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State Long-Term Care: Recent Developments and Policy DirectionsBarbara Coleman, Wendy Fox-Grage and Donna FolkemerNational Conference of State LegislaturesJuly 2002
TABLE OF CONTENTS
PREFACEState Long-Term Care: Recent Developments and Policy Directions is the first of two reports of an 18-month project funded by the Office of the Assistant Secretary for Planning and Evaluation of the U.S. Department of Health and Human Services. This report provides a thumbnail sketch of long-term care budgets, legislation and planning in the 50 states and the District of Columbia. The goal of the project is to obtain insights into recent state long-term care public policy reforms, as evidenced by their proposed or recently enacted legislation, task forces and budgets. The focus of this first report is mainly on state legislation, expenditures and policy activity in fiscal year 2001 to provide the most current perspective possible in fast-changing state environments. However, it also previews fiscal year 2002 (when the data were available and appropriate). In some cases, reference is made to prior years to provide context for review and analysis. In the summer of 2003, NCSL will publish a second report that will update subsequent long-term care budgets, planning and implementation strategies in the states. The fiscal analysis in this report was derived from the responses to a NCSL long-term care expenditure survey sent to legislative fiscal offices in 2001. Twenty-six states responded to the survey. For the other states, fiscal information was gathered from the FY 2000 and FY 2001 Medicaid long-term care expenditures reports compiled by Brian Burwell of MEDSTAT Inc., who uses HCFA 64 reports that the states file annually with CMS (formerly HCFA). While HCFA 64 data are the most accurate available on Medicaid expenditures, there are several important caveats associated with the information. HCFA 64 data are based on date of payment rather than date of service and thus may not accurately reflect the specific services actually delivered in a particular year. In addition, HCFA 64 data are derived from submitted claims and may include some claims that are subsequently disallowed. Finally, HCFA 64 data include only fee-for-service expenditures; any services provided through managed care are not included. Other fiscal information was gathered from state Web sites and state legislative reports. Information on the number of Medicaid home and community-based waiver programs came from a report for The Kaiser Commission on Medicaid and the Uninsured by Charlene Harrington, Medicaid 1915(c) Home and Community-Based Waivers: Program Data, 1992-1999. State reporting of long-term care expenditures (primarily Medicaid) can present challenges in conveying an accurate overview of a state's long-term care system. In particular, specific events may distort the picture from one year to the next. For instance, a large increase in nursing home spending may be due to a state's use of a specific strategy to maximize federal dollars, rather than to an increase in the nursing home population or to a sudden surge in nursing home costs in that state. Rates of change in state Medicaid spending for specific services can be due to factors related to state payment policies as well as to real change in service utilization. Therefore, expenditure data need to be considered with caution. Information on 2001 legislative activities in the states comes from NCSL's Health Policy Tracking Service. The section on long-term care planning was drawn largely from NCSL's "The States' Response to the Olmstead Decision: A Work in Progress," published in December 2001, and from information on state Web sites.
ACKNOWLEDGMENTSElizabeth Devore, Corina Eckl, and Arturo Perez of NCSL contributed material used in this report. The authors thank the Office of the Assistant Secretary for Planning and Evaluation (ASPE) of the U.S. Department of Health and Human Services for its generous funding and Ruth Katz and Hunter McKay of ASPE for their insight and advice. We also are grateful to our review committee- Diane Braunstein with the National Governors' Association, Brian Burwell with The MedStat Group, Kurt DeWeese with the Illinois House Democrat staff, and Susan Reinhard with Rutgers Center for State Health Policy for their valuable comments and feedback.
INTRODUCTIONLong-term care policies and programs are determined in the United States by 50 separate state governments, each with different demographics, economies and political philosophies. For many years, the main direction of long-term care state policy was to support institutionalization of frail elders and people with disabilities. As individuals with disabilities and their families began to advocate and push for greater choice and for increased opportunities to remain in their homes and communities, states began to broaden their focus on home and community-based care services. These programs and services run the gamut from in-home care to adult day services to supportive housing and transportation. Today, most states are seeking to curb increasing costs for nursing homes that are largely paid through the Medicaid program.1 States also are expanding the range of home and community-based services (HCBS) that they offer to provide greater options for the elderly, people with physical disabilities, people with mental retardation or developmental disabilities, and other diverse populations with disabilities. The trend toward greater state spending on HCBS encountered a major obstacle in 2001, however, as state revenues began to shrink at the same time as Medicaid spending was rising. State officials face several major challenges as they try to slow rising Medicaid costs and meet demands from other state services:
A number of states have used creative approaches to expand the options for frail elders and people with disabilities to receive services and supports that enable them to live in their homes and communities rather than be institutionalized. In the report that follows, the National Conference of State Legislatures (NCSL) traces state long-term care policy developments in 2001, looking backward to the late 1990s and forward to 2002 to add context to the issues discussed in this report.
FISCAL ANALYSISMost states have been forced in recent years to grapple with budget shortfalls resulting from declining revenues and escalating costs, particularly Medicaid costs. From FY 2000 to FY 2002, states realized about 5 percent revenue growth, according to the National Association of State Budget Officers (NASBO). Over the same period, NASBO reports that states saw a 25-percent rate of growth in Medicaid expenditures. Medicaid is second only to education in terms of state spending, accounting for about 20 percent of all state spending. In addition, Medicaid is the single largest source of public funding for long-term care. NASBO surveyed the states in May 2002 regarding their Medicaid budgets.2 Of the 49 states that responded to the survey, 39 states had Medicaid shortfalls in FY 2001 and 28 states were anticipating shortfalls in FY 2002. The survey indicated that 47 of the 49 states that responded took action in fiscal 2002 or proposed action in fiscal 2003 to reduce Medicaid expenditures. NASBO reported that total Medicaid expenditures increased about 10.6 percent in FY 2001 over FY 2000 levels and were estimated to have risen another 13.3 percent from FY 2001 to FY 2002. The federal Centers for Medicare and Medicaid Services (CMS) attributed the expenditure growth to prescription drug spending, nursing home costs, community-based long-term care costs, and payments to health plans.3 Institutional and community expenditures. For many years, Medicaid long-term care spending was almost exclusively for institutional services. In FY 1990, more than 90 percent of Medicaid long-term care expenditures was allocated to institutional care (nursing homes and intermediate care facilities for the mentally retarded [ICF/MR] facilities) and only 10 percent to HCBS programs.4 By 2001, the percentage of Medicaid long-term care dollars for institutional care had decreased to 71 percent and HCBS had risen to 29 percent. Medicaid spending for nursing home care increased by 8.8 percent (from $36.4 billion to $39.6 billion) from FY 1999 to FY 2000, and then by 13.5 percent to $42.7 billion in FY 2001, despite the fact that occupancy has been declining nationally. Home and community-based services waivers. The Medicaid long-term care benefit that has been growing rapidly in recent years is HCBS waiver programs, which increased from $10.6 billion in FY 1999 to $12.7 billion in FY 2000 (a 14.6 percent increase) and to approximately $14 billion in FY 2001. Implementing Medicaid waiver programs allows states to tap federal matching funds for services that otherwise cannot be covered under the regular state Medicaid plan. About three-fourths of waiver expenditures in FY 2001 (about $10.5 billion) were allocated to services for people with mental retardation and developmental disabilities. Although the caseloads in many states for MR/DD programs are smaller than for Aged/Disabled programs, the costs are higher because many people with MR/DD receive 24-hour support. State variations. States differ considerably in their allocation of Medicaid long-term care funds to institutional care versus HCBS. Vermont apportioned only 45 percent to institutional care in 2001, for example, and 55 percent to home care. Washington allocated 52 percent to institutional care in 2001 and 48 percent to home care. In contrast, Mississippi spent 91 percent of its Medicaid long-term care funds on institutional care and only 9 percent on home care. It should be noted, however, that reviewing state spending on long-term care services from the perspective of Medicaid expenditures distorts the fiscal picture in several states that commit significant state general revenues to home and community-based services (home care and residential services). For example, Illinois spent 88 percent of its Medicaid long-term care expenditures on institutional care in 2001 and only 12 percent on HCBS. In addition to the $293 million of Medicaid money that went to home care in 2001, however, the state also committed $200 million in general revenues for its Community Care Program in FY 2001; this program served 38,000 older adults each month. Although the Community Care Program consists almost exclusively of chore-homemaker support services that may not in and of themselves serve as deterrents to institutionalization, the program nevertheless represents a significant commitment by the state to community services. State general revenue and federal funds. Several states fund significant HCBS programs from their state general revenues; federal Older Americans Act funds also are a major source of funding. Indiana and Pennsylvania offer two other examples of the use of non-Medicaid funds for long-term care services in the community. For its home and community-based OPTIONS program in 2000, Pennsylvania provided $175 million in lottery revenue. The state also committed $45 million in tobacco settlement revenue for expanding HCBS in FY 2001-2002 to serve an additional 11,000 people. The state-funded CHOICE program in Indiana, which served more than 12,000 people in FY 2000, was funded at more than $40 million that year. Another major source of funds for long-term care community services is the Older Americans Act program, under which $1.25 billion in funding was distributed in FY 2001 through Area Agencies on Aging throughout the country. Of that total, about two-fifths was allocated to congregate and home-delivered meals ($530 million) and another $125 million went to the new National Family Caregiver Program, which provides support services such as information and assistance, respite, and education and training to family caregivers.
LEGISLATIVE ACTIVITIESLawmakers in 2001 pursued long-term care reforms in the context of tight budget constraints and growing concern about health-related expenditures. A number of legislative initiatives involved expanding home and community-based options for people with disabilities. State legislatures also took a number of major actions to regulate nursing homes and assisted living facilities. Home and community-based services expansions. Perhaps the most ambitious effort took place in Minnesota, where the Legislature created a comprehensive framework for reshaping the state's long-term care system, acting on the recommendations of the Long-Term Care Task Force. The legislation resulted in $183 million in appropriations for long-term care reforms for FY 2002-2003, of which more than $75 million was invested in expanding home and community-based service options and $108 million provided cost-of-living increases for nursing facilities and continuing care providers. Increased spending was to be partially offset by $44 million in savings from downsizing the nursing home industry by 5,100 beds. In Iowa, legislators appropriated more than $25 million to fund long-term care development initiatives through the state's Senior Living Trust Fund. The Senior Trust was created to encourage the development of assisted living and community-based services, at the same time decreasing the number of nursing home beds in the state. In addition to providing grants for the conversion of nursing home beds into assisted living, the fund pays for home-delivered meal programs, adult day services and respite care. The Maryland General Assembly created a new program to provide community attendant services and other supports to individuals with physical or cognitive disabilities who qualify for Medicaid. Participants will be able to obtain services in a variety of settings- such as in their own homes or in a supported living environment- and will be permitted to hire their own personal assistant. Pennsylvania lawmakers dedicated a significant portion of the state's tobacco settlement revenue ($45 million) to expand HCBS to 3,000 additional people eligible for Medicaid-funded waiver services. A portion of the funds also will be used to establish a new program to provide HCBS for individuals with low incomes who do not qualify for Medicaid services. Nursing home quality. Concern about continuing reports of poor quality of care in many of the nation's nursing homes led lawmakers in many states to take actions related to quality improvement. Nineteen state legislatures considered nursing home staffing proposals in 2001. Of these states, Arkansas and Florida enacted laws to increase nursing home staffing standards beyond previously enacted standards. Both states will phase in staff-to-resident ratios for licensed nurses and nurse aides during the next few years. The Wyoming Legislature initiated a study to examine wages and salaries of nonprofessional, direct care workers in nursing homes, assisted living and mental health care facilities, and developmental disability programs. Several states adopted other measures aimed at improving nursing home quality. Texas, for example, became the first state to permit nursing home residents to use video cameras to monitor the care they receive. The "Grannycam" law, as it is known, stipulates that individuals who view a tape that reveals abuse or neglect must report these crimes; it also allows videotapes to be used as evidence in court. Legislation enacted in Arizona allows nursing homes that receive an "excellent" quality rating on the state's annual facility compliance and licensure survey for two consecutive years to receive grant money for quality improvement. Minnesota will develop a system of quality profiles for all long-term care providers, while Texas will establish pilot centers for advancing quality in long-term care through research, education and outreach programs. Nursing home liability insurance. Another nursing home issue liability insurance received significant attention from state legislatures in 2001. Nursing homes have faced a growing number of liability cases in recent years, often resulting in costly settlements. With the cost of liability insurance skyrocketing, insurers were pulling out of the market in some states. In Arkansas, lawmakers authorized the state insurance commissioner to establish a voluntary liability insurance pool for long-term care facilities. Florida lawmakers added mandatory liability coverage requirements for nursing homes and implemented tort reforms, including caps on punitive damages and attorneys' fees. As of September 1, 2003, the Texas Legislature requires nursing homes to maintain professional liability insurance coverage annually of at least $1 million per occurrence of a violation and $3 million total coverage. The Florida and Texas legislation also addressed quality improvements in nursing homes. Assisted living regulation. A number of state legislatures addressed issues related to assisted living facilities. The Arkansas Legislature established licensure and oversight standards for assisted living facilities, provided that facilities currently licensed as residential care facilities could switch all or a portion of their beds to assisted living, and directed the state to apply for a Medicaid waiver to cover assisted living services for at least 1,000 Medicaid beneficiaries. Alabama legislators enacted several assisted living laws in 2001, following regulatory reforms in 2000 that created a two-tiered assisted living structure with separate standards for facilities that provide care to residents with dementia. The new Alabama laws established licensure standards for assisted living administrators and appropriated $200,000 to fund assisted living inspections. The Maine Legislature established a commission to study options for developing high-quality, cost-effective assisted living housing and service programs in community center locations across the state. New Jersey lawmakers enacted a policy requiring providers that operate new assisted living or comprehensive care facilities to reserve at least 10 percent of their beds for Medicaid residents. Long-term care insurance. States have begun taking significant steps to ensure the protection of consumers who purchase long-term care insurance policies, primarily by focusing on premium inflation protection. For example, Utah established standards for disclosure relating to federally tax-qualified policies, notification when a policy does not include certain premium inflation protections, and written notification when an insurer denies a policyholder's claim. The Utah legislation also specifies a time frame for delivery of a policy and mandates inclusion of nonforfeiture benefits. Idaho created a tax deduction for half of a purchaser's long-term care insurance premiums, and Michigan required long-term care insurers to define more clearly their assisted living and home care benefits. The Minnesota Legislature established standards for rating practices, rate schedule increases, contingent benefits upon lapse, and nonforfeiture benefits.
LONG-TERM CARE PLANNINGAs a follow-up to the 1999 Supreme Court ruling in L.C. & E.W. vs. Olmstead, 40 states had task forces, commissions, or state agency work groups assessing their current long-term care systems in 2001. In its interpretation of the Americans with Disabilities Act (ADA), the court ruled that states must provide services in the most integrated setting appropriate to the needs of qualified individuals with disabilities. The ruling directs states to make "reasonable modifications" in programs and activities. Modifications that would "fundamentally alter" the nature of services, programs or activities are not required. As a result, the federal government has encouraged states to plan for reforms not only in the health arena but also in the areas of transportation, housing, education and other social supports to fully integrate people with disabilities into the least restrictive settings. Of the 40 states that were reviewing their long-term care systems in 2001, 18 states issued long-term care plans or significant papers addressing options for serving more people with disabilities in home and community-based settings (as of January 2002). State Olmstead activities. Each state approached Olmstead in a different way. Some states developed specific strategies designed for implementation over a number of years, some identified key priorities for more immediate actions, and others set forth broad policy recommendations upon which to base future action. Eight additional states were expected to issue reports in 2002. The recommendations embodied in the reports issued to date included the following:
Plans in four states Mississippi, Missouri, Ohio and Texas stand out because they contain a clear vision for systems change; include specific strategies and goals; identify the state agencies responsible for each strategy; and include timelines and budgets. For example, Mississippi's 59-page plan contains recommendations for the next 10 years and proposed budgets for FY 2003 to FY 2011 for each recommendation. The 79-page Ohio report contains short-term and long-term recommendations. It contains the proposed executive budget for FY 2002-2003 of $145 million for new initiatives and expansion of programs for people with disabilities. Study commissions. Not all state long-term care planning in 2001 was a consequence of the Olmstead decision. Minnesota embarked on a program of comprehensive long-term care reform initiated by the work of a Long-Term Care Task Force that began meeting in 2000. The task force, composed of state legislators and state agency commissioners, issued its report, Reshaping Long-Term Care in Minnesota, in January 2001. Its recommendations are limited to the aging population. A number of the task force proposals were enacted into law in 2001. These included funding of community service grants to pay start-up, capital, and other costs of developing supportive housing and home and community-based services and promoting the elimination of excess nursing home beds. North Carolina offers another example of long-term care planning. In 1999, the North Carolina General Assembly asked the state Department of Health and Human Services to develop a long-term care system that could provide a continuum of care for people with disabilities. The department called on the North Carolina Institute of Medicine to convene a statewide task force to assist in developing the plan. That 49-person task force produced a report in March 2001 containing 47 recommendations that relate to issues of infrastructure, quality, work force and access/financing. Other. As in the past, some states also continued implementing moratoria on new nursing home beds or continued to administer certificate-of-need laws that effectively restricted the addition of more institutional beds. Others provided financial incentives for divestiture by institutional providers and diversification or reinvestment in home and community-based services.
FUTURE OUTLOOKDecreasing revenues and rising Medicaid costs caused tight budgets in most states in FY 2001 and continued concern in FY 2002. The effect of these developments on long-term care reforms in the states is uncertain. A number of states have had to consider cost-containment options, many of which affect long-term care programs and services.5 Cost containment. As in the past, states are paying particular attention to nursing home costs, which are the largest single item in their Medicaid long-term care package. One strategy involves reducing or freezing rate reimbursement for nursing homes in FY 2002 and FY 2003. Maine, Illinois, Indiana, Iowa and Virginia reported on the NASBO survey that they were taking such actions or would be in the near future. Pennsylvania was revising income eligibility requirements for nursing homes to tighten admissions. Other strategies involved imposing provider taxes and transforming reimbursement systems from cost-based methods to prospective payment systems. Other cost-containment actions that states were considering in the long-term care area included enhanced estate recovery and asset transfer recoupment from Medicaid beneficiaries (Kansas, Maine and Vermont), capping the enrollment of some waiver programs (Kentucky), placing tighter limits on personal care services (North Carolina), and maintaining long-term care per diem prices at FY 2001 levels (Michigan). Systems change. Still, not all state activity in regard to long-term care was restrictive in 2001. With impetus from the Olmstead decision and seed money from the Centers for Medicare and Medicaid Services under the Systems Change Grant Program, a number of states were exploring options for helping people in nursing homes make the transition to community settings (if they wished to do so and were found to be capable of living more independently). States also were enhancing personal attendant care options and reforming the delivery of long-term care services. For example, Washington planned to support up to 300 people under age 65 to make the transition out of nursing homes, including partnering with independent living consultants to provide peer support, skills training and advocacy. The Colorado Transitions Project will create a state infrastructure for transition efforts and provide choice information to more than 1,200 people in nursing homes, resulting in 130 transitions to the community. Maryland plans to coordinate with local housing authorities and housing providers to obtain housing for a minimum of 150 people to leave nursing homes; this program is targeted to individuals with physical disabilities who are age 65 or younger. States also propose using Systems Change grant money to advance consumer direction in many of their HCBS programs, to develop incentives for recruiting and retaining direct care workers for home care and nursing homes, to improve assessment systems, and to strengthen outreach efforts that will inform people with disabilities about community-based alternatives to nursing homes. The Systems Change Grant Program was allowing states to test new strategies and approaches to their long-term care services.
CONCLUSIONSeveral themes emerge from this review of state long-term care actions in 2001. In future months, states are likely to:
Uncertainty about the economy may limit state long-term care initiatives that require greater spending in the near future. However, states are showing that they can still design innovative programs and services that expand options for the frail elderly and people with disabilities to live independent lives.
NOTES
Copyright
© 2002 Global Action on Aging |
U.S.
Department of Health and Human Services