In 1998, the United States Supreme Court ruled on a landmark case with far-reaching implications. The case posed the question: What is the responsibility of states when they allocate Medicaid money?
For decades, states have used nursing homes and other long-term care facilities as the primary means to care for elders and people with disabilities. The majority of Medicaid long-term care dollars went to nursing homes. Very little was left to provide services in home and community-based settings.
The Supreme Court ruled in a 6-3 decision in Olmstead v. LC that states must provide services where it is most appropriate for the individual. The ruling mandates that states maintain a range of long-term care services, both institutional and home and community-based. Individuals must be given the choice of where they receive long-term care. States are now struggling with providing funding for both the old system of nursing home care and the newly mandated home and community-based services.
The position of the Kenai Peninsula Independent Living Center is states should provide home and community-based services first, using nursing homes as the final option.
There are some innovative ways that states can save money by providing home and community-based services. The belief that the most cost-effective way to provide long-term care is in an institutional setting is increasingly under attack. Advocates of home and community-based services are pointing to cost-saving methods within the current Medicaid payment structure.
One of the most promising strategies is allowing Medicaid dollars to follow the individual from the nursing home to the community. This would use Medicaid funds, currently allocated by the state to pay for nursing home beds, to pay instead for community services, when the person chooses to live in the community. Other states have chosen to implement this option and are realizing savings in the cost of long-term care.
One thing to remember is that Alaska uses a formula to pay nursing homes for the total number of beds, whether people use them or not. Reimbursements to nursing homes are based on mortgage payments, utilities costs and capital costs for the total number of beds in the institution, not actual residents. Payments to nursing homes become a line item in the state budget; at the same time people are waiting for community-based services.
It's critical to remember, according to the American Health Care Association, the average cost of nursing home care is $41,000 per year, while community services are much cheaper. In Alaska the average cost is $97,000 per year. Missouri reports, in 1998, the average cost per person in a nursing facility was $31,765. The average cost per recipient of home and community services was $3,371 (Missouri Division of Aging, Missouri Care Options Annual Report. Fiscal Year 1998). The cost was even higher for persons in intermediate care facilities. The Missouri Developmental Disabilities Planning Council reported, for the same year, an average cost of institutional care of $85,000 per person while the per person cost of home and community-based services for people with developmental disabilities was just over $35,000.
A simple approach to decreasing the escalating Medicaid costs is to let people choose to receive long-term care in community-based programs instead of nursing homes. If the state chooses to allow the money to follow the individual the cost is neutral. In the long run, there will be a net saving. National averages of long-term care costs in institutions and community-based services bear this out.
In Alaska, the cost of nursing home expenditures increased from $50 million to $60 million between 1995 and 2000. For fiscal year 2000, this amount was 13 percent of Alaska's entire Medicaid budget. It was more than the amount of money needed to provide prescription drug coverage.
Remember, nursing homes and other long-term care facilities are paid by the total number of beds, not the number of residents. In Alaska, 29 percent of the long-term care beds are vacant at any one time. The state can stop paying for a portion of these vacant beds in a process called decertification. The money saved can be directly moved to providing long-term care in a community setting.
The federal government has recognized that a bias exists in favor of providing care in institutions over community-based settings. Sometimes needed services can only be funded if they are provided in a nursing home or other long-term care facility. This is unfortunate both from the viewpoint of medical care and economics. In most instances the cost will be less in the community, and the individual will respond better to services provided in his or her own home. Providing proper supports will allow people to stay in their homes longer and lower the annual cost of Medicaid to the state.
Alaska could and should adopt a policy similar to that of the state of Missouri by providing home and community-based services first. Those who reside in long-term care facilities and nursing homes could and should be assessed for appropriate home and community-based services.
Individuals who will benefit from home and community-based services could and should be allowed to save Social Security and Social Security Disability checks to provide a transition fund. One-time grants can be used to help individuals pay for first month's rent and security deposits. The state could and should require that the long-term care bed vacated by an individual be held open for a period of time to ensure that the individual has a safety net, if the home and community placement fails. Every individual who is in danger of nursing home placement must be apprised of the alternatives available, and every long-term care recipient deserves reevaluation every three months to see if community-based services are appropriate.
These common-sense steps will save the state money. They will provide a better level of care. It is time that the state of Alaska, with its enviable record of inclusion of people with disabilities, takes a leadership role in providing an alternative to the institution as the primary choice for long-term care.
Jim Brady is the Americans with Disabilities Act specialist at the Kenai Peninsula Independent Living Center. He is the former coordinator of the ADA Partners Project where he provided Americans with Disabilities Act advice and technical assistance to business and local governments across the state. He is extensively involved in providing information about the Olmstead decision and its implications for long-term care providers and the state of Alaska.
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