning and Resources Development Act of 1974
(P.L.  93-641), among other things, required state agencies to
administer so-called certificate of need programs as a means of
containing health care costs and preventing unnecessary duplication
of health services.  Under these programs, nursing facilities and
other providers were required to obtain a certificate of need before
they could expand facilities.  Certificate of need commonly was used
to control the expansion of nursing facility bed supply and
associated costs.  After sections of the law were repealed effective
1987, some states discontinued or modified their programs. 


      OREGON
---------------------------------------------------------- Letter :3.1

Oregon operates under a policy that considers nursing facilities to
be the placements of last resort.  Implementation of that policy
through certificate of need controls and facility closures has
reduced the ratio of nursing facility beds per 1,000 persons 65 and
older from 47 in 1982 to 36 in 1992, one of the lowest in the
country. 

In Oregon, a single agency is responsible for institutional and
noninstitutional care programs for the aged and persons with physical
disabilities.  Oregon covers personal care and home health services
in its regular Medicaid program, but most of its home and
community-based services are provided through a Medicaid waiver
program.  There also is a smaller state-funded program for persons
who do not qualify for Medicaid.  In 1993, 68 percent of the nearly
24,000 beneficiaries receiving Medicaid or state-supported long-term
care during an average month were being cared for in home or
community-based settings. 

The state has actively developed noninstitutional alternative living
arrangements for long-term care beneficiaries, with emphasis on adult
foster homes and assisted living facilities.  Of the aged and persons
with physical disabilities who received noninstitutional care in
1993, about 34 percent (more than 5,500 individuals) received it in a
setting other than their own homes. 


      WASHINGTON
---------------------------------------------------------- Letter :3.2

Washington has a formal policy to deliver long-term care through home
and community-based settings whenever possible.  In 1989, it
established a goal of gradually reducing the ratio of nursing
facility beds per 1,000 aged residents from about 54 to 45 by
limiting the number of new beds.  By 1992, the ratio had dropped to
49 per 1,000 aged residents. 

In Washington, a single state agency is responsible for institutional
and noninstitutional long-term care services for the aged and persons
with physical disabilities.  Washington offers a number of home and
community-based care programs, including a Medicaid waiver program, a
nonwaiver Medicaid personal care program, and two state-funded
programs for persons who do not qualify for Medicaid.  In 1993, 56
percent of the nearly 39,500 beneficiaries receiving Medicaid or
state-supported long-term care during an average month were being
cared for in home or community-based settings. 

Washington has made some efforts to encourage development of
alternative living arrangements, but not to the extent that Oregon
has.  In 1993, about 15 percent (almost 3,300 individuals) of the
aged and persons with physical disabilities who received
noninstitutional care received it in a setting other than their
homes. 


      WISCONSIN
---------------------------------------------------------- Letter :3.3

Wisconsin has expanded home and community-based care programs to help
moderate the growth of Medicaid nursing facility use and
expenditures.  The state also has capped the number of nursing
facility beds.  As a result, Wisconsin's ratio of nursing facility
beds per 1,000 elderly persons, though it remained higher than the
U.S.  average, declined from 89 in 1982 to 75 in 1992. 

Wisconsin's regular Medicaid program provides a substantial amount of
home health and personal care services to the aged and persons with
physical disabilities.  In addition, the state operates a Medicaid
waiver program and the state-funded Community Options Program (COP). 
Wisconsin differs from Oregon and Washington in its administrative
structure for long-term care programs.  The waiver program and the
state-funded program are the responsibility of one division of the
Department of Health and Social Services, while the regular Medicaid
program and nursing facilities fall in a different division. 
Services are managed and delivered at the county level. 

In 1992, most of Wisconsin's long-term care beneficiaries--a daily
average of almost 30,500 individuals--continued to receive services
in nursing facilities.  An estimated 14,000 individuals, or about
one-third of the total, used one or more of the home and
community-based care programs.\8 Unlike Oregon and Washington,
Wisconsin has not been active in encouraging or developing
alternative living arrangements, but has placed more emphasis on
in-home services. 


--------------------
\8 It is difficult to estimate the number of individuals using home
and community-based services in Wisconsin because individuals
generally are served by more than one program and persons with
developmental disabilities are included in the data on home health
and personal care.  This estimated unduplicated count of users is
based on data reported in table 1 and appendix table IV.1. 


   MANAGEMENT AND COST CONTROLS
   LIMIT GROWTH IN MOST HOME AND
   COMMUNITY-
   BASED PROGRAMS
------------------------------------------------------------ Letter :4

Federal waiver rules and state budget constraints limit the overall
growth in many of the three states' home and community-based service
programs.  In addition, the states apply financial eligibility and
functional impairment criteria to control beneficiary eligibility for
services.  Finally, the states use a variety of management techniques
to control long-term care program growth and expenditures in both
institutional and home and community settings. 


      WAIVER RULES AND STATE
      BUDGETS CONSTRAIN OVERALL
      GROWTH
---------------------------------------------------------- Letter :4.1

Federal Medicaid waiver rules have been a significant factor in
determining how large the three states' home and community-based
programs have grown.  Under these rules, each waiver is approved to
serve a specific unduplicated number of beneficiaries each year, and
there is a limit on the amount of federal funds that may be spent
under the waiver.  These controls are in place to help ensure that
waiver programs (1) will not increase overall Medicaid expenditures
and (2) will provide home and community-based services only as a
substitute for institutional care.  Oregon's waiver for the aged is
the only waiver nationwide that operates under different rules, which
approve an overall expenditure cap on the federal Medicaid
contribution to the state's nursing facility and home and
community-based care programs combined. 

In the mid-1980s, some states were critical of federal waiver rules
that constrained expansion of home and community-based care.  More
recently, however, state budget limitations also have restricted the
size of home and community-based programs, including the waivers.  In
1989, for example, Wisconsin did not initially apply for the maximum
number of waiver beneficiaries that federal rules would allow because
of limited state funding.  In all three states, home and
community-based programs that are exclusively state-funded also face
state spending limits that generally cannot be exceeded. 


      FINANCIAL AND FUNCTIONAL
      IMPAIRMENT CRITERIA CONTROL
      ELIGIBILITY
---------------------------------------------------------- Letter :4.2

Program eligibility criteria provide ways to manage program growth
and costs.  Individuals must meet Medicaid financial eligibility
criteria, which though complex generally require low income and
limited assets.  State programs also are focused on lower-income
individuals and have similar criteria regarding income and assets. 
In addition, individuals must meet functional impairment criteria to
qualify for services under each of the long-term care programs. 
Eligibility for long-term care based on functional impairment
generally is determined by a detailed assessment of each applicant's
need for assistance in activities of daily living (such as eating,
toileting, and bathing) and other factors, including medical,
cognitive, social, and living conditions.  In Oregon, Washington, and
Wisconsin, these assessments are conducted using instruments and
procedures that are standard statewide. 


      STATES USE A VARIETY OF
      MANAGEMENT TECHNIQUES
---------------------------------------------------------- Letter :4.3

The three states expanded home and community-based care in part to
help control rising Medicaid expenditures for institutional services. 
To that end, they also have used the certificate of need process or
other mechanisms to limit new nursing facility beds, eliminated beds,
undertaken preadmission screening of nursing facility applicants, and
constrained the annual increases in nursing facility reimbursement
rates.  In addition, the states have developed various management
controls to limit the size and costs of home and community-based
programs.  The specific controls vary among the three states, but
many of them fall into three groups, as follows: 

  Provider fee controls and capped individual service budgets.  All
     three states control payments to home and community-based
     service providers through fee or payment rate schedules.  Rates
     for a particular service may vary according to beneficiary
     disability levels.  The states also impose per-beneficiary
     limits on hours of service or dollar benefits in the different
     programs. 

  Case management.  Case management is an important component of home
     and community-based service delivery in all three states.  Case
     managers typically assess beneficiary needs, determine financial
     eligibility, develop and monitor care plans, and authorize
     services.  Officials in Oregon and Washington believe that case
     management saves money by functioning as a gatekeeper to
     Medicaid services, but studies have not been done to document
     the cost-control effects. 

  Other mechanisms.  Some mechanisms are unique to a particular
     state.  For example, Oregon's Nurse Delegation Act appears to
     stand out nationally for the extent to which it permits nurses
     under contract with the state to train and monitor persons who
     are not licensed health caregivers to provide specific medical
     services, such as administering certain kinds of medications. 
     Oregon officials said this use of nonprofessional caregivers
     makes the delivery of home and community-based care less costly. 
     In Washington, on the other hand, the use of unlicensed paid
     staff is prohibited, and officials believe this increases costs. 


   STATES BELIEVE EXPANDING HOME
   CARE HAS INCREASED ACCESS WHILE
   CONTROLLING LONG-TERM CARE
   COSTS
------------------------------------------------------------ Letter :5

One result of the shift to home and community-based care in these
three states is that the states have been able to serve more
beneficiaries with the Medicaid and state dollars they have
available.  This is because on a per-beneficiary basis, home and
community-based care is considerably less expensive than nursing
facility care.  In Washington, for example, the average monthly
expenditure per user for nursing facility care for the aged and
persons with physical disabilities averaged $2,023 in 1993, compared
with $419 for home and community-based care users (see table 2). 
Generally, per-user spending for nursing facility care has also been
rising faster than for home and community-based care. 



                           Table 2
           
           Average Expenditure per User for Nursing
            Facility and Home and Community-Based
               Care in Oregon, Washington, and
                          Wisconsin

Programs for          Oregon   Washington
the aged and        (monthly     (monthly  Wisconsin
persons with     expenditure  expenditure  (annual
physical                   ,            ,  expenditure,
disabilities           1993)        1993)  1992)\a
---------------  -----------  -----------  -----------------
Nursing               $1,657       $2,023  $20,427
 facility care
Home and                 420          419  Home health &
 community-                                 personal care
 based care                                 Aged--5,744
                                            Disabled--
                                            7,017
                                            Waiver--6,371
                                            COP--3,410
------------------------------------------------------------
\a Because Wisconsin beneficiaries generally use more than one
program, we have not summed the data.  The home health and personal
care services for the disabled category includes persons with
physical and developmental disabilities. 

Sources:  Senior and Disabled Services Division, Oregon Department of
Human Resources; Aging and Adult Services Administration, Washington
Department of Social and Health Services; Division of Community
Services and Division of Health, Wisconsin Department of Health and
Social Services. 

Looking at Medicaid and state expenditures only, however, provides a
somewhat distorted picture of the difference between spending for
institutional and for home and community-based care.  Persons who are
served at home or in community-based settings may receive other forms
of government support that persons in nursing facilities do not
receive.\9 For example, in 1993 many beneficiaries of home and
community-based care received federal SSI payments of up to $434 per
month as general income support.  Studies performed in Wisconsin
suggest that the net savings in per-person public expenditures
associated with home and community-based care amounted to about 16
percent. 

Officials in the three states credit expansion of home and
community-based services with playing an integral part in controlling
increases in long-term care expenditures.  A study concluded that
Oregon's use of home and community-based services instead of nursing
facility care had saved an estimated $227 million between 1981 and
1991 out of a projected direct service expenditure of $1.35 billion
for the period.  Oregon and Washington officials told us that
increased home and community-based services have enabled them to
reduce the number of nursing facility beds and place beneficiaries in
less costly settings.  All three states have succeeded in controlling
the number of nursing facility beds.  Between 1982 and 1992, the
number of licensed nursing facility beds increased 20.5 percent
nationally, while the combined number of beds in Oregon, Washington,
and Wisconsin declined 1.3 percent.\10


--------------------
\9 Individuals entering a nursing facility for a stay of 90 days or
less and who maintain an outside residence may receive full SSI
payments for up to 3 months.  For others, the payment is discontinued
except for a small personal allowance of $30 per month plus a
supplement in some states. 

\10 Our analysis of available data from 50 states shows that
increased spending for home and community-based care was not always
linked to slower growth in the number of nursing facility beds.  Some
states (for example, Colorado and Michigan) had limited growth in the
number of nursing facility beds, but also had relatively low spending
for Medicaid home and community-based care.  Other states (such as
North Carolina and Massachusetts) had greater than average growth in
the number of nursing facility beds along with relatively high home
and community-based care spending. 


      PROGRAM COST CONTROLS RESULT
      IN NOT EVERYONE BEING SERVED
---------------------------------------------------------- Letter :5.1

Although home and community-based programs have allowed the three
states to offer services to more people, there are indications that
the programs' cost controls have at times limited access to services. 
There are waiting lists for Wisconsin's waiver program, and
Washington's waiver program was closed for 8 months in 1992-93
because of limited waiver capacity.  Enrollment was limited for some
state-funded programs for the aged and persons with physical
disabilities in all three states.  In Oregon and Washington, local
service administrators have taken various approaches to managing this
excess demand, ranging from simple first-come, first-served waiting
lists for eligible beneficiaries to priority-ranking systems based on
assessed beneficiary needs.  A Washington official said that eligible
waiver applicants have the option of using institutional services
when waiver services are not available, but may choose not to do so. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Oregon, Washington, and Wisconsin have expanded their Medicaid home
and community-based care programs to better serve residents with
long-term care needs, while managing expected growth in demand for
long-term care and controlling overall long-term care expenditures. 
An essential component of this expansion has been the states' ability
to control growth and expenditures effectively for these home and
community-based care programs.  The three states have pursued this
objective through the use of Medicaid waivers, which limit enrollment
and expenditures, and through additional controls on beneficiary
functional eligibility and provider fees.  State officials believe
that expanding home and community-based care programs has been cost
effective because of the savings that result from more stringent
controls on the number and use of nursing facility beds. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

We discussed a draft of this report with HCFA officials in the
Medicaid Bureau and with Oregon, Washington, and Wisconsin state
officials.  They generally agreed with the information as presented. 
We have incorporated their comments where appropriate. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to the Secretary of Health and
Human Services, the Administrator of the Health Care Financing
Administration, the Director of the Office of Management and Budget,
the Secretaries of Human Services in each of the three states, and
other interested parties.  We also will make copies available to
others on request. 

Please call me at (202) 512-7125 if you or your staff have any
questions concerning this report.  Other major contributors are
listed in appendix V. 

Sincerely yours,

Mark V.  Nadel
Associate Director,
 Health Policy Issues


MEDICAID LONG-TERM CARE SERVICES
=========================================================== Appendix I

This appendix describes (1) national and state long-term care
services focusing on Medicaid, (2) Medicaid institutional long-term
care, (3) the Medicaid home and community-based service waiver
program and related policies, (4) nonwaiver Medicaid home care
services, and (5) the study's scope and methodology. 


   NATIONAL AND STATE LONG-TERM
   CARE SERVICES
--------------------------------------------------------- Appendix I:1

Long-term care, which includes an array of health, personal care, and
social and supportive services, is provided to individuals who are at
least partially unable to care for themselves because of a disability
or impairment resulting from advanced age, a chronic illness, injury,
or other conditions.  State governments have lead responsibility for
public long-term care programs.  These programs fund services
including institutional services in nursing facilities and
intermediate care facilities for the mentally retarded (ICF/MR), and
a range of home and community-based services.  States have taken a
variety of approaches to program administration and service delivery. 
The states also are responsible for licensing all long-term care
facilities, public and private. 

Since the early 1980s, home and community-based long-term care has
expanded more rapidly than institutional care, reflecting individual
preferences and state initiatives.  Most long-term care expenditures,
however, continue to be for services in nursing facilities and other
institutions. 

In the United States, expenditures for nursing facility care are
financed about equally by Medicaid and private out-of-pocket
payments.  In fiscal year 1993, the Department of Health and Human
Services estimated that Medicaid provided $36.3 billion (48.3
percent) of the $75.2 billion spent on nursing facility care
including care in ICFs/MR, while private individuals paid $29.6
billion (39.4 percent) out-of-pocket.  The remainder was covered by
Medicare (7.6 percent), private insurance (0.1 percent), and other
sources.  The large proportions paid by Medicaid and individuals
out-of-pocket have remained relatively constant since 1980. 


      MEDICAID
------------------------------------------------------- Appendix I:1.1

Total Medicaid expenditures for all types of long-term care services
increased from $33.8 billion in fiscal year 1991 to $38.9 billion in
fiscal year 1992 (15.1-percent growth) and to $42.0 billion in fiscal
year 1993 (8-percent growth).  In fiscal year 1993, Medicaid
long-term care expenditures were broken down as follows:  nursing
facility care, 62.2 percent; ICF/MR care, 21.9 percent; personal care
services, 5.9 percent; home and community-based waivers, 6.6 percent;
and home health services, 3.4 percent.  Institutional services
consumed about 84 percent of Medicaid long-term care expenditures and
home and community-based services, the remaining 16 percent.  This
distribution is shown in figure I.1. 

   Figure I.1:  Medicaid
   Expenditures for Long-Term Care
   Services, 1993

   (See figure in printed
   edition.)

Note:  Total spending was $42 billion. 

Source:  SysteMetrics.MEDSTAT, using preliminary data from HCFA-64. 


   MEDICAID INSTITUTIONAL
   LONG-TERM CARE IN THE STATES
--------------------------------------------------------- Appendix I:2

Medicaid payments for institutional care far exceed the amount spent
on noninstitutional care.  As table I.1 shows, funding for
institutional care was about $35.3 billion in fiscal year 1993,
compared with $6.7 billion for noninstitutional home and
community-based care.  This pattern has persisted over time despite
the higher growth rate in spending for home and community-based care
shown in figure I.2. 



                                    Table I.1
                     
                       Medicaid Institutional and Home and
                          Community-Based Care Spending

                              (Dollars in millions)

                1987      1988      1989      1990      1991      1992      1993
----------  --------  --------  --------  --------  --------  --------  --------
Institutio   $19,068   $20,532   $22,296   $25,625   $28,994   $33,065   $35,286
 nal care
Home and       2,069     2,448     3,257     3,925     4,758     5,761     6,662
 community-
 based
 care
--------------------------------------------------------------------------------
Note:  Institutional care spending includes expenditures for nursing
facilities and ICFs/MR.  Home and community-based care includes
expenditures for personal care, home health, and waiver services. 

   Figure I.2:  Medicaid Long-Term
   Care Expenditures for Home and
   Community-Based and
   Institutional Care, Fiscal
   Years 1987-1993

   (See figure in printed
   edition.)

Source:  SysteMetrics.MEDSTAT, using preliminary data from HCFA-64. 


      NURSING FACILITY SERVICES
------------------------------------------------------- Appendix I:2.1

Nursing facilities primarily serve the elderly with disabilities
(that is, individuals with disabilities who are over 65 and
especially those over 85), but may also serve younger persons with
physical disabilities.  Nationwide, the number of nursing facility
beds grew from about 1.3 million in 1978 to 1.7 million in 1992,
while the ratio of beds per 1,000 persons aged 65 and older dropped
slightly from 53.4 per 1,000 in 1978 to 53.1 beds per 1,000 in 1992. 
However, the ratio of beds to 1,000 persons aged 85 and older--the
group most likely to require nursing facility services--declined from
610 in 1978 to 502 in 1992.  Nursing facility bed ratios vary
dramatically from state to state.  In 1992, ratios ranged from fewer
than 25 beds per 1,000 aged 65 and older in Nevada to nearly 86 in
Nebraska. 

The Omnibus Budget Reconciliation Act (OBRA) of 1987 (P.L.  100-203)
comprehensively revised the statutory authority that applies to
nursing homes participating in the Medicaid program.  The so-called
nursing home reform law eliminated the Medicaid program's previous
distinction between skilled nursing facilities and intermediate care
facilities, and established a single category called nursing
facilities.  It strengthened the quality requirements that a nursing
facility must meet to participate in Medicaid and specified that
nursing facility reimbursement rates must be sufficient to cover the
costs of complying with the new nursing facility requirements. 


      INTERMEDIATE CARE FACILITIES
      FOR THE MENTALLY RETARDED
------------------------------------------------------- Appendix I:2.2

Although this report focuses on programs for the aged and persons
with physical disabilities, the cost of care provided to persons with
developmental disabilities constitutes a substantial portion of the
Medicaid institutional long-term care budget.  Expenditures on
ICFs/MR in fiscal year 1993 were $9.2 billion.  This amount is 21.9
percent of Medicaid long-term care expenditures and more than the
total amount spent for all Medicaid home and community-based care. 


   MEDICAID HOME AND
   COMMUNITY-BASED SERVICE WAIVER
   PROGRAM
--------------------------------------------------------- Appendix I:3

As part of OBRA 1981 (P.L.  97-35), the Congress established the home
and community-based service waiver program as section 1915(c) of the
Social Security Act to offer an alternative to institutional
long-term care services.  The provision was one of two in OBRA 1981
that allowed states, with federal approval, greater flexibility in
program design as a means of developing cost-effective alternatives
for delivering services.\1

As of May 1994, all states except Arizona--which provides similar
services under a separate demonstration program--had initiated
Medicaid home and community-based waiver programs.  The 49 states
operate 195 individual waivers with each waiver authorizing services
for a specific group needing long-term care, such as the aged,
persons with physical disabilities, or persons with developmental
disabilities.  In 1991, when the Health Care Financing Administration
most recently tabulated figures, approximately 73 percent of those
served under the waivers were aged and persons with physical
disabilities; 21 percent were persons with developmental
disabilities; and the remainder were persons with acquired
immunodeficiency syndrome (AIDS), disabled children, and others.  In
terms of spending, however, 31 percent of the nearly $1.7 billion in
1991 waiver expenditures was spent on the aged and persons with
physical disabilities, 65 percent was spent on persons with
developmental disabilities, and the remaining 4 percent was split
among children with disabilities and persons with AIDS or chronic
mental illness. 


--------------------
\1 Much of the following description of the waiver program is drawn
from Medicaid Source Book:  Background Data and Analysis,
Congressional Research Service (Jan.  1993). 


      HOME AND COMMUNITY-BASED
      WAIVER SERVICES
------------------------------------------------------- Appendix I:3.1

States provide a range of health and social support services under
Medicaid home and community-based waivers.  Waiver programs for the
aged and persons with physical disabilities most often offer case
management, homemaker services, adult day care, personal care, and
respite services.  For persons with developmental disabilities,
waiver programs most often provide habilitation services, respite
services, and case management.  States may also provide other
services such as transportation and minor home modifications. 

The waiver program permits states to cover (1) services that are
beyond the medical and medically related benefits that have been the
principal focus of the Medicaid program and (2) individuals whose
incomes are above the usual Medicaid eligibility standard, but less
than the higher income standard used for nursing facility residents. 
Under waiver programs, the states may cover a wide variety of
medical, nonmedical, social, and supportive services.  But services
are to be directed to individuals who, "but for the provision of such
services ...  would require the level of care provided in a hospital,
or a nursing facility, or intermediate care facility for the mentally
retarded."\2 Descriptions of some of these types of services are
presented in table I.2.  States have flexibility in deciding which
services they will cover in their programs. 



                          Table I.2
           
             Examples of Home and Community-Based
                           Services

Service             Description
------------------  ----------------------------------------
Case management     Assists beneficiaries in getting
                    medical, social, educational, and other
                    services.

Personal care       Includes bathing, dressing, ambulation,
                    feeding, grooming, and some household
                    services such as meal preparation and
                    shopping.

Adult day care      Includes personal care and supervision
                    and may include physical, occupational,
                    and speech therapies. Also provides
                    socialization and recreational
                    activities adapted to compensate for any
                    physical or mental impairments.

Respite care        Provides relief to the primary caregiver
                    of a chronically ill or disabled
                    beneficiary. By providing services in
                    the beneficiary's or provider's home, or
                    in other settings, respite care allows
                    the primary caregiver to be absent for a
                    time.

Homemaker           Assists beneficiaries with general
                    household activities and may include
                    cleaning, laundry, meal planning,
                    grocery shopping, meal preparation,
                    transportation to medical services, and
                    bill paying.
------------------------------------------------------------
In addition, waivers are not required to cover all Medicaid
beneficiaries throughout the state--but may be targeted.  States have
the flexibility to define the geographic areas and target
populations, and set financial eligibility levels for any individual
waiver.  Because of these variations, many states have more than one
waiver. 


--------------------
\2 Section 1915(c)(1) of the Social Security Act. 


      WAIVER APPROVAL PROCESS
------------------------------------------------------- Appendix I:3.2

The statute requires that a waiver shall be approved only if

     "under such waiver the average per capita expenditure estimated
     by the State in any fiscal year for medical assistance provided
     with respect to such individuals [the waiver enrollees] does not
     exceed 100 percent of the average per capita expenditure that
     the State reasonably estimates would have been made in that
     fiscal year for expenditures ...  for such individuals if the
     waiver had not been granted."\3

To implement this portion of the statute, HCFA applies a formula that
seeks to keep costs at or below what Medicaid would have spent in the
absence of the waivers--a concept known as budget neutrality.\4
Within the targeted group, the formula generally compares the
estimated average cost per beneficiary of long-term care services in
a state Medicaid program with a home and community-based service
waiver and without such a waiver.  The formula also sets an annual
limit on the unduplicated number of beneficiaries who may be served
in a waiver program.  By multiplying the average cost per beneficiary
by the unduplicated number of beneficiaries, an annual budget ceiling
is created for the waiver.\5 The most contentious issue surrounding
the formula has always been the "cold bed" concept used to determine
the number of eligible waiver beneficiaries. 


--------------------
\3 Section 1915(c)(2)(D) of the Social Security Act. 

\4 HCFA regulations formalized budget neutrality in a formula
published in 1981 and revised in 1985. 

\5 Initially, HCFA disallowed federal Medicaid payments for
expenditures exceeding approved waiver limits.  However, in 1986 the
Congress amended the statute to clarify that HCFA could not disallow
payments on that basis. 


      COLD BEDS AND THE WOODWORK
      EFFECT
------------------------------------------------------- Appendix I:3.3

Historically, a state has been required to document that it has
either an empty or closed institutional bed (cold bed) for each
waiver beneficiary.  HCFA viewed this policy as a means to control
the rate of growth of the Medicaid home and community-based waivers. 
HCFA's concern was that providing a new home care benefit would bring
individuals "out of the woodwork" to use the services. 

The waiver formula requires states to estimate the number of persons
who would be served in nursing facilities and other institutions in
the absence of a waiver.  This requirement is intended to ensure that
home and community-based services substitute for institutional
services rather than supplement them.  Institutional capacity is
measured as the sum of (1) all current Medicaid-certified beds, by
type of facility; (2) all beds that would be added during the life of
the waiver; and (3) all beds eliminated as a direct result of the
waiver.  States with a certificate of need program must document that
beds would be added and would be certified in the absence of a
waiver.  For states without certificate of need, other "convincing
evidence" must be provided that nursing facilities would actually be
built (in the absence of the waiver).  States also had to submit data
on occupancy rates and waiting lists for their nursing facilities as
evidence of the demand for institutional services and a baseline
measure for the effect of waiver services over time. 

The cold bed policy has at times been problematic for states that
limited nursing facility bed supplies prior to applying for a waiver. 
Their smaller bed supplies, when incorporated into the formula, have
resulted in lower limits on the number of persons allowed to be
covered under the waiver.  Some states believed the formula punished
them for their earlier success in controlling costly institutional
care. 

In recent years, HCFA has become more flexible in evaluating the
evidence required to document actual and potential bed capacity in
the absence of a waiver.  HCFA and the National Governors'
Association have negotiated a simplified version of the
cost-neutrality formula, and the new formula was published as a final
rule on July 25, 1994.\6 The new formula compares average costs with
and without the waiver, and eliminates number of beds as a variable
altogether.  In brief, the cold bed policy no longer exists. 


--------------------
\6 59 Fed.  Reg.  37702. 


      1915(D) WAIVERS FOR THE
      ELDERLY
------------------------------------------------------- Appendix I:3.4

In OBRA 1987 (P.L.  100-203), the Congress established a new waiver
program for persons aged 65 and older.  This alternative waiver was
developed to give states that had tried to limit their nursing
facility bed supply more flexibility to expand home and
community-based services.  Where the 1915(c) waiver limits the
unduplicated number of persons served and sets an overall spending
target, the 1915(d) waiver sets only an overall spending limit.  For
example, under a 1915(c) waiver, if a state shows that it will empty
a nursing facility bed costing $24,000 a year, it can serve only one
person in the community even if community-based services cost
substantially less.  Under a 1915(d) waiver, however, when a state
empties a bed costing $24,000, it can provide community-based
services to as many more people as can be served for that amount. 

Under a 1915(d) waiver, a limit on total Medicaid long-term care
expenditures (that is, nursing facility and home and community-based
services combined) is agreed on by HCFA and the state.  Long-term
care spending in a base year is updated annually based on the changes
in cost of the services and size of the state's population 65 and
older.  As long as a state stays within the limit, the mixture of
spending on nursing facilities and home and community-based services
is left to the state.  As with the 1915(c) waivers, states have the
flexibility to define the geographic areas and target populations and
to set financial eligibility levels.  As of January 1994, Oregon was
the only state that had sought and operated a 1915(d) waiver program. 
However, in March 1994 state officials submitted an application to
HCFA to drop the 1915(d) waiver and expand the 1915(c) waiver because
of expected difficulty in staying within the 1915(d) expenditure
limit.\7


--------------------
\7 There is one other type of waiver for home and community-based
care.  Section 1915(e), enacted in 1988, created waivers for children
with AIDS or who were drug dependent at birth. 


      FUNCTIONALLY DISABLED
      ELDERLY OR FRAIL ELDERLY
      PROGRAM
------------------------------------------------------- Appendix I:3.5

In 1990, the Congress enacted a program within Medicaid that allows
states to provide a package of home and community-based services to
the elderly as a state option.  The intent of the legislation was to
give states an alternative to the waiver programs.  The new program
does not require states to demonstrate budget neutrality as under
1915(c) and 1915(d) waivers.  It does, however, cap overall spending
at specific amounts each year.  Only two states have requested
funding under this program, which is authorized only through fiscal
year 1995. 


   NONWAIVER MEDICAID HOME CARE
   SERVICES
--------------------------------------------------------- Appendix I:4

Two home care services are covered under the regular Medicaid
program.  One is mandatory and one is optional.  Use of these
services has been growing, along with the use of waiver services, as
another alternative to institutional care. 

Home Health.  Medicaid requires all state programs to make home
health services available to certain eligible Medicaid beneficiaries
who are entitled to nursing facility services.  Home health services
generally are provided in an individual's place of residence--not in
a hospital or nursing facility.  Services must be provided on a
physician's orders as part of a written plan of care that is reviewed
by a physician every 60 days.  Home health services include part-time
nursing care, home health aide care, and medical supplies and
equipment, and also may include physical therapy, occupational
therapy, and speech pathology and audiology services. 

Personal Care.  Personal care has become an important part of the
home and community-based service mix in certain states.  While the
service can be covered under a waiver, most states have chosen to
provide it as a separate optional service, targeting it to persons
who meet the states' functional impairment criteria.  OBRA 1993
clarified that personal care services are covered at the option of
the state and can be authorized for an individual either by a
physician as part of a plan of treatment or by others, such as a case
manager, in accordance with a service plan. 


   SCOPE AND METHODOLOGY
--------------------------------------------------------- Appendix I:5

We focused our work on Oregon, Washington, and Wisconsin mainly
because the three states use home and community-based programs to a
significant extent.  Moreover, federal and state Medicaid specialists
indicated that the three states' programs could provide examples of
mechanisms for managing program growth. 

Our analysis covered state programs that provided long-term care
services to individuals who are aged or who have physical
disabilities.  We conducted extensive interviews with state program
administrators and collected documentation, including program
enrollment and expenditure data.  We spoke with other interested
parties, including local officials and advocates for those served by
the programs.  We conducted our work between July 1992 and April 1994
in accordance with generally accepted government auditing standards. 


LONG-TERM CARE IN OREGON
========================================================== Appendix II

By 1993, 68 percent of the aged and persons with physical
disabilities who were beneficiaries of publicly funded long-term care
in Oregon were receiving care in their homes or in other community
settings, compared with 49 percent in 1983.\1 Increased reliance on
home and community-based care has helped the state serve more
beneficiaries within the constraints of available funds.  Oregon has
generally been able to meet the demand for home and community-based
services, although its state-funded program has faced capacity
limits. 


--------------------
\1 All caseload and expenditure data discussed and displayed in
tables are state fiscal year data (July through June) unless
otherwise noted. 


   OREGON'S PROGRAMS FOR
   DELIVERING LONG-TERM CARE
-------------------------------------------------------- Appendix II:1

Oregon operates two home and community-based programs for the aged
and persons with physical disabilities:  a Medicaid waiver program
and a state-funded program.  These two programs served an average of
more than 16,300 persons per month in 1993, compared with about 7,600
in nursing facilities (see table II.1).  Annual direct expenditures
for the two programs totaled about $82 million, compared with about
$152 million for nursing facilities.  Additionally, federal
Supplemental Security Income (SSI) and state supplemental payments
(SSP) totaled about $14 million for eligible beneficiaries of these
two home and community-based programs in 1993, according to
information supplied by Oregon officials.\2



                                    Table II.1
                     
                     Oregon's Long-Term Care Service Programs
                      for the Aged and Persons With Physical
                                Disabilities, 1993

                                                   State
                                                  fiscal       Average
                                   Average     year 1993       monthly
                    Services       monthly  expenditures   expenditure  Funding
                    provided      users \a            \b   per user \c  source
------------------  ------------  --------  ------------  ------------  --------
Institutional care
--------------------------------------------------------------------------------
Nursing facilities  Nursing and      7,631  $151,714,128        $1,657  Medicaid
                    personal
                    care


Home and community-based care
--------------------------------------------------------------------------------
Medicaid waiver     Personal        13,053    77,712,002           496  Medicaid
program: section    care and
1915(c) waiver and  some nursing
section 1915(d)     services
waiver

Oregon Project      Personal         3,277     4,501,025         \114\  State
Independence        care, chore,
                    escort, home
                    health, day
                    care, and
                    respite care

================================================================================
All home and                        16,330   $82,213,027          $420
community-based
programs
--------------------------------------------------------------------------------
\a The average monthly users for nursing facility and home and
community-based care programs are reported differently.  For nursing
facilities, average monthly users is the average daily census.  For
home and community-based care programs, average monthly users is the
average number of persons served monthly during 1993. 

\b Only direct long-term care expenditures are reported for the home
and community-based programs; other public expenditures, such as SSI,
are not included.  Also excluded are expenditures for program
administration (including case management services), Older Americans
Act services, and Medicaid nonwaiver personal care, home health, and
private duty nursing services.  Medicaid nonwaiver service
expenditures totaled about $4 million in 1993.  Expenditure figures
do not include $7.2 million in state offsets that are primarily from
estate recoveries, according to a state official. 

\c For nursing facility and home and community-based care programs,
average monthly expenditure per user has been calculated by dividing
the fiscal year expenditure by 12 and dividing that quotient by the
average monthly users. 

Source:  Senior and Disabled Services Division, Oregon Department of
Human Resources. 

The Medicaid waiver program (in fact, two waivers operated as one
program) serves persons who otherwise would qualify for
Medicaid-covered care in a nursing facility.\3 The program provides
such personal care and home support services as meal preparation,
assistance with medications, eating, dressing, bathing and personal
hygiene, mobility, money management, transportation, laundry,
housekeeping, and shopping.  The other program, Oregon Project
Independence, is entirely state-funded.  It provides similar types of
services to persons 60 and older who are at risk of
institutionalization but are not receiving services under Medicaid. 

In 1993, about 66 percent of the persons in Oregon's home and
community-based programs received services in their own homes.  The
rest--about 5,500--were in alternative living arrangements such as
adult foster homes or assisted living facilities.\4 Oregon has
actively promoted the development of such alternatives since the
early 1980s.  Oregon officials cite continued growth and high rates
of private-pay clients as evidence of favorable public attitudes
toward such alternatives.  In 1993, private-pay clients constituted
about 60 percent of adult foster home residents and about 73 percent
of assisted living residents. 

Oregon has consolidated administrative authority over both
institutional and noninstitutional long-term care in a single unit
within the state's Department of Human Resources (the Senior and
Disabled Services Division), which administers all funding resources
and services for aged beneficiaries and persons with physical
disabilities.  According to state officials, this consolidation has
been instrumental in developing a comprehensive long-term care
program. 


--------------------
\2 Oregon data show that $14 million in SSI and SSP support
represents an average payment of $214 per month or $2,568 per year to
about one-third of Oregon's home and community-based care
beneficiaries who are aged or have physical disabilities.  SSI/SSP
may be used to pay for the room and board portion of care in
alternative living arrangements, such as adult foster homes or
assisted living facilities. 

\3 Waiver conditions are discussed in a later section on program
management and cost controls. 

\4 These alternatives include adult foster homes, which provide a
family living environment for up to five eligible residents;
residential care facilities, which are group living facilities
providing services to six or more eligible persons; and assisted
living facilities, which provide a range of services, including
access to routine licensed nursing tasks, to six or more persons in
individual living units.  Medicaid covers only approved services
provided in these settings, not room and board. 


   PROGRAM MANAGEMENT AND COST
   CONTROLS
-------------------------------------------------------- Appendix II:2

Oregon's management and cost controls fall into three main
categories.  First, federal waiver rules and state budget limits
impose constraints on the overall size and cost of the long-term
program.  Second, beneficiaries must meet financial eligibility and
functional impairment criteria.  Third, Oregon has instituted other
management controls designed to reduce the proportion of long-term
care expenditures for institutional care and to help manage growth in
the home and community-based programs. 


      KEY FEDERAL AND STATE
      PROGRAM CONSTRAINTS
------------------------------------------------------ Appendix II:2.1

Oregon has received two types of Medicaid waivers.  The waiver for
persons with physical disabilities is a section 1915(c) waiver that
operates under enrollment capacity and expenditure limits approved by
HCFA.\5 Oregon's program for aged beneficiaries is the nation's only
section 1915(d) waiver, which has an overall expenditure cap but
allows flexibility in the number of beneficiaries served.  In this
waiver, the state can increase enrollment of home and community-based
beneficiaries as long as total expenditures for nursing facility and
home and community-based services together do not exceed the
expenditure cap.  The state must assure HCFA, however, that persons
who receive home and community-based waiver services would otherwise
qualify for Medicaid-supported nursing facility care.\6

State budgets have been an even more constraining factor in program
growth than waiver capacity limits have been, according to Oregon
officials.  State revenues in Oregon were limited throughout the
1980s, and the state-funded program in particular saw little funding
growth.  As a result, waiting lists have developed for some services
(these waiting lists are discussed later in this appendix). 

To supplement available program funding, Oregon has developed one of
the nation's most effective estate recovery programs.  Oregon law
permits the state to recover costs of Medicaid-funded nursing
facility or home and community-based services from the estates of
beneficiaries aged 65 and older who have died.\7 Recoveries amounted
to more than $7 million in 1993. 


--------------------
\5 For a description of how HCFA reviews and approves the waiver
capacity and spending limits, see appendix I. 

\6 In March 1994, because of concerns that the state might exceed the
overall expenditure cap on the 1915(d) waiver program by 1995, Oregon
submitted an application to combine its aged and physically disabled
beneficiaries in an expanded 1915(c) waiver. 

\7 OBRA 1993 (P.L.  103-66) authorized states to recover from the
estates of beneficiaries aged 55 and older.  In its next legislative
session, Oregon is expected to amend its statute to conform. 


      FINANCIAL AND FUNCTIONAL
      ELIGIBILITY CRITERIA
------------------------------------------------------ Appendix II:2.2

Oregon uses financial eligibility and functional impairment criteria
to target services to those most in need of services and at risk of
institutionalization.  The criteria for each program are summarized
in table II.2. 



                          Table II.2
           
            Oregon's Eligibility Requirements for
                   Long-Term Care Programs

Institutional care
------------------------------------------------------------
Nursing facility

Medicaid eligibility: Income less than or equal to 300
percent of the federal SSI benefit; nonexempt assets at or
below $2,000

Functional impairment: Functional disability within
specified categories of the state's functional assessment
priority system (currently categories 1-17)

Home and community-based care

Waivers

Medicaid eligibility: Same as for nursing facility

Functional impairment: Same as for nursing facility

Oregon Project Independence

Income eligibility: Individuals not eligible for Medicaid;
no assets test; income up to $580 per month; above that,
sliding fee schedule

Functional impairment: Individual at risk of
institutionalization; same criteria as for nursing facility
or waiver
------------------------------------------------------------
Source:  Senior and Disabled Services Division, Oregon Department of
Human Resources. 

Once a person's financial eligibility has been established, Oregon's
primary control mechanism for both institutional and noninstitutional
care for the aged and persons with physical disabilities is a
detailed functional needs assessment system called the Client
Assessment and Planning System (CAPS).  A case manager, registered
nurse, or social worker uses this standardized approach to measure
each applicant's dependency in activities of daily living and to
assess the applicant's living situation (for example, availability of
family or friends as caregivers).  Each applicant receives a
functional disability rating on an 18-point scale, with 1 being the
most impaired.  Table II.3 defines the 18 levels of need and shows
how the state's nearly 24,000 beneficiaries were distributed among
the levels as of December 1992.  About 60 percent of beneficiaries
were in levels 1 through 4 (the highest dependency), and 83 percent
were in levels 1 through 10. 



                          Table II.3
           
            Oregon's Distribution of Beneficiaries
           by Level of Functional Disability in the
                  CAPS System, December 1992


Level     Description                       Number   Percent
--------  ------------------------------  --------  --------
1         Dependent in mobility,             2,586      11.0
           toileting, eating, and
           cognition
2         Dependent in mobility, eating,       340       1.4
           and cognition
3         Dependent in mobility, or         11,274      47.5
           cognition, or eating
4         Dependent in toileting                81       0.3
5         Needs substantial assistance         838       3.5
           with mobility, assistance
           with toileting, and
           assistance with eating
6         Needs substantial assistance         816       3.4
           with mobility and assistance
           with eating
7         Needs substantial assistance         922       4.0
           with mobility and assistance
           with toileting
8         Needs minimal assistance with        106       0.5
           mobility and assistance with
           eating and toileting
9         Needs assistance with eating          38       0.2
           and toileting
10        Needs substantial assistance       2,744      11.6
           with mobility
11        Needs minimal assistance with        170       0.7
           mobility and assistance with
           toileting
12        Needs minimal assistance with        439       1.9
           mobility and assistance with
           eating
13        Needs assistance with                 67       0.3
           toileting
14        Needs assistance with eating         242       1.0
15        Needs minimal assistance with      2,165       9.0
           mobility
16        Dependent in bathing or               96       0.4
           dressing
17        Needs assistance in bathing          570       2.4
           and dressing
18        Independent in above levels          221       0.9
           but requires structured
           living for supervision for
           complex medical problems or a
           complex medication regimen
============================================================
          Total                             23,715       100
------------------------------------------------------------
\a Beneficiaries include those in nursing facilities and home and
community-based care programs. 

Source:  Senior and Disabled Services Division, Oregon Department of
Human Resources. 

Oregon's Senior and Disabled Services Division uses CAPS in several
ways.  It uses the individual's functional disability level to help
identify service needs and develop care plans, and it also uses CAPS
data in the nursing facility and community-based care rate-setting
systems.  In addition, if state budget limits make it necessary to
curtail eligibility, CAPS rankings help ensure that any beneficiaries
who may be dropped from coverage are the ones who would be best able
to survive on their own.  To date the legislature has chosen to fund
services for persons in levels 1 through 17. 


      OTHER MANAGEMENT AND COST
      CONTROLS
------------------------------------------------------ Appendix II:2.3

Oregon officials believe that, overall, the state's consolidated
administrative structure has been the key factor in program
management and cost control.  In addition, Oregon has other specific
controls in place.  These controls include preadmission screening of
all applicants for nursing facility services (including private-pay
applicants) and payment limitations, service limitations, and several
other related procedures for home and community-based services. 

Preadmission Screening.  Oregon conducts preadmission screening of
all nursing facility candidates--that is, on private-pay as well as
Medicaid-eligible candidates.  Case managers encourage nursing
facility applicants to consider a variety of home and community-based
services.  Oregon officials said this combination of screening and
case management has played a major part in slowing the rate of
Medicaid-eligible persons entering nursing facilities, and this has
controlled costs.  Another result is that nursing facilities
increasingly are being used to care for people who need short-term
sub-acute care or rehabilitation services.  Oregon's nursing facility
residents on average tend to be older and more severely disabled than
the average person who receives care in other settings.  All
beneficiaries, however, are severely enough disabled to be at risk of
institutionalization, and there are individuals receiving home and
community-based services who are as severely disabled as those in
nursing facilities. 

Payment and Service Limits.  Oregon sets limits on rates paid to home
and community-based providers for the aged and persons with physical
disabilities, as well as limits on the amounts of service that may be
authorized for each beneficiary.  Rates vary according to disability
levels.  For example, for beneficiaries who are aged or have physical
disabilities, the maximum monthly service payment in adult foster
homes ranges from $254 (for persons needing the lowest level of care)
to $747 (for those needing the highest level).  The state pays
providers of in-home services on an hourly basis up to a maximum
number of hours per month.\8 According to state officials, with few
exceptions (such as persons with AIDS with extensive needs), the
total cost for home and community-based services for any individual
cannot exceed 80 percent of the cost of the comparable level of
nursing facility care. 

Nurse Practice Act.  Oregon's Nurse Practice Act appears to stand out
nationally for the extent to which it permits state contract nurses
to train and monitor nonlicensed persons (usually relatives or adult
foster care resident managers) to provide eligible beneficiaries with
specific medical and support services, such as administering certain
kinds of medications.  Oregon officials said the law has been
instrumental in controlling costs because of the expense that would
otherwise be involved in paying professional nurses to provide such
services. 

Case Management.  Case management is an important component of
Oregon's long-term care delivery model.  Oregon's programs rely on
local case managers (who may be employed by the state, county, or
local Area Agency on Aging) to assess client service needs, determine
financial eligibility, develop and monitor care plans, and authorize
services.  Although studies have not been done to document the
cost-containment effects of case management in Oregon, officials
believe case managers save money by functioning as Medicaid service
gatekeepers.  In particular, as noted above, case managers control
expenditures by encouraging beneficiaries to select less costly home
and community-based services rather than nursing facility care. 


--------------------
\8 For in-home services, hours of service that the state will provide
are adjusted if beneficiaries receive unpaid care from family members
or friends.  An Oregon official estimated that if the unpaid care
were not available, the state's costs to provide care would rise by
25 percent.  Oregon also supports family members and other informal
caregivers by providing education, information, and respite care, and
in some cases, the state will approve payments to family caregivers. 


   OREGON'S EXPERIENCE IN
   EXPANDING HOME AND COMMUNITY-
   BASED PROGRAMS AND CONTAINING
   COSTS
-------------------------------------------------------- Appendix II:3

Oregon's shift to greater reliance on home and community-based
services, which are less costly per person, has allowed the state to
serve more beneficiaries with available dollars.  The state has been
able to provide waiver services to all Medicaid-eligible applicants
who are aged or have physical disabilities, but limited funding has
meant that not all non-Medicaid applicants eligible for the
state-funded program have been served. 


      PROGRAM GROWTH HAS BEEN
      ACCOMMODATED IN HOME AND
      COMMUNITY-BASED CARE
------------------------------------------------------ Appendix II:3.1

From 1983 through 1993, Oregon's annual expenditures for long-term
care for the aged almost tripled, from $79 million to about $234
million--an average increase of 11.4 percent each year.  The number
of individuals served by Oregon's Medicaid and state-funded programs
grew somewhat more rapidly than the state's aged population.  Between
1982 and 1992, total beneficiaries who were aged or had physical
disabilities increased by about 38 percent, compared with a
27-percent increase in the state population 65 and older.\9

All of the growth in Oregon's aged and physically disabled
beneficiary population has been accommodated in home and
community-based care.  The average number of beneficiaries using
nursing facility care dropped from 7,812 persons per month in 1983 to
7,631 in 1993 (see fig.  II.1).  Over that same period, users of home
and community-based care more than doubled, from an average 7,522 to
16,330 per month.  As a result, 68 percent of beneficiaries who were
aged or had physical disabilities were served at home or in the
community in 1993 (compared with 49 percent in 1983), and 32 percent
were in nursing facilities. 

   Figure II.1:  Oregon's Average
   Monthly Users for Nursing
   Facility and Home and
   Community-Based Care, 1983-
   1993

   (See figure in printed
   edition.)

Notes:  Nursing facility data are reported as average daily census.

Home and community-based care data for the Medicaid waivers and
Oregon Project Independence are reported as average number of persons
served per month. 

Source:  Senior and Disabled Services Division, Oregon Department of
Human Resources. 

Expenditures for home and community-based services as a percentage of
total long-term care for the aged and persons with physical
disabilities increased from 16 percent in 1983 to 35 percent in 1993,
but expenditures for nursing facility care continued to consume the
largest share of the funding.  The 32 percent of beneficiaries in
nursing facilities accounted for 65 percent of total expenditures. 


--------------------
\9 The most recent year for which Oregon general population figures,
by age, are available, is 1992. 


      INCREASED RELIANCE ON HOME
      AND COMMUNITY-BASED CARE HAS
      HELPED CONTROL OVERALL
      EXPENDITURES
------------------------------------------------------ Appendix II:3.2

Oregon officials attributed much of their success in controlling
nursing facility capacity and use to the statewide availability of
home and community-based services, including alternative living
arrangements such as adult foster homes and assisted living
facilities. 

In the early 1980s, Oregon's certificate of need program set a target
for adequate nursing facility bed capacity at a ratio of 35 to 45
beds per 1,000 persons aged 65 and older.  This policy has
contributed to a decline in the ratio of nursing facility beds from
almost 47 beds per 1,000 in 1982 to 36 in 1992, one of the lowest in
the nation.  Oregon also is one of two states that has reduced the
actual number of nursing facility beds, from 15,146 in 1982 to 14,758
in 1992. 

By serving a larger share of beneficiaries in home and
community-based care, the state has been able to serve more
beneficiaries overall within a given budget than would have been
possible using more costly nursing facilities.  A state study
concluded that the use of home and community-based services instead
of nursing facility care for the aged and persons with physical
disabilities had saved an estimated $227 million between 1981 and
1991 because actual expenditures were $1.12 billion instead of a
projected $1.35 billion.\10

As figure II.2 illustrates, the average monthly expenditure per user
for nursing facility care is substantially higher than for home and
community-based care.  In 1993, the average monthly expenditure per
user for nursing facility care was nearly $1,657, compared with $420
for home and community-based care.\11 The rate of increase in average
monthly expenditure per user has been about the same for the two
types of care. 

   Figure II.2:  Oregon's Average
   Monthly Expenditure per User
   for Nursing Facility and Home
   and Community- Based Care,
   1983-1993

   (See figure in printed
   edition.)

Notes:  Home and community-based care includes Medicaid- funded
1915(c) and (d) waivers and state-funded Oregon Project Independence.

Average monthly expenditure per user was calculated by dividing
fiscal year expenditures by 12 and dividing that quotient by average
monthly users. 

Source:  Senior and Disabled Services Division, Oregon Department of
Human Resources. 

Oregon officials believe that when acceptable alternatives to nursing
facility care are available and people are made aware of them, many
of those who need long-term care--whether they are private-pay or
Medicaid beneficiaries--will choose home and community-based
alternatives.  They cite as evidence the majority of private-pay
residents in adult foster homes and assisted living facilities, and
an independent review of those programs in 1990.\12 The review found
that individuals in adult foster homes valued flexibility and a
homelike setting. 


--------------------
\10 The estimate was based on assumptions that (1) long-term care
programs had continued to grow at the same rate as the state's
population aged 75 and older and (2) the state continued providing
nursing facility services in 1991 to the same proportion of people
who were served in nursing facilities in 1979.  Expenditures and
estimated savings were direct program expenditures, not including
other public payments such as SSI and SSP. 

\11 Using the estimates discussed earlier, adding SSI and SSP support
to the amounts for home and community-based care would increase the
monthly per-user amount over the total 16,330 users by about $71. 

\12 Rosalie A.  Kane, et al., Meshing Services with Housing:  Lessons
from Adult Foster Care and Assisted Living in Oregon, Division of
Health Services Research & Policy, School of Public Health
(Minneapolis:  University of Minnesota, May 1990). 


      CONTROLS ON HOME AND
      COMMUNITY SERVICES HAVE
      LIMITED ACCESS FOR SOME
      APPLICANTS
------------------------------------------------------ Appendix II:3.3

To date, the state has been able to serve all of the applicants who
are aged or have physical disabilities who have met financial and
functional eligibility criteria for the Medicaid waiver programs.\13
The state- funded program for the aged, however, has faced capacity
limits.  State funding for this program was reduced in 1991 and 1993,
and as a result local offices had to deny services, raise client
fees, or keep waiting lists. 


--------------------
\13 Officials said if a need to limit services were identified,
legislative approval would be sought for discontinuing services to
beneficiaries in the lowest priority (least severe) functional
disability levels.  During the 1993 legislative session, for example,
the legislature considered but rejected an option to restrict
eligibility for waiver services to individuals in priority levels 1
through 16 (instead of 1 through 17). 


LONG-TERM CARE IN WASHINGTON
========================================================= Appendix III

By 1993, more than half of the nearly 39,500 aged and physically
disabled beneficiaries of publicly funded long-term care in
Washington were receiving care in noninstitutional settings.\1 While
the number of persons in institutional and noninstitutional programs
combined has grown over the past decade, the increased reliance on
lower-cost home and community-based services has helped control
growth in overall expenditures.  A variety of federal and state
controls limit growth in Washington's home and community-based
programs, however, and access to some services has been limited at
times. 


--------------------
\1 Expenditure and utilization figures are for Washington state
fiscal years, July through June. 


   WASHINGTON'S PROGRAMS FOR
   DELIVERING LONG-TERM CARE
------------------------------------------------------- Appendix III:1

Washington has four home and community-based care programs for the
aged and persons with physical disabilities.  These programs served
an average of about 22,000 persons per month in 1993,\2 compared with
about 17,400 in the nursing facility program (see table III.1). 
Direct expenditures for the home and community-based programs totaled
about $111 million for the year, compared with about $423 million for
nursing facility services.  We estimate that Washington's home and
community-based beneficiaries may receive an additional $27 million
in SSI and SSP support.\3



                                   Table III.1
                     
                       Washington's Long-Term Care Service
                      Programs for the Aged and Persons With
                           Physical Disabilities, 1993

                                                   State
                                                  fiscal       Average
                                   Average     year 1993       monthly
                    Services       monthly  expenditures   expenditure  Funding
                    provided      users \a            \b   per user \c  sources
------------------  ------------  --------  ------------  ------------  --------
Institutional care
--------------------------------------------------------------------------------
Nursing facilities  Personal        17,428  $423,122,025        $2,023  Medicaid
                    care and
                    services
                    provided by
                    licensed
                    nursing
                    personnel


Home and community-based care
--------------------------------------------------------------------------------
Community Options   Personal         4,840    47,330,320           815  Medicaid
Program Entry       care,                                               (waiver)
System (COPES)      related
                    household
                    tasks, case
                    management,
                    supervision

Medicaid Personal   Personal         7,823    33,606,968           358  Medicaid
Care                care,                                               (nonwaiv
                    related                                             er)
                    household
                    tasks

Chore Services      Personal         8,656    27,563,967           265  State
                    care,
                    household
                    tasks

Adult Residential   Personal           721     2,240,595           259  State
Care                care,
                    supervision

================================================================================
All home and                        22,040  $110,741,850          $419
community-based
programs
--------------------------------------------------------------------------------
\a The average monthly users for nursing facility and home and
community-based care programs are reported differently.  For nursing
facilities, average monthly users is the average daily census.  For
home and community-based care programs, average monthly users is the
average number of persons served monthly during 1993. 

\b Only direct long-term care expenditures are reported for the home
and community-based programs; other public expenditures, such as SSI,
are not included.  Also excluded are expenditures for program
administration, Older Americans Act services, and a number of small
special programs.  Expenditures for the four programs above
represented about 80 percent of total home and community-based
service expenditures in 1993. 

\c For nursing facility and home and community-based care programs,
average monthly expenditure per user was calculated by dividing the
fiscal year expenditure by 12 and dividing that quotient by the
average monthly users. 

Source:  Aging and Adult Services Administration, Washington
Department of Social and Health Services. 

All four home and community-based programs provide personal care
services to assist beneficiaries with activities of daily living; but
they differ in their funding sources and the amount of services they
provide.  Some individuals may qualify for more than one program, but
they receive services through only one.  The state's objective is to
provide beneficiaries the most suitable services at the lowest cost. 
Placement in a program is based on such factors as the individual's
need for services and the availability of support from family and
friends. 

The Community Options Program Entry System (COPES), a Medicaid waiver
program established in 1983, serves low-income persons who do not
receive cash payments and who have income and resources below
specified limits.  The nonwaiver Medicaid Personal Care program is
limited to persons who receive federally assisted income maintenance
payments or would be eligible to receive payments if they applied.\4
In 1994, the state began to make these two programs more comparable
by increasing the amount of services and provider payments under
Medicaid Personal Care.  This change was intended to help reserve
COPES enrollment capacity, which is limited, for beneficiaries with
higher incomes. 

Chore Services, the larger of the two state-funded programs, serves
persons at risk of institutionalization but not eligible for
Medicaid.  Recipients must meet state income and assets standards
(described later in this appendix).  Adult Residential Care is a
small program that covers individuals in adult family homes and
congregate care facilities who are not eligible for Medicaid.\5

In 1993, 85 percent of the aged and persons with physical
disabilities in these four programs received services in their own
homes.  The remaining 15 percent (about 3,300 persons) received care
in alternative living arrangements such as adult family homes or
assisted living facilities.  The state encourages private sector
development of these living arrangements.\6

The Aging and Adult Services Administration within the Department of
Social and Health Services is responsible for administering the four
home and community-based programs and the Medicaid nursing facility
benefit.  As in Oregon, state officials in Washington believe
consolidated authority over both institutional and noninstitutional
care has helped the state expand home and community-based services
while controlling institutional care. 


--------------------
\2 About 2,400 (11 percent) of those using home and community-based
services in 1993 were persons with developmental disabilities. 

\3 Washington officials estimated that 39 percent of persons in these
four home and community-based programs received SSI and SSP support. 
As of December 1993, the average SSI/SSP amount for persons aged 65
and older in Washington was about $257 per month ($3,084 per year). 
The estimate of $27 million is based on the assumption that 39
percent of those in home and community-based programs receive $3,084
per year in SSI/SSP support. 

\4 Income eligibility for Medicaid Personal Care, at or below 100
percent of federal SSI plus the state supplemental payment, is lower
than for Medicaid COPES waiver or nursing facility services at 300
percent of SSI. 

\5 Adult family homes are private homes that provide homelike
settings for up to six people.  Congregate care facilities (also
referred to as boarding homes or group homes) provide services for 3
or more persons but generally serve from 12 to 200 persons. 

\6 In the 1993-1995 budget biennium, for example, funding was
provided for another 850 assisted living units. 


   PROGRAM MANAGEMENT AND COST
   CONTROLS
------------------------------------------------------- Appendix III:2

Management and cost controls fall into three main categories.  First,
federal waiver rules and state budget limits impose constraints on
the overall size and costs of Washington's long-term care programs. 
Second, beneficiaries must meet financial eligibility and functional
impairment criteria.  Third, the state has established other
management controls to reduce institutional expenditures and manage
growth in home and community-based programs. 


      KEY FEDERAL AND STATE
      PROGRAM CONSTRAINTS
----------------------------------------------------- Appendix III:2.1

Washington's Medicaid waiver program for the aged and persons with
physical disabilities is restricted by federally approved enrollment
and expenditure limits, and indirectly by the availability of state
funds.\7 Enrollment capacity for the COPES waiver has grown from
1,540 in 1983 to 7,192 in 1993.  COPES was closed to new applicants
from November 1992 through June 1993, however, because of concerns
about exceeding the enrollment limit of 6,724 then in effect. 

Growth in Washington's Medicaid and state-funded home and
community-based care programs has also been limited by the
availability of state funding.  In 1993, despite a HCFA-authorized
increase in the COPES enrollment limit to 7,192 in April, the state
did not reopen the waiver program until funds became available with
the new state fiscal year in July.  Limited state funding also has
restricted new admissions to the Chore Services program since late
1993. 


--------------------
\7 See appendix I for a discussion of HCFA criteria and procedures
for establishing the federal limits. 


      FINANCIAL ELIGIBILITY AND
      FUNCTIONAL IMPAIRMENT
      CRITERIA
----------------------------------------------------- Appendix III:2.2

Washington uses financial eligibility and functional impairment
criteria to target services to those most in need of services and at
risk of entering a nursing facility.  The criteria for each program
are summarized in table III.2. 



                         Table III.2
           
            Washington's Eligibility Requirements
                 for Long-Term Care Programs

Institutional care
------------------------------------------------------------
Nursing facility

Medicaid eligibility: Income less than or equal to 300
percent of the federal SSI benefit; nonexempt assets at or
below $2,000

Functional impairment: Requires individually planned
treatment and services ordered by a physician and directed
daily by a registered nurse

Home and community-based care

COPES Waiver

Medicaid eligibility: Same as for nursing facility

Functional impairment: Requires nursing facility level of
care and likely to be institutionalized within 30 days;
requires assistance with two or more personal care tasks

Medicaid Personal Care

Medicaid eligibility: Income less than or equal to 100
percent of SSI plus SSP; nonexempt assets at or below
$2,000

Functional impairment: Requires help with at least one
personal care task because of a medical condition

State-Funded Chore Services

Income eligibility: Income less than or equal to 30 percent
of the state median income; nonexempt assets at or below
$10,000 for one person or $15,000 for two; reduced services
if income exceeds 30 percent of the state median income

Functional impairment: (1) Is at risk of
institutionalization, (2) needs help with at least one
personal care task, and (3) has no one available to help

Adult Residential Care

Income eligibility: Determined by local staff (SSI or
general assistance eligible)

Functional impairment: Needs help with at least one personal
care task
------------------------------------------------------------
Source:  Aging and Adult Services Administration, Washington
Department of Social and Health Services. 

All applicants for Medicaid nursing facility care and Medicaid or
state-supported home and community-based care must undergo a
comprehensive assessment of their functional abilities.  The state
uses the comprehensive assessment to (1) identify the applicant's
needs in six areas (see table III.3) and (2) evaluate the degree of
need based on levels of assistance required and the availability of
family and friends to provide some services. 



                         Table III.3
           
              Factors Considered in Washington's
                   Comprehensive Assessment

Assessment
category            Critical information for each category
------------------  ----------------------------------------
General             Marital status, source of referral,
information         housing arrangement, condition of
                    housing, and the applicant's reason for
                    seeking services

Health status       Current diagnosis (physical and mental
                    health); pertinent medical and mental
                    health history; bladder and bowel
                    control; medications, frequency of use,
                    and if applicant needs help with taking
                    it; speech, sight, and hearing; and
                    treatments or therapies and the source

Psychological,      Problems with memory, hallucinations,
cognitive, and      depression, anxiety, wandering, a danger
social status       to self or others

                    Applicant's ability to supervise a
                    caregiver

                    Whether the applicant has a primary
                    caregiver (unpaid or privately paid) and
                    caregiver's ability and willingness to
                    continue the care

                    Summary of social contacts, family
                    relationships, and other personal
                    history

Functional          Assessed for 16 activities of daily
abilities and       living and instrumental activities of
supports            daily living: eating, toileting,
                    ambulation, transfer, positioning,
                    specialized body care, personal hygiene,
                    dressing, bathing, self-medication,
                    travel to medical services, essential
                    shopping, meal preparation, laundry,
                    housework, and wood supply

Income and          Inventory of resources
resources
                    Assessed for Medicaid eligibility

Additional factors  Factors indicating institutional care
                    may be appropriate, such as client is 75
                    or older, lives alone, needs help with
                    multiple medications, needs moderate to
                    total assistance with personal care, is
                    incontinent, lacks adequate family or
                    social support

                    Other services available to the
                    applicant

                    Additional pertinent information from
                    such people as family members or
                    professional caretakers
------------------------------------------------------------
Source:  Aging and Adult Services Administration, Washington
Department of Social and Health Services. 


      OTHER MANAGEMENT AND COST
      CONTROLS
----------------------------------------------------- Appendix III:2.3

Other key management and cost controls for home and community-based
programs include payment and service limitations and case management. 

Payment and Service Limits.  These limits are of several kinds.  One
is a maximum monthly payment limit per beneficiary.  For example, in
the COPES waiver program, the maximum per-beneficiary payment was set
at $1,061 per month in 1993.  A second kind of limit is the number of
hours of service a beneficiary may receive.  In the Chore Services
program, an individual whose income is at or below 30 percent of the
state median income may receive up to 116 hours of service per month
(those with incomes above the limit receive fewer state-paid hours). 
Limits on per-beneficiary service hours are coupled with a third kind
of limit, maximum hourly or daily provider payment rates.  These vary
by type of service and provider, with contract agencies paid higher
rates than individual providers.\8

State officials cited another consideration relating to provider
payments--regulations governing the practice of nursing in
Washington, which they say tend to counteract their efforts to
control costs.  The regulations prohibit unlicensed paid staff from
administering medications and certain treatments to people who
receive home and community-based services.  According to state
officials, the required use of professional providers increases the
costs of service delivery. 

Case Management.  Washington requires case management for all
beneficiaries receiving home and community-based services under the
COPES Medicaid waiver and selectively in other instances.  Case
management is generally targeted to beneficiaries who have multiple
needs, are unable to provide for themselves, and do not have adequate
assistance from family or friends.  Washington officials believe case
management helps control costs by authorizing and monitoring
services, and by ensuring that beneficiaries receive the support
services they need to stay out of institutions.  No studies have been
conducted to specifically measure case management's effect as a cost
control. 


--------------------
\8 The state believes agency providers offer a higher level of care
because they hire and train their caregivers, while individual
providers are hired by beneficiaries.  Although the state pays lower
rates for individual providers, it also pays their Social Security
and unemployment taxes. 


   WASHINGTON'S EXPERIENCE IN
   EXPANDING HOME AND
   COMMUNITY-BASED PROGRAMS AND
   CONTAINING COSTS
------------------------------------------------------- Appendix III:3

Over the past decade, Washington's officials believe increasing
reliance on home and community-based care for the aged and persons
with physical disabilities has helped control the rate of growth in
overall long-term care expenditures while allowing the state to serve
more beneficiaries.  By expanding home and community-based care,
which is less expensive per person than institutional care, and by
controlling growth in the capacity and use of nursing facilities,
Washington has been able to serve more people with available dollars
than could have been served under a program that relied more heavily
on institutional care.  Both the federal Medicaid program and state
controls on growth of home and community-based services, however,
have limited access to services at times. 


      MOST PROGRAM GROWTH HAS
      OCCURRED IN HOME AND
      COMMUNITY-BASED CARE
----------------------------------------------------- Appendix III:3.1

From 1983 through 1993, Washington's expenditures for long-term care
programs for the aged and physically disabled (programs included in
table III.1) grew from $173 million to $534 million--an increase that
averaged almost 12 percent per year.  The number of individuals using
these long-term care services has grown more rapidly than the aged
population.  Between 1982 and 1992,\9 the number of persons receiving
Medicaid and state-funded long-term care increased 48 percent, while
the state's population aged 65 and older--the group at greatest risk
of needing long-term care--increased 30 percent. 

Almost all (85 percent) of the growth in the number of Washington's
service users who are aged or have physical disabilities has been
accommodated in home and community-based care.  In 1993, home and
community-based programs covered 56 percent of the nearly 39,500
beneficiaries served each month, compared with 41 percent in 1983. 
Over the decade, the number of beneficiaries using home and
community-based services doubled, from an average 10,900 to about
22,000 per month (see fig.  III.1).  By contrast, the number of
Medicaid nursing facility beneficiaries increased only 12 percent
(from about 15,500 to 17,400 per month), a rate lower than the growth
rate of the aged population. 

   Figure III.1:  Washington's
   Average Monthly Users for
   Nursing Facility and Home and
   Community-Based Care, 1983-1993

   (See figure in printed
   edition.)

Notes:  Nursing facility data are reported as average daily census.

Home and community-based care data for the COPES waiver, Medicaid
Personal Care, Chore Services, and Adult Residential Care programs
are reported as average number of persons served per month. 

Source:  Aging and Adult Services Administration, Washington
Department of Social and Health Services. 

Expenditures for home and community-based services for the aged and
persons with physical disabilities, as a percentage of total
long-term care expenditures, increased from about 15 percent in 1983
to almost 21 percent in 1993; but nursing facility services continued
to consume the largest share of funding.  As a result, the 44 percent
of the beneficiaries who were in nursing facilities in 1993 accounted
for 79 percent of total expenditures, while only 21 percent of
service funds were spent on the 56 percent of beneficiaries who were
served at home and in the community. 


--------------------
\9 The most recent year for which general Washington population
figures, by age, are available is 1992. 


      INCREASED RELIANCE ON HOME
      AND COMMUNITY-BASED CARE HAS
      HELPED CONTROL OVERALL
      EXPENDITURES
----------------------------------------------------- Appendix III:3.2

Expansion of home and community-based services has played an integral
part in the state's ability to control expenditures for the aged and
persons with physical disabilities, according to officials.  Home and
community-based programs have provided beneficiaries with choices
other than nursing facility care and, by counting as available
long-term care capacity, have reduced the need for additional nursing
facility beds.  Moreover, officials said the Medicaid home and
community-based waiver program enabled them to convince the Governor
and legislature to take steps to reduce the nursing facility bed
supply, helping to slow increases in the use of more costly nursing
facility services.\10

Washington established a goal in 1989 to reduce the number of nursing
facility beds per 1,000 persons aged 65 and older from 53.7 beds to
45 beds.  This goal is incorporated in the state's certificate of
need process for planning statewide nursing facility services.  By
1992, the ratio of nursing facility beds stood at 48.7 per 1,000
persons 65 and older. 

As figure III.2 illustrates, the average monthly expenditure per user
for nursing facility care is substantially higher and has increased
more rapidly than for home and community-based care.  Between 1983
and 1993, the average monthly expenditure per nursing facility user
increased from $793 to $2,023.  State officials attributed the rise
primarily to the nursing facility reimbursement system and cited an
internal study done in 1991 that showed similar dependency levels in
nursing facility and COPES waiver beneficiaries.  By contrast, the
average monthly expenditure for all home and community-based care
users and for Medicaid COPES waiver users alone increased more
slowly. 

   Figure III.2:  Washington's
   Average Monthly Expenditure per
   User for Nursing Facility,
   COPES Waiver, and Total Home
   and Community-Based Care,
   1983-1993

   (See figure in printed
   edition.)

Notes:  Total home and community-based care includes the COPES
waiver, Medicaid Personal Care, Chore Services, and Adult Residential
Care programs.

Average monthly expenditure per user was calculated by dividing
fiscal year expenditures by 12 and dividing that quotient by average
monthly users. 

Source:  Aging and Adult Services Administration, Washington
Department of Social and Health Services. 


--------------------
\10 In 1993, the Adult and Aging Services Administration was
authorized to accelerate the reduction of nursing facility beds by
closing about 750 beds, statewide, over the 1993-95 budget biennium. 


      CONTROLS ON HOME AND
      COMMUNITY-BASED CARE HAVE
      LIMITED ACCESS FOR SOME
      APPLICANTS
----------------------------------------------------- Appendix III:3.3

By managing the growth of waiver and state-funded programs,
Washington has been able to expand those programs without exceeding
approved federal waiver capacity or state budget limits.  However,
these controls have had an impact on access to services by persons
who meet program eligibility criteria, as shown in the following
examples. 

When the COPES waiver program was closed for 8 months in 1992 and
1993 because of concerns about exceeding the enrollment limit, some
eligible applicants may not have received needed services.  Officials
said that COPES applicants eligible for the Medicaid Personal Care or
Chore Services programs were diverted to those programs, and nursing
facility beds also were available.  Because the state did not
maintain COPES waiting lists, officials were unable to estimate the
number of persons turned away or to determine if those who were
turned away received services from other programs.  The Washington
Senior Citizens Lobby told us they received complaints from eligible
applicants who had been turned away from COPES during the period, but
they could not estimate the number of persons affected. 

As a result of reduced state funding for the Chore Services program,
there were waiting lists for that program in January 1994.  Program
officials said they were operating under a general policy of not
enrolling a new applicant until four beneficiaries had left the
program.  However, the state established criteria that prioritized
applicants on the waiting list by their functional needs. 
Individuals seeking relocation from nursing facilities also had
priority for Chore Services. 


LONG-TERM CARE IN WISCONSIN
========================================================== Appendix IV

Although it began the 1980s with one of the nation's highest ratios
of nursing facility beds to elderly population, Wisconsin has been
able to constrain Medicaid nursing facility utilization and moderate
growth in expenditures, while serving more long-term care
beneficiaries with home and community-based care.  Home and
community-based care programs continue to grow, but demand for the
services has exceeded program capacity in Wisconsin, resulting in
lengthy waiting lists. 


   WISCONSIN'S PROGRAMS FOR
   DELIVERING LONG-TERM CARE
-------------------------------------------------------- Appendix IV:1

Wisconsin provides home and community-based long-term care services
for the aged and persons with physical disabilities through Medicaid
home health and personal care services, a Medicaid waiver program,
and the state-funded Community Options Program (COP). 

Through these programs, Wisconsin served approximately 14,000 users
in 1992,\1 compared with an average daily census of 30,497
Medicaid-funded beneficiaries in nursing facilities.  About 12,500
received Medicaid home health and personal care services,\2 while the
Medicaid waiver program and COP each served about 6,000 aged or
persons with physical disabilities.  An exact count of the
unduplicated number of users was not available at the time data were
requested.  Direct service expenditures for the home and
community-based programs totaled $141 million in 1992, compared with
expenditures of $623 million for nursing facilities.\3 Table IV.1
summarizes Wisconsin's long-term care programs for the aged and
persons with physical disabilities. 



                                    Table IV.1
                     
                        Wisconsin's Long-Term Care Service
                      Programs for the Aged and Persons With
                           Physical Disabilities, 1992

                                                               Average
                                                                annual
                                                              expendit
                                                                   ure
                    Services            Annual  Expenditures       per  Funding
                    provided           users\a            \b    user\c  source
------------------  ------------  ------------  ------------  --------  --------
Institutional care
--------------------------------------------------------------------------------
Nursing             Nursing and         30,497  $622,956,017   $20,427  Medicaid
facilities\d        personal
                    care


Home and community-based care
--------------------------------------------------------------------------------
Medicaid personal   Personal            Aged--    29,280,950     5,744  Medicaid
care and home       care, home           5,098  52,480,453\e   7,017\e
health services     health         Disabled\e-
                                        -7,479

Medicaid waiver     Supportive           6,129  39,047,710\\     6,371  Medicaid
program: section    home care,                             f
1915(c) waiver      respite
                    care, chore,
                    and
                    supervision
                    services

Community Options   Any                  5,819    19,841,247     3,410  State
Program             necessary
                    service
--------------------------------------------------------------------------------
\a For nursing facilities, annual users is the average Medicaid daily
census.  For home and community-based care programs, annual users is
the total number of persons receiving services during the year. 

\b The most recent data available for all programs were for 1992. 
Nursing facility, COP, and Medicaid waiver data are reported by
calendar year, while Medicaid home health and personal care data are
reported by federal fiscal year. 

\c Average annual expenditure per user has been calculated by
dividing 1992 expenditures by the annual users. 

\d State officials reported that in 1992, approximately 850 persons
with developmental disabilities received services in nursing
facilities. 

\e The figure includes persons with developmental disabilities. 

\f Waiver data include expenditures for program administration
(including case management services).  State officials report that
program administration expenditures are approximately 7 percent of
total expenditures.  COP data include expenditures for administration
and case management. 

Source:  Division of Community Services and Division of Health,
Wisconsin Department of Health and Social Services. 

In Wisconsin, home and community-based long-term care is built around
the Medicaid program.  In general, eligibility for any of Wisconsin's
state-supported home and community-based services is restricted to
those eligible for Medicaid or those who would be eligible for
Medicaid nursing facility services.  Furthermore, when building a
package of services, case managers are required to provide services
through the regular Medicaid program and the Medicaid waivers before
relying on services from the state-funded COP.  If a beneficiary
requires services that cannot be provided through Medicaid, then COP
services are utilized.  All of these programs provide basic personal
care services to assist beneficiaries with activities of daily living
such as dressing and eating, but they differ in the range of benefits
available. 

With expenditures of $81.8 million for the aged and persons with
disabilities in 1992, Wisconsin's Medicaid nonwaiver home health and
personal care services provided a substantial share of the state's
home and community-based services.\4 In fact, because eligibility for
COP and the waivers is primarily restricted to those eligible for
Medicaid, many people enrolled in these programs also receive
Medicaid home care services.  State officials estimate that $24.3
million of the total $91.5 million home health and personal care
expenditures for 1992 (about 27 percent) was provided in services to
the elderly and persons with physical disabilities who were also
receiving Medicaid waiver services. 

Wisconsin operates two programs under its waiver for the aged and
persons with physical disabilities.  The programs provide home and
community-based care to persons at risk of entering nursing
facilities.  One program also has a small component to relocate
people from nursing facilities to the community.\5 The services
available through these programs are the same, but they have
different limits on average per-person monthly expenditures. 
Although eligibility for waiver services is restricted to those who
are financially eligible for Medicaid, waiver recipients must also
either have been receiving services in an institutional setting or
have been at risk for Medicaid-funded institutionalization.  In
addition, waiver capacity must be available. 

COP was authorized in 1981 and implemented in 1982.  It provides home
and community-based care to the elderly, persons with physical and
developmental disabilities, and others who need long-term care,
including persons with a serious mental illness or Alzheimer's
disease.  Because it is funded almost entirely through state general
revenues, there are very few restrictions on the types of services
that can be provided.  Any necessary service is allowed, with a few
exceptions pertaining to the purchase of land, buildings, or the
funding of institutional care. 

As noted, many people receive services from more than one of these
programs.  In fact, case workers deliberately enroll beneficiaries in
multiple programs to provide a comprehensive package of services. 
For example, regular Medicaid and even the Medicaid waiver have
service gaps that can be filled with services funded by the state's
COP.  A state official reported that in 1992, about 32 percent of the
aged and persons with physical disabilities receiving waiver services
also received COP services, and about 58 percent of them also
received Medicaid home health or personal care services. 

Wisconsin officials estimate that about 92 percent of the aged and
persons with physical disabilities who receive services through COP
and the waiver program live in their own homes or the homes of
relatives.  The remaining 8 percent live in alternative living
arrangements:  6 percent in community-based residential facilities
(three beds or more), 1 percent in adult family homes (one to two
beds), and 1 percent in supervised apartments.  Wisconsin has not
made an effort to develop and encourage alternative living
arrangements for the aged and persons with physical disabilities to
the extent that Oregon and Washington have. 

Although responsibility for Wisconsin's most important long-term care
programs is consolidated within the Department of Health and Social
Services, management of individual programs is divided among
different divisions within the department.  For example, Wisconsin's
Medicaid waiver and the state-funded COP are managed by one division,
while the regular Medicaid program and the state's nursing homes are
managed by another division.  Furthermore, while overall policy
decisions about these programs are made by the state, management of
service delivery is subcontracted to Wisconsin's 72 county
governments. 


--------------------
\1 This figure is an estimated unduplicated count of beneficiaries
and is not the sum of all home and community-based program users in
table IV.1 because many beneficiaries use more than one program at a
time.  Expenditures by program do not overlap.  Expenditure and
utilization figures are for the calendar year when discussing nursing
facilities, COP, and the Medicaid waiver program, and for the federal
fiscal year when discussing regular Medicaid services such as home
health and personal care. 

\2 The data on users and expenditures for Medicaid home health and
personal care include services provided to persons with developmental
disabilities.  Because of data limitations, it is not possible to
separate the two populations. 

\3 Persons receiving services through the home and community-based
programs generally may receive additional public support, such as SSI
payments.  For example, Wisconsin officials report that in 1991, on
average, persons receiving services through their Medicaid waiver for
the aged and persons with physical disabilities also received $118
per month ($1,416 per year) in SSI payments. 

\4 Data include expenditures for persons with developmental
disabilities; total Medicaid expenditures for home health and
personal care services were $91.5 million in 1992.  The difference
between $91.5 million and $81.8 million is accounted for by services
to other Medicaid recipients. 

\5 Initially, this program was aimed primarily at relocating nursing
facility residents to community services and allowed higher monthly
expenditures.  Currently, it operates mainly to divert potential
nursing facility residents. 


   PROGRAM MANAGEMENT AND COST
   CONTROLS
-------------------------------------------------------- Appendix IV:2

Wisconsin controls expenditures for home and community-based long-
term care through (1) federal waiver rules and state budget limits
that constrain the overall size and cost of the programs, (2)
financial and functional eligibility criteria for program
participation, and (3) other management controls such as requiring
case management and prior authorization for services. 


      KEY FEDERAL AND STATE
      PROGRAM CONSTRAINTS
------------------------------------------------------ Appendix IV:2.1

Wisconsin's Medicaid waiver program for the aged and persons with
physical disabilities is restricted by federally approved enrollment
and expenditure limits and by state budget constraints.  As explained
in appendix I, HCFA approves a maximum allowable enrollment and
associated expenditures for each waiver based on the state's
application.  While the HCFA formula would have allowed 7,822 aged
and physically disabled beneficiaries to be served each year from
1989 through 1992, Wisconsin initially applied to serve only 4,730
individuals and later submitted three amendments to obtain approval
to serve the full number of beneficiaries by 1992.  Wisconsin
officials explained that they did not originally request a waiver
program as large as they could justify under HCFA's formula because
of the need to control state spending.  Thus, the state budget has
been a more significant constraint on the waiver's use than have HCFA
rules. 

Because COP is financed almost entirely with state funds, the program
is not subject to federal limits on enrollment.  However, the state
provides funding for a specific program capacity, and this funding is
allocated among Wisconsin's county governments.  While each county
receives an annual COP budget based on a designated number of
beneficiaries, counties are free to serve more or fewer persons as
long as total spending remains within the budget.  Counties also are
given some discretion in allocating funds among the elderly and
persons with physical or developmental disabilities.  However, the
state sets annual quotas for each of these groups. 


      FINANCIAL ELIGIBILITY AND
      FUNCTIONAL IMPAIRMENT
      CRITERIA
------------------------------------------------------ Appendix IV:2.2

Wisconsin relies on financial eligibility and functional impairment
criteria to control long-term care costs while targeting services to
those most in need of care.  The program criteria are summarized in
table IV.2. 



                          Table IV.2
           
            Eligibility Requirements for Long-Term
                  Care Programs in Wisconsin

Institutional care
------------------------------------------------------------
Nursing facility

Medicaid eligibility: Income less than or equal to 300
percent of the federal SSI benefit; nonexempt assets at or
below $2,000

Functional impairment: Meets specified level of care
criteria, generally requires care provided in a nursing
facility

Home and community-based care

Medicaid waivers

Medicaid eligibility: Same as for nursing facility

Functional impairment: At risk of institutionalization and
qualifies for level of care reimbursable by Medicaid (care
provided in a skilled nursing facility or intermediate care
facility level 1 or 2)

Medicaid Personal Care/Home Health

Medicaid eligibility: Income less than or equal to 100
percent of SSI plus SSP; nonexempt assets at or below
$2,000; and physician order

Functional impairment: Impaired in at least one activity of
daily living or in need of skilled nursing or therapy
services, as determined by an assessment form completed by
the provider and by physician order

State-funded COP

Current financial eligibility for Medicaid: Income less than
or equal to 100 percent of SSI; nonexempt assets at or below
$2,000; or expected eligibility within 6 months of spend-
down at a nursing home

Functional impairment: At risk of institutionalization and
qualifies for level of care reimbursable by Medicaid
(generally care provided in a skilled nursing facility or
intermediate care facility level 1 or 2), plus special
eligibility criteria for people with Alzheimer's disease
------------------------------------------------------------
Source:  Division of Community Services and Division of Health,
Wisconsin Department of Health and Social Services. 

For the most part, COP restricts participation to those who are
eligible for Medicaid.  However, some persons with incomes above the
Medicaid eligibility level may use cost-sharing to receive COP
services.  For example, persons who would be eligible for Medicaid
through spending nearly all of their resources within 6 months of
entering a nursing facility may receive services through COP if they
pay part of the cost of those services.  According to program rules,
persons who are unlikely to become eligible for Medicaid may receive
COP services if they pay the entire cost of those services.  However,
state officials explained that this rarely happens because county
boards are generally not willing to hire the additional staff to
provide care on a fee-for-service basis. 

County staff determine functional eligibility for COP using uniform
statewide criteria and screening instruments.  Once eligibility is
established, local officials assess each beneficiary's condition,
preferences, and abilities, and prepare a care plan.  The state
requires each county to develop an assessment procedure that
addresses two areas:  (1) the person's functional abilities and
disabilities, including physical health, activities of daily living,
emotional and cognitive functioning, communication, capacity for
self-care, and social participation; and (2) the home and
community-based services necessary for the person to live in the
community.  Functional assessments may be provided free of charge to
anyone (including private-pay applicants) who is a candidate for or
current resident of a nursing facility or ICF/MR, or has mental
illness or Alzheimer's disease. 


      OTHER MANAGEMENT AND COST
      CONTROLS
------------------------------------------------------ Appendix IV:2.3

Wisconsin has imposed average per-beneficiary expenditure limits on
home and community-based programs, requires prior authorization for
some services, and uses case management to control use of long-term
care. 

Payment and Service Limits.  Wisconsin's waiver program and COP
impose financial limits on average per-beneficiary service
expenditures.  For example, under state requirements, average COP
expenditures per person are limited to the state's share (currently
40 percent) of the amount that would be paid under the Medicaid
program had the COP beneficiaries been residents of nursing
facilities.  In 1994, that limit was $880 per month per participant. 
This is a limit on average spending, however; individual COP
beneficiaries may be funded at essentially any cost.\6

Similarly, the waiver restricts average per-beneficiary expenditures,
although the cost of services for any individual client is not
constrained.  The average payment limit is based on the approved
federal Medicaid contribution to the waiver and state funding.  The
limit varies from a low of $23.40 per day ($712 per month) for
participants in the program that helps the elderly and persons with
physical disabilities stay in the community, to a high of $39.98 per
day ($1,215 per month) for the program that was created to relocate
or divert individuals from nursing facilities into the community. 

Prior Authorization for Medicaid services.  As a means of controlling
expenditures for Medicaid home health and personal care services,
Wisconsin requires providers, who may be county employees or home
health agencies, to receive authorization from the state before
approving care plans that include home health services.  A state
official explained that after home health expenditures began to grow
at annual rates as high as 40 percent between 1987 and 1991, the
state began enforcing more vigorously the requirement for prior
authorization.  As a result of this and other changes, home health
expenditures declined from $73 million in 1992 to $49 million in
1993. 

Case Management.  Case management is required for all clients
receiving services through COP or the waiver.  County-based case
managers prepare a care plan for each potential recipient of home and
community-based services.  If the beneficiary is not eligible for COP
or the waiver, the care plan is used to offer advice about other
programs that may be available to provide needed services. 


--------------------
\6 The state limit on average COP expenditures is much lower than the
average nursing home expenditure because COP is not designed to pay
the full cost of care for any beneficiary.  Regular Medicaid services
are intended to be used first, with COP filling in the gaps.  When
all public expenditures from COP, regular Medicaid, and other sources
are added together, the expenditure per person averages 80 to 90
percent of the cost of nursing home care. 


   WISCONSIN'S EXPERIENCE IN
   EXPANDING HOME AND COMMUNITY-
   BASED PROGRAMS AND CONTAINING
   COSTS
-------------------------------------------------------- Appendix IV:3

By expanding home and community-based care, which generally is less
expensive per person than institutional care, and by capping the
number of nursing facility beds, Wisconsin has been able to constrain
nursing facility utilization and moderate the rate of growth in
expenditures.  In this way, Wisconsin has been able to serve more
long-term care beneficiaries with available dollars.  However,
expansion of home and community-based programs has been limited by
federal Medicaid waiver rules and state budget constraints.  As a
result, lengthy waiting lists have developed for all of Wisconsin's
home and community-based programs. 


      PROGRAM GROWTH HAS BEEN
      ACCOMMODATED IN HOME AND
      COMMUNITY-BASED CARE
------------------------------------------------------ Appendix IV:3.1

Although Wisconsin has experienced limited growth in the total number
of long-term care beneficiaries, there has been significant
substitution of home and community-based services for nursing
facility care.  From 1983 to 1992, the number of Medicaid
beneficiaries in Wisconsin's nursing facilities dropped from an
average daily census of 35,587 to 30,497.  Because of growth in the
home and community-based care programs, however, the total number of
individuals using long-term care services has increased modestly.  As
shown in figure IV.1, the number of aged and persons with physical
disabilities who received home and community-based care through COP
grew from 1,284 in 1983 to 5,819 in 1992.  Similarly, waiver
beneficiaries increased from 61 in 1985, the first year of operation,
to 6,129 in 1992; and while 5,283 persons received Medicaid home
health or personal care services in 1983, 12,577 persons received
those services in 1992.\7

   Figure IV.1:  Wisconsin's Users
   of Nursing Facility and Home
   and Community-Based Care,
   1983-1992

   (See figure in printed
   edition.)

Notes:  The most recent available data were for 1992.  Nursing
facility data and Medicaid waiver data are reported by calendar year,
COP data are reported by state fiscal year (July 1 to June 30), and
Medicaid home health and personal care services data are reported by
federal fiscal year.

Nursing facility data are reported as average daily census.  COP,
Medicaid waiver, and Medicaid services data are reported as the
number of individuals served each year.  Any individual may receive
services through more than one program. 

Source:  Division of Community Services and Division of Health,
Wisconsin Department of Health and Social Services. 

Wisconsin's expenditures for home and community-based services as a
percentage of total long-term care expenditures increased from 2
percent in 1983 to 18 percent in 1992, but nursing facility care
continued to dominate long-term care programs. 


--------------------
\7 Data on beneficiaries of home health and personal care services
include the aged and persons with physical or developmental
disabilities, and are not limited only to individuals at risk of
institutionalization.  For example, this figure includes children
with physical or developmental disabilities receiving services at
home through a special program known as the Katie Beckett program. 
In May 1994, 2,569 children participated in this program. 


      EXPANDING HOME AND
      COMMUNITY-BASED CARE HAS
      HELPED MODERATE OVERALL
      EXPENDITURES
------------------------------------------------------ Appendix IV:3.2

Wisconsin officials believe that by expanding home and
community-based programs while controlling growth in the number of
nursing facility beds, they have been able to control growth in
overall long-term care expenditures.  In 1981, Wisconsin put a
moratorium on new nursing facility beds and later converted it to a
cap (allowing the replacement of current beds but no new ones) that
is still in effect today.  State officials explained that the
legislature simultaneously enacted COP in 1981 as a companion to the
original moratorium on nursing facility beds.  In fact, funding for
COP in the first few years was tied directly to the amount that would
have been required had nursing facility beds been added and filled
with Medicaid beneficiaries.  Wisconsin had 89 nursing facility beds
per 1,000 persons 65 and older in 1982 and 75 beds per 1,000 in 1992. 

Wisconsin has further limited nursing facility capacity by lowering
the overall state cap on beds as nursing facility beds have been
delicensed.  Beds are delicensed when they are closed by a facility
and the beds are not relocated to another facility or added to the
state pool for future relocation.  State requirements allow adding
capacity to treat one waiver beneficiary for each bed delicensed in a
public nursing facility and for roughly every two beds delicensed in
a private nursing facility.  This is true if funding is available and
the approved HCFA ceiling on waiver capacity has not been exceeded. 
Approximately 1,342 beds have been closed voluntarily by nursing
facilities since 1985 and converted to capacity for Medicaid waiver
beneficiaries. 

As a result of these capacity controls, nursing facility utilization
has declined in Wisconsin during the past decade, dropping from an
average daily Medicaid census of 35,587 in 1983 to 30,497 in 1992. 
During the same period, Medicaid nursing facility expenditures have
continued to rise at an average rate of 3.9 percent per year.  This
rate of increase is low compared to other states'; nationwide,
nursing facility expenditures grew 11.5 percent a year from 1987 to
1993.  Wisconsin's Medicaid expenditures for nursing facilities were
$443 million in 1983 and $623 million in 1992. 

As shown in figure IV.2, the average annual expenditure per-user for
nursing facility care is substantially higher than the per user
expenditure for home and community-based care.  Between 1983 and
1992, the average annual expenditure per user for nursing facility
care increased from $12,445 to $20,427.  During the same years, the
average annual per-user expenditure for COP increased from $1,582 to
$3,410, while per-user expenditure for the waiver increased from
$6,249 in 1985 to $6,371 in 1992.  Per-user expenditures for Medicaid
home health and personal care services combined were $1,149 in 1983
and had increased to $6,501 by 1992. 

   Figure IV.2:  Wisconsin's
   Average Annual Expenditure per
   User for Nursing Facility and
   Home and Community- Based Care,
   1983-1992

   (See figure in printed
   edition.)

Notes:  The most recent available data were for 1992.  Nursing
facility data and Medicaid waiver data are reported by calendar year,
while COP data are reported by state fiscal year (July 1 to June 30). 
Medicaid home health and personal care service data are reported by
federal fiscal year and include expenditures for the aged and persons
with physical and developmental disabilities.

Average annual expenditure per user has been calculated by dividing
1992 expenditures by annual users.  Any individual may receive
services through more than one program. 

Source:  Division of Community Service and Division of Health,
Wisconsin Department of Health and Social Services. 

Several reviews of COP and the waiver performed by Wisconsin's
Department of Health and Social Services and others suggest that the
state's home and community-based programs result in per-person total
public savings of about 16 percent, compared with the cost of
institutional care.  The department's studies included expenditures
for home and community-based beneficiaries by the Medicaid waiver,
Medicaid acute care, COP, SSI, and others. 


      CONTROLS ON HOME AND
      COMMUNITY-BASED CARE HAVE
      LIMITED ACCESS FOR SOME
      APPLICANTS
------------------------------------------------------ Appendix IV:3.3

While Wisconsin has controlled the growth of its Medicaid waiver
program and COP, the demand for these services has resulted in a
substantial number of eligible beneficiaries being placed on waiting
lists.  For example, while COP and the waiver for elderly and persons
with physical disabilities each served about 6,000 persons in 1992,
an additional estimated 3,660 persons were waiting for services. 

A 1994 state study of the state-funded COP waiting list in Dane
County described a typical waiting list participant as an older,
unmarried, white female who lived in her own home or with relatives. 
She was on SSI or Medicaid and required a level of care equivalent to
those of persons in nursing facilities.  Most people waiting for
services described their interim care plans as relying on family and
friends for support.  The elderly persons surveyed had been on the
waiting list from 3 months to 4-1/2 years, with the median wait being
nearly 14 months. 


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V

William Scanlon, Associate Director
Michael Gutowski, Assistant Director
Ellen M.  Smith, Evaluator-in-Charge, (206) 287-4796
Richard N.  Jensen, (202) 512-7146
Jennifer A.  Grover
Nancy Purvine
Stanley Stenersen
Evan Stoll


RELATED GAO PRODUCTS
=========================================================== Appendix 0

Older Americans Act:  Funding Formula Could Better Reflect State
Needs (GAO/HEHS-94-41, May 12, 1994). 

Long-Term Care Reform:  Program Eligibility, States' Service
Capacity, and Federal Role in Reform Need More Consideration
(GAO/T-HEHS-94-144, Apr.  14, 1994). 

Long-Term Care:  The Need for Geriatric Assessment in Publicly Funded
Home and Community-Based Programs (GAO/T-PEMD-94-20, Apr.  14, 1994). 

Long-Term Care:  Demography, Dollars, and Dissatisfaction Drive
Reform (GAO/T-HEHS-94-140, Apr.  12, 1994). 

Long-Term Care:  Status of Quality Assurance and Measurement in Home
and Community-Based Services (GAO/PEMD-94-19, Mar.  31, 1994). 

Long-Term Care:  Support for Elder Care Could Benefit the Government
Workplace and the Elderly (GAO/HEHS-94-64, Mar.  4, 1994). 

Long-Term Care:  Private Sector Elder Care Could Yield Multiple
Benefits (GAO/HEHS-94-60, Jan.  31, 1994). 

Older Americans Act:  Title III Funds Not Distributed According to
Statute (GAO/HEHS-94-37, Jan.  18, 1994). 

Health Care Reform:  Supplemental and Long-Term Care Insurance
(GAO/T-HRD-94-58, Nov.  9, 1993). 

Long-Term Care Insurance:  High Percentage of Policyholders Drop
Policies (GAO/HRD-93-129, Aug.  25, 1993). 

VA Health Care:  Potential for Offsetting Long-Term Care Costs
Through Estate Recovery (GAO/HRD-93-68, July 27, 1993). 

Medicaid Estate Planning (GAO/HRD-93-29R, July 20, 1993). 

Long-Term Care Reform:  Rethinking Service Delivery, Accountability,
and Cost Control (GAO/HRD-93-1-SP, July 13-14, 1993). 

Long-Term Care Insurance:  Tax Preferences Reduce Costs More for
Those in Higher Tax Brackets (GAO/GGD-93-110, June 22, 1993). 

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