Commission delivered final report to Congress on June 28, 2002
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The need for appropriate and affordable housing and the need for accessible, high-quality services are equal partners in creating a workable equation for successful aging. A person’s ability to function can be enhanced or impeded by his or her physical and social environment.72 As people age, independence and quality of life can depend on their ability to access and pay for the housing and services they need in the environment that best supports an appropriate balance between autonomy and safety.

Since the 1930s, the Federal Government has created an array of programs to encourage the development of affordable housing, ranging from grants to direct loans to mortgage insurance to rental assistance and other types of incentives. Similarly, it has created entitlement, grant, loan, and discretionary programs to meet the health and supportive service needs of seniors, including Medicare, Medicaid, and the Older Americans Act programs.

The Commission presents here brief descriptions of existing Federal programs of particular importance to seniors.


Section 202 Supportive Housing for the Elderly

Created by the Housing Act of 1959,73 today’s Section 202 program provides capital advances (grants) and project-based rental assistance — to non-profit sponsors for the development and construction of supportive housing for very-low-income seniors, age 62 and older. Through 2001, the Section 202 program provided housing for approximately 381,000 senior or disabled households in more than 9,000 facilities

Initially, the Section 202 program provided a below-market interest rate loan. In 1968, however, that program was phased out and replaced by the Section 236 program. The initial program was, however, reinstated by Congress in 1974, at which time it was targeted to households with incomes of less than 80 percent of AMI. Project-based Section 8 rental assistance was made available for up to 100 percent of the units, in most cases, for 20 years. The presence of Section 8 units in such projects permitted owners to serve very-low-income seniors. (The majority of pre-1975 projects relied on tenant income to pay the debt service and served moderate-income residents.)

In 1990, Section 202 funding was changed from direct loan to capital advance (grant) for the development and construction of supportive housing for seniors, but continued to include project-based rental assistance that ensures that no resident pays in excess of 30 percent of income for rent and utilities. Eligible residents must be 62 or older and have incomes at or below 50 percent of AMI. Eligible sponsors are private non-profits. HUD opens competition for funding once each year. Because of its rental assistance component, this program has an exceptional ability to reach extremely low-income seniors — individuals with incomes at or below 30 percent of AMI. Funding is, however, limited. In the Notice of Funding Availability (NOFA) issued on March 26, 2002, HUD estimated that funding was available for the production of 5,816 units, nationwide.

Section 202 is the only affordable housing program dedicated exclusively to seniors and, as such, can serve as the linchpin between housing and service delivery. It also has the advantage that it can serve a range of housing and service needs while promoting maximum independence among residents. Although originally designed as an independent living program, the modifications resulting from the 1990 Housing Act encourage service to a frail population. According to a recent AARP study,74 the average age of the residents is 75, a large proportion of whom are frail.

Section 202 projects can also be designed or retrofitted to provide a continuum of care services as residents age, thereby allowing older residents to age in place without fear of displacement due to frailty. This is an often-cited problem with existing assisted living facilities.

Although a highly popular and successful program, as indicated by the chart below, funding for the Section 202 program has dropped from an annual production level of 20,000 units in 1977, to today’s production level of approximately 6,000 per annum.

Exhibit 15 Chart
   *Chart prepared using HUD data

Public Housing

Created by the 1937 Housing Act, our system of public housing is administered at the local level by local housing authorities. Utilizing a system of construction grants and operating subsidies, hundreds of thousands of units of rental housing were developed across the country and made available to the poorest Americans. It is estimated that between 600,000 and 700,000 persons age 62 and older live in public housing, but only about one-half of those live in “seniors only” public housing.75 Much of this housing stock needs modernization. Because no new incremental public housing units have been created for more than a decade, however, at present this program is not a resource for meeting the growing need for new senior housing.

Since 1993, HOPE VI has provided financial incentives to Public Housing Authorities (PHAs) to modernize, renovate, demolish, and replace dense public housing communities with mixed-use, mixed-income units. HOPE VI grant funds can also be used to pay for supportive services and service coordinators for seniors and many PHAs have incorporated senior housing into their HOPE VI revitalization projects. The Commission views this as a good source for intergenerational living for seniors. Still, a net loss of units available to low-income seniors often results from a HOPE VI development, because the program does not require “one for one” unit replacement.

Housing Choice Vouchers

Administered by local housing authorities, Housing Choice Vouchers (a tenant-based rental assistance program which was formerly the Section 8 certificate and voucher program), is available to help with rent affordability for very-low-income and extremely-low-income persons in existing private rental housing. Although this program does not produce new units, it is a valuable resource where a supply of appropriate units for very low-income seniors already exists. According to the 1999 American Housing Survey, the most important consideration in the choice of neighborhood for seniors who moved recently was convenience to friends or relatives. A voucher program may permit an older person to relocate closer to family and community support. HUD estimates that approximately 1.5 million vouchers are currently in use and that 17 percent of voucher holders are elderly households.

Seniors may encounter significant difficulty in locating acceptable units. Housing Choice Vouchers are limited in their utility for older seniors with physical impairments or transportation problems. These difficulties are compounded in areas of the country with low vacancy rates or where fair-market rents lag behind market rents. In a recently released HUD-commissioned study, 7 percent of respondents were elderly households. Of those respondents, persons age 62 and older had only a 54 percent success rate in finding appropriate housing using the voucher program. By contrast, households headed by persons under age 25 had a 73 percent success rate and households headed by persons aged 25 to 62 had a 68 percent success rate.76

The following table shows the amount of new, incremental vouchers funded by Congress from 2000 through the President’s FY 2003 budget proposal. HUD does not collect demographic information on the types of households that receive these new vouchers. For purposes of illustration, however, the HUD estimate of 17 percent senior voucher holders was assumed.

Exhibit 16: Incremental Vouchers

Fiscal Year Number of New, Incremental Vouchers Number Used by Elderly Households*
2000 60,000 10,200
2001 79,000 13,430
2002 26,000 4,420
2003 (proposed) 34,000 5,780
*Chart prepared from HUD data

Recently, HUD has allowed PHAs to use up to 20 percent of their vouchers in housing developments, as project-based subsidies. This decision will assist both the seniors who are searching for subsidized housing and senior housing providers who are attempting to increase the stock of affordable housing.

HOME Investment Partnership Program

HOME, a federally funded program for housing, was enacted in 1990 as part of the National Affordable Housing Act (NAHA). The program is intended to foster partnerships among Federal, State, and local governments, and the private sector. Funds are allocated annually to States and local governments on a needs-based formula. This formula includes the number of low- and very-low-income families, the number of homeless, local housing conditions, and local economic conditions. Typically, 40 percent of HOME funds are allocated to the State unit of government and 60 percent to local Participating Jurisdictions , generally, the larger cities. To receive funds, States and localities must generate a Consolidated Plan — a planning tool that documents housing statistics and sets housing goals, as part of a comprehensive strategy. HOME could be an important resource for seniors in that it is locally administered and could potentially combine services with housing. For example, in FY2000, State agencies were awarded almost $72 million in funds for a range of housing activities targeted to seniors.77 HOME is not, however, a program that is dedicated exclusively to seniors and it is typically used as “gap” financing to create affordability in projects that rely on mixed-financing.

Community Development Block Grant Program (CDBG)

Enacted by the Housing and Community Development Act of 1974, the Community Development Block Grant (CDBG) program provides a flexible source of annual formula grant funding for local governments to address their particular development priorities. HUD provides grant funds to States and local governments based on relative needs. To receive both CDBG and HOME funds, States and localities must generate a Consolidated Plan, as described above.

CDBG funds support a wide range of activities intended to further community and economic development directed toward neighborhood revitalization, economic development, and the provision of improved community facilities and services. CDBG activities are initiated and developed at the local level based on a community’s perceptions of its needs and priorities and potential benefits to the community. CDBG projects must benefit low- and moderate-income families, prevent or eliminate slums and blight, or meet other urgent community development needs.

Approximately 70 percent of CDBG funds go directly to local governments with 50,000 or more residents. Remaining funds go to the States, which then allocate the funds among less populated localities. CDBG funds can be used to benefit seniors through the:

  • Reconstruction or rehabilitation of affordable senior housing;

  • Construction of public facilities and improvements, such as senior centers; and/or

  • Provision of public services, such as congregate meals and transportation.

States and local governments often use CDBG funds to match Older Americans Act (OAA) formula funding to help provide OAA Title III services.

Low-Income Housing Tax Credit Program

Currently, more affordable housing is produced through the Low-Income Housing Tax Credit Program (LIHTC) than any other Federal housing program. Created by Congress in 1986 — under Section 42 of the Internal Revenue Code — the program provides a tax credit to those who invest in affordable housing. To be eligible for the credit, 20 percent of the applicable housing units must be affordable to persons with incomes at or below 50 percent of AMI, or 40 percent of the units must be affordable to persons at or below 60 percent of AMI. Although LIHTC program rents must be “affordable,” the rents are not subsidized i.e., the individual resident’s rent is not capped at 30 percent of income. Because of this, the “band of affordability” in tax credit housing is considered to be persons with incomes between 40 percent and 60 percent of AMI.

Although the enabling legislation for Section 42 establishes basic ground rules, the housing tax credit program is administered by each State through the State’s Qualified Allocation Plan (QAP), which reflects the goals and principles of that State. The Commission finds that this model of Federal/State partnership works well, with State and local governments better able to determine local needs and adjust for changes in demographics. Many states have established “set-asides” or have provided additional points in their scoring systems to provide incentives for developers who produce senior housing under the tax credit program. Some States require services in senior housing developments as well, or provide additional points for housing owners who are willing to commit to offering services on a long-term basis. The Commission believes that States that include senior housing as a priority should be commended and that other States should be encouraged to move in that direction.

Although not a program targeted exclusively to senior housing, each year about 13,20078 units of senior housing are being created through the LIHTC. A recent 40 percent per capita increase in tax credit authority to the States should [result in an increase in senior housing production levels under this program.

Mortgage Revenue Bonds and 501(c)(3) Tax Exempt Bonds

Senior facilities, including independent living and health care facilities are also financed with multifamily bonds. These are tax-exempt bonds developers use to obtain more favorable interest rates. As a result of reduced interest expense, they are able to set lower rents. Generally, multifamily bonds take two forms: 501(c)(3) bonds that are exclusively available to non-profits and have no upper limits on how much can be issued; and private activity bonds, which can be used by private developers and are generally combined with a 4 percent tax credit that is subject to a State’s bond cap.

Multifamily bonds are issued on a project-specific basis. Regardless of the sponsor/developer, a public entity such as a State or local housing finance agency or PHA must be involved in the issuance of these bonds. Taxable bonds may also be issued to provide additional funds for the production of affordable rental housing.

The Internal Revenue Code requires that at least 80 percent of the units financed with housing bonds be rented to persons with incomes at or below 80 percent of AMI, and that non-501(c)(3) bonds meet one of the following more stringent tenant income requirements:

  • · At least 20 percent of the units in a bond-financed project must be rented to tenants with incomes at or below 50 percent of AMI; or

  • At least 40 percent of the units must be rented to tenants with incomes at or below 60 percent of AMI.

Health facility bonds are also used to finance assisted living and long-term care facilities, but do not carry the same affordability test, as do multifamily bonds.

Government Sponsored Enterprises

Because Government Sponsored Enterprises (GSEs) — Fannie Mae, Freddie Mac, and the Federal Home Loan Banks — are chartered as a private enterprise by Congress they are able to access the capital market at lower costs. GSEs are a critical part of the Nation’s financial delivery system and their actions have direct bearing on the availability and cost of housing finance, including housing for seniors. Again, although they are not designed to help fill needs for senior housing exclusively, they are useful sources of financing for moderately priced senior housing. Both Fannie Mae and Freddie Mac offer forward commitments for projects utilizing LIHTC, and Fannie Mae is one of the largest purchasers of housing tax credits. The Affordable Housing Program of the Federal Home Loan Bank is a good example of GSE participation in affordable housing as a frequent supplement to mixed-financed projects, including those projects that are making use of housing tax credits.

HUD Mortgage Insurance

Pursuant to the Housing Acts of 1954 and 1959, HUD offers Federal Housing Administration (FHA) mortgage insurance for housing and health care facilities under a variety of programs. Sections 221(d)(3) and 221(d)(4) of the Housing Act provide insurance for the construction or rehabilitation of housing for low- and moderate-income families. Section 232 provides insurance for nursing facilities, board and care homes, assisted living facilities, and projects that combine two or more of those types of housing units. The regulations that govern all three of programs are quite similar. HUD mortgage insurance offers a number of advantages to the potential housing provider. With HUD insuring the loan, the risk to financing institution(s) is reduced, which means lower interest rates for the housing provider. FHA programs, although not direct subsidy programs, are an important potential resource in the delivery of housing and health care services for seniors.

Home Equity Conversion Mortgages (HECM)

Also known as “reverse mortgages,” Home Equity Conversion Mortgage (HECM) loans enable older homeowners to convert the equity in their homes into monthly income streams or lines of credit.

Homeowners aged 62 and older can receive reverse mortgage loans for single-family homes, one-to-four unit owner-occupied dwellings, condominiums, planned unit developments, and manufactured homes. The borrower must, however, participate in counseling from a HUD-approved counseling agency prior before filing an application for this type of mortgage. Approved Direct Endorsement Lenders process all aspects of the loan application and submit it to HUD for insurance endorsement. HUD insures lenders against loss on these loans.

Section 515 Rural Rental Housing Program

Section 515 is a multifamily direct-loan program administered by the Rural Housing Service (RHS) of the U.S. Department of Agriculture. Although Section 515 served as a major funding source for rural housing for a number of years, in recent years, Congress severely limited funding. Currently, the program receives allocations of only approximately 1,000 units per annum. Traditionally, projects intended for very-low and extremely low-income seniors receive about half of this allocation. Under the program, housing developers receive loans at 1- percent interest for a 50- year term for the purpose of developing affordable rental housing in rural communities. Rents are set at Basic (based on 1 percent debt) and Market rate (assuming a market rate loan). In new Section 515 projects, 95 percent of tenants must have very-low-incomes. In existing projects, 75 percent of new tenants must have very-low-incomes. Project-based rental assistance can be made available, because of scarcity, however, newer facilities are less likely to receive such assistance. Developers may restrict their housing to occupancy by persons age 62 and older.79 It should be noted that:

  • Approximately 40 percent of Section 515 developments are built and operated as senior housing properties that may contain community rooms that accommodate service delivery;

  • 57.8 percent of all Section 515 units (in both elderly and family properties) are currently occupied by elderly or disabled households; and

  • 55 percent of Section 515 households receive Section 521 Rental Assistance and 7 percent receive project-based Section 8 assistance administered by HUD.

Section 504 Home Repair Loan and Grant Program

The Section 504 Home Repair Loan and Grant Program is an RHS program offered to elderly persons and very-low-income families who own homes that need repairs. Seniors may use grant funds to repair, improve, or modernize their dwellings, or to remove health and safety hazards. Such activities include: repairing or replacing a leaking roof; adding insulation; installing electric lines; replacing a wood stove with central heating; installing running water, a bathroom, or a waste-water disposal system; or making a home accessible to family members with disabilities.

Homeowners who are at least 62 can receive home improvement grants of up to $7,500 if they cannot afford a loan at the 1- percent interest rate.

Community Facility Loan and Grant Program

RHS provides grants, direct loans, and guaranteed/insured loans to construct, enlarge, extend, or otherwise improve community facilities that offer essential services to rural residents through the Community Facility Loan and Grant program. . Eligible facilities include hospitals, clinics, assisted living facilities, nursing facilities, medical rehabilitation centers, group homes, community centers, and public buildings.

Exhibit 17: Summary of Income Eligibility for Programs of Housing Assistance

Income Level Extremely Low 30%
of Median and Below
31% – 50% of Median
51% – 80% Median
Programs currently
financing new
construction or
rental assistance vouchers
  • Section 202
  • Housing Choice Vouchers
  • HOME
  • Section 515
  • Public Housing / HOPE VI
  • Section 202 Housing Choice Vouchers
  • HOME
  • Section 515
  • Public Housing/ HOPE VI
  • 501(c)(3) Bonds (partial)
  • LIHTC (up to 60%)
  • HOME (up to 65%)
  • 501(c)(3)
  • Bonds
  • GSEs
  • HUD Mortgage Insurance
  • GSEs
  • 501(c)(3)
  • Bonds (partial)


Service Coordinators in Multifamily Housing

Service Coordinator positions in multifamily assisted housing were authorized in the 1990 Cranston-Gonzalez National Affordable Housing Act. HUD currently provides funding for service coordinators through three mechanisms: a nationalcompetition with other properties for a limited amount of grant funding; the useof the development's residual receipts or excess income; and budget-based rentincreases or special rent adjustments.

Owners of Section 202, Section 8, Section 221(d)(3) below-market interest rate,and Section 236 developments may apply for grant funding. Eligibility for funding islimited to those developments designed for the elderly and persons with disabilities,including any such building within a mixed-use project originally designed for themor where the owner — with HUD approval — gives preference to the elderly or persons with disabilities in tenant selection.

Service Coordinator program funding covers service coordinator salaries andbenefits as well as administrative and training expenses. Service coordinatorsroutinely assess resident needs, identify and link residents to appropriate services, andmonitor the delivery of services. Services involve activities of residents' daily living,such as eating, dressing, bathing, grooming, transferring, and home management. Aservice coordinator may also educate residents about what services are availableand how to use them or help residents build informal support networks with otherresidents, family, and friends. The service coordinator may not require any elderlyor disabled family to accept supportive services.80

Resident service coordinators provide an essential role for seniors by:

  • Enabling individuals to remain in the least restrictive environment;

  • Affording those who suffer from early- to mid-stage dementia and chronic

  • disabilities an alternative to relinquishing their independence;

  • Coordinating the most basic of health care needs with community service providers, preventing the pre-emptive movement of seniors to a higher than necessary level of care;

  • Navigating the complex array of existing supportive services and eligibility guidelines; and

  • Preventing the potential occurrence of acute medical episodes and costly treatments through early detection of apparent changes in health status.

In December 2000, Congress expanded the role of service coordinators through legislation that allows them to also assist low-income elderly or disabled families living in the geographic vicinity of eligible federally assisted housing properties.81

Resident Opportunities and Self-Sufficiency Program (ROSS)

The Resident Opportunities and Self-Sufficiency (ROSS) program links public housing residents with resident empowerment activities, supportive services, and assistance in becoming economically self-sufficient. The program is consistent with HUD's goal to focus resources more effectively on welfare-to-work and independent living for the elderly and persons with disabilities.

ROSS incorporates three basic funding categories: technical assistance/training support for resident organizations; resident service delivery models; and service coordinators. The last two categories specifically serve seniors as follows:

  1. Resident Service Delivery Models for the Elderly and Persons with Disabilities. Eligible activities include, but are not limited to:

    • Providing personal assistance with daily activities;

    • Transporting residents to medical appointments, shopping, and other locations;

    • Helping residents maintain their health through nutritional meals, wellness programs, health education, and referrals to community resources;

    • Providing congregate services, and

    • Making physical improvements to the housing development in order to provide space for supportive services.

  2. Service Coordinator Grants. These grants enable PHAs to employ Service Coordinators to assist elderly and disabled residents in maintaining independent living. Grant funds may be used to pay salaries, fringe benefits, and related administrative costs (i.e., training, office equipment, and utilities). Since FY 1999, HUD has provided Service Coordinator extension funding under ROSS for grants originally awarded in FY1995. ROSS does not fund new Service Coordinator programs.

Each year, HUD awards grants to PHAs through a competitive grant process set forth in annual NOFAs.

Assisted Living Conversion Program (ALCP)

The FY2000 VA- HUD and Independent Agencies Appropriations (Public Law 106-74) authorized the Assisted Living Conversion Program (ALCP), as a program of grants to non-profit providers of Section 202 facilities to cover the physical conversion of common spaces and some or all residential units within existing projects to operate as assisted living facilities. In 2001, Congress expanded this program to include HUD Section 221(d)(3) BMIR, Section 236 and senior developments with project-based Section 8, including RHS Section 515 projects. Although funds may be used to renovate and reconstruct units and common spaces, no grant funds may be used to pay for or deliver services. The funding level for FY2000 and FY2001 was $50,000,000 per year, with FY2000 authority carried over to 2001. Due to difficulty in qualifying for and implementing the program, funds have not been fully utilized in either funding cycle.

Congregate Housing Services Program (CHSP)

Congress created the Congregate Housing Services Demonstration (CHSP) program in 1978, and made it a permanent, discretionary grant program in 1990. Each year, Congress provides extension funding for existing CHSP grantees, but has not appropriated funding for new grants since 1994.

CHSP grants subsidize the cost of service coordination and onsite supportive services (i.e., home and community based services) for frail elderly and disabled residents of HUD and RHS subsidized senior housing. The goal of CHSP is to enable aging in place and to prevent premature or unnecessary institutionalization. It was among the first initiatives developed by the Federal Government to provide a comprehensive housing and supportive services package within a subsidized housing environment.

CHSP grant funds are matched through contributions from grantees and private and public funding sources, and through participant fees. This coordinated effort to provide housing and supportive services has given to frail elderly persons whose incomes, and therefore housing and service options, are limited, a higher-quality of life than they would have had without it. CHSP can serve as an alternative to nursing facility placement for many participants.


Medicaid Waivers and Demonstrations

The Federal Government may waive certain Medicaid State plan requirements to allow States to operate specific programs. These programs are referred to as Medicaid waivers. In general, Federal law allows States to enact two types of Medicaid waivers:

  • Program Waivers [1915(b), 1915(c), 1915(b)/1915(c) concurrent waivers]; and
  • Research and Demonstration Waivers[1115 waivers].

Program waivers, the most common waivers used to support seniors living in the community with services, include the following:

  • 1915 (c): Home and Community Based Service Waivers. Since 1981, Medicaid home and community based services (HCBS) waivers afford States the flexibility to develop and implement creative alternatives to placing Medicaid-eligible individuals in hospitals, nursing facilities or intermediate care facilities for persons with mental retardation.

    The HCBS waiver program recognizes that many seniors at risk of being placed in these facilities can be cared for in their homes and communities, preserving their independence and ties to family and friends at a cost no higher than that of institutional care.

    Under section 1915(c) of the Social Security Act (the Act), States may request waivers of certain Federal requirements if they wish to develop Medicaid-financed alternatives to home- and community-based care. The three requirements that may be waived are statewide applicability, service comparability, and community income and resource rules for the medically needy. As a result, Medicaid HCBS waivers may allow States to deliver services to persons with incomes that are greater than those allowed under general Medicaid eligibility rules.

    To illustrate, in most States, seniors are eligible for Medicaid benefits if their incomes are no higher than the SSI limit. The basic Medicaid benefit provides coverage for services such as primary health and acute care. But Federal Medicaid law allows States to apply special income rules for nursing facility care and the most often applied rule to determine Medicaid nursing facility eligibility permits coverage for seniors with incomes of up to 300 percent of SSI — the “300 percent rule.” In 2002, 300 percent of SSI equated to $1,635 per month or $19,620 per year. Under HCBS waiver programs, States may, as with nursing facilities, allow seniors to have incomes up to 300 percent of SSI to qualify for Medicaid HCBS. Medicaid eligibility limits for all covered services are, however, set at the discretion of each State. Consequentially, disparities within and among States exist in Medicaid nursing facility eligibility income limits when compared with HCBS eligibility limits.

    Section 1915(c) of the Social Security Act specifically lists the following seven services that can be provided in HCBS waiver programs: case management, homemaker/home health aide services, personal care services, adult day health programs, habilitation, and respite care. A broad range of other services, may also be provided on requested of the State — subject to CMS approval — if they are needed by waiver participants to avoid placement in a medical facility. .

    States have the flexibility to design each waiver program and select the mix of waiver services that best meets the needs of the population they wish to serve.82 HCBS waiver services may be provided statewide or may be limited to specific geographic areas. To be eligible for home- and community-based waiver services, individuals must require the level of care provided in skilled-nursing, intermediate-care, or intermediate-care facilities for the mentally retarded. To obtain approval to implement HCBS waiver programs, State Medicaid agencies must assure CMS that the cost of providing home-and community-based waiver services to persons eligible for waiver services will not exceed the cost of care for the identical population in an institutional setting. The Medicaid agency must also document that safeguards are in place to protect the health and welfare of beneficiaries.

  • 1915(b) Freedom of Choice Waivers. States are permitted to waive statewide applicability and service comparability, and to restrict beneficiaries’ choice of provider. These types of waivers are limited in that they apply to existing Medicaid eligible beneficiaries. In addition, authority under the waivers cannot be used for eligibility expansions. There are four types of 1915(b) Freedom of Choice Waivers:

    1. mandates Medicaid Enrollment into managed care;
    2.  (b)

    3. utilizes a "central broker;"
    4.  (b)

    5. uses cost savings to provide additional services; and
    6.  (b)

    7. limits the number of providers for additional services. 
    8. (b)
No State can use these waivers to serve beneficiaries beyond Medicaid State Plan Eligibility.

Concurrent Waivers (Combining HCBS with Freedom of Choice Waivers)

Some States are interested in providing long-term care services in a managed care environment or using a limited pool of providers. In addition to providing traditional long-term care State plan services (e.g., home health, personal care, institutional services), some States propose to include nontraditional home and community-based "1915(c)-like" services (e.g., homemaker services, adult day health programs, and respite care) in their managed care programs. No authority is provided under 1915(b) to cover individuals in a special eligibility category (the 42 CFR 435.217 group) who are only Medicaid eligible through a link to a 1915(c) waiver. For these reasons, several States have opted to utilize authorities of the 1915(b) and 1915(c) programs simultaneously to provide a continuum of services to disabled and/or elderly populations. In essence, States use the 1915(b) authority to limit freedom of choice, and the 1915(c) authority to provide home- and community-based services and to expand Medicaid to cover individuals in the special eligibility category listed above.

Nursing Home Transition Grants Program

Beginning in 1998, the Health Care Financing Administration (HCFA – now CMS) solicited proposals from States for the development of programs to assist then current nursing facility residents with the transition to home- and community-based settings. Although many States have developed procedures for diverting prospective nursing facility residents from institutions, far fewer have attempted to design programs that assist nursing facility residents in returning to their communities. The Nursing Home Transition Grant program’s purpose is twofold: to provide administrative and service resources to help States develop transition programs; and to set aside technical assistance grant funds for at least one State that is willing to collaborate with one or more Independent Living Centers (ILCs).83

Two primary goals of this grant initiative are to establish community support systems and a comprehensive set of choices that will enable current beneficiaries who are residing in nursing facilities to live safely, maintain and improve their health status, and participate in community life to the fullest extent possible. States need to consider the range of services and supports that will enable people with all levels of disability, including significant disability, to meet those goals and to eliminate barriers that may impede success.

Appropriate housing options are of particular importance. Barriers to effective transition are sometimes found in the regulations, policies, or the organization of the provider network. For example, no provision for nighttime services may exist, assistive technology may be difficult to obtain, or there may be no training available in how to use it. Alternatively, there may be gaps in the supply of quality providers (i.e., attendants or transportation services) or a lack of opportunities for persons with disabilities to direct their own services. As part of the solicitation, States are encouraged to explore ways to develop consumer controlled and other community-based providers, fostering voluntary supports, and create housing opportunities for nursing facility residents who will participate in the transition program.

Medicare Home Health Benefit

Medicare is the largest single payer of home care services. In 1999, Medicare paid for about 26 percent of total estimated home care expenditures. There are very specific eligibility criteria for Medicare home health. Medicare home health provides skilled nursing and related personal care services provided by a certified home health aide to those who meet the need for skilled and intermittent care, and are homebound. Beneficiaries who meet these criteria may also receive needed personal care services. Services must be provided by a certified home health agency.

During the early 1990s, the home health benefit grew rapidly, in part because of changing demographics. This unanticipated growth led Congress to reduce home health expenditures under Medicare by $16 billion over the past five years by limiting annual per-person benefits to home health care agencies, and reducing payments for services. Overall, CMS estimates that almost 900,000 fewer Medicare beneficiaries received services in 1999 than in 1997.

Social Services Block Grant (SSBG)

Administered by the Administration for Children and Families of HHS, Social Service Block Grant (SSBG) funds enable each State to furnish those social services that best suit the needs of individuals who reside in their State.

SSBG funds may be used to provide services directed toward one of five goals:

  • To prevent, reduce, or eliminate dependency;

  • To achieve or maintain self-sufficiency;

  • To prevent neglect, abuse, or exploitation of children and adults;

  • To prevent or reduce inappropriate institutional care; and

  • To secure admission or referral for institutional care when other forms of care are not appropriate.

HHS allocates SSBG funds to the 50 States, the District of Columbia, and the U.S. Territories, by formula. Section 2003 of Title XX of the Social Security Act specifies how the allotments for each State and jurisdiction are determined. Each State is entitled to payments in an amount equal to its allotment for that fiscal year.

Exhibit 18 shows expenditures for Long-Term Care Services from public and private sources in 1998.

Exhibit 18: Expenditures for Long-Term Care Services

Nursing Facilities
(1998 $billions)
Home Care
(1998 $billions)
Medicaid $40.6 $14.8
Medicare $10.4 $10.4
Other Public $2.1 $0.1
Private Insurance $4.7 $4.0
Out-of-Pocket $28.5 $6.0
Other Private $1.6 $3.7
Total $87.9 $39.0

Source: Citizens for Long-Term Care 2001.


Medicaid Personal Care Services: State Plan Option

Under the Medicaid State plan, personal care services are an optional benefit. . Although individuals who are not undergoing treatment in a hospital on an inpatient basis, or residing in a hospital, nursing facility, intermediate-care facility for the mentally retarded, or institution for mental disease may receive services, such services must be:

  • Authorized for the individual by a physician or other health professional in accordance with a plan of treatment or service delivery must be approved by the State;

  • Provided by a qualified individual who is not a member of the individual's family; and

  • Furnished in a home or other location.

Personal care services may include a range of human assistance provided to persons with disabilities and/or chronic conditions of all ages, enabling them to accomplish tasks that they would be able to complete in the absence of a disability. Assistance may be in the form of hands-on assistance or cueing so that the person is able to perform the task. Such assistance most often relates to performance of Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs), such as eating, bathing, dressing, toileting, transferring, personal hygiene, light housework, medication management, etc. Personal care services can be provided on an episodic or continuing basis. . Skilled services that may be performed only by a health professional are not considered personal care services.

Unlike Medicaid HCBS waiver services, personal care services are available only to individuals who meet Medicaid’s basic income eligibility criteria (generally SSI- level income for the elderly). To receive personal care services, however, an individual is not required to demonstrate need for nursing facility level of care. In 2000, 27 states provided personal care coverage under their State plans.84

Title III—State And Community Programs

The Older Americans Act of 1965, as amended (OAA) authorizes a range of programs that offer services and opportunities for older Americans, especially those at risk of losing their independence. Under Title III - State and Community Programs, the Administration on Aging (AoA) oversees a nationwide network of agencies that focus on aging, including Regional offices, State Units on Aging (SUAs) and Area Agencies on Aging (AAAs). These agencies plan, coordinate, and develop community-level systems of services that meet the unique needs of older persons and their caregivers.

Title III supports services designed both to assist older persons at risk of losing their independence and to enhance the lives of active older persons. Through Title III, AoA advocates for the needs of the elderly in program planning and policy development by, providing technical assistance and by issuing best practices guidelines.

AoA awards funds for Title III to the 57 SUAs, which are located in every State and territory. Program funding is allocated based on the number of older persons in the State.

Most states are divided into Planning and Service Areas (PSAs) so that programs can be effectively developed and targeted to meet the unique needs of the elderly residing in those areas. Nationwide, some 670 AAAs receive funds to plan, develop, coordinate, and arrange for services in each PSA from their respective SUAs.

AAA's contract with public or private groups to provide services. More than 27,000 service provider agencies operate nationwide, and in some cases, they AAA may act as the service provider, if no local contractor is available.

Although the Act directs that priority be given to serving those with the greatest economic and social need —with particular attention to low-income minority older persons — all individuals age 60 and older are eligible for services. Limits in program funding often result in waiting lists for OAA services.

Until recently, no mandatory fees existed for services. Recent legislative changes, however, now allow States to implement participant cost sharing for services received. Older persons also are encouraged to make voluntary contributions to help defray the costs of services. Under current law, these contributions are used to expand services. Volunteer support is also an integral component of the service system.

Title III- B Supportive Services

In FY 2002, Congress appropriated $357 million for supportive services and senior centers. Most supportive services fall under three broad categories:

  • Access services, such as transportation, outreach, information and assistance, and case management;

  • In-home services, including homemaker and home health aides, chore maintenance, and supportive services for families of older individuals who have Alzheimer's disease; and

  • Community services, such as adult day programs, legal assistance, and recreation.

Supportive services are designed to maximize the informal support provided by caregivers and to enhance the capacity of older persons to remain self-sufficient. During FY 1999, information and assistance services were provided to more than 12 million older persons and their caregivers. More than 8 million outreach contacts were also made to identify older persons in need of access to services. Transportation continued to be one of the most heavily used services. The OAA funded nearly 46 million trips by older persons to their doctor, clinic, senior center, or other location. Of Title III participants, 19 percent were minorities and 51 percent were low-income.85

Title III-C Congregate and Home-Delivered Meals

Nutrition services are provided under Title III-C of the Older Americans Act. The title contains two Parts, Congregate Meals (C-1) and Home-Delivered Meals (C-2). The services provided under these two parts are similar, however, Congregate Meals are targeted to active seniors, while Home-Delivered Meals are delivered to the homebound.

There is substantial private sector, State, and local financial and volunteer support for meal programs. Although older participants are not charged a fee, they are encouraged to make voluntary contributions to help defray the cost of services. Under current law, these contributions are used by local programs to expand services. In FY 2002, Congress appropriated $390 million for Congregate Meals and $176.5 million for Home-Delivered Meals. In FY 1999, nearly 884,000 seniors received Home-Delivered Meals and nearly 1.8 million received Congregate Meals.86

National Family Caregiver Support Program

The Older Americans Act Amendments of 2000 enacted the National Family Caregiver Support Program. This program calls for all States to provide five basic services for family caregivers, including:

  • Information about available services;

  • Assistance in gaining access to supportive services;

  • Individual counseling, organization of support groups, and caregiver training to assist caregivers in making decisions and solving problems relating to their caregiving roles;

  • Respite services to give caregivers temporary relief from their responsibilities; and

  • Supplemental services, on a limited basis, to complement the care provided by caregivers.

  • In FY 2002, Congress appropriated $141.5 million for this program.


Market Rate Housing

Market rate (i.e., moderately priced) housing fills an important niche for our Nation's seniors. Many properties offer amenities tailored to senior households, such as security, community rooms, wellness centers, dining, and other supportive services. Most are not subsidized in any significant way, and for the most part use private financing; however, some non-profits rely on tax-exempt financing to develop market rate apartments.

Many types of market rate products fill the two major categories of market rate housing — apartments that provide housing only in a secure environment; and apartment communities that offer services in addition to housing. These community alternatives generally address the housing needs of seniors whose incomes are too high to qualify for subsidized senior housing admission, yet not high enough to afford either assisted living facilities or continuing care retirement communities. A recent analysis by the America Senior Housing Association estimated that approximately 1.1 million apartments of this type now exist nationally, providing a valuable resource in reaching the moderate-income senior market.87

Continuing Care Retirement Communities 88

Continuing Care Retirement Communities (CCRCs) describe a diverse group of campus type retirement communities that provide a continuum of housing, health care, supportive services, amenities and activities. CCRCs can be made up of apartments, cottages, or a variety of other independent living spaces located in a single community. They may be urban, suburban or rural, and may range from garden style to high-rise structures. CCRCs are not homogenous; each has an array of differences, while preserving the core elements that allow them to be described as a “CCRC.”

A key way in which CCRCs differ is in the degree of health care coverage included for the resident. Extensive or “full life care” agreements generally include housing, residential services, amenities and unlimited, yet specific health-related services for the life of the resident. Such agreements may feature little or no substantial increases in monthly payments for enhancements such as additional meals or incidentals; however,

there may be periodic increases for normal operating costs or adjustments for inflation.

Modified agreements generally include housing, residential services, amenities and a limited, specified amount of skilled nursing care. A number of variations may be found in these contracts; however, substantial increases in monthly payments are not common.

Fee-for-service agreements, which are often termed “a la carte,” generally include housing, residential services and amenities as specified in the individual agreement. Health-related services are commonly paid for as they are needed and utilized.

Access to and availability of health care services either within or in close proximity to a CCRC are at the heart of the CCRC care concept. Health-related services may include the following:

  • Emergency u response systems;
  • Resident health clinic;
  • Wellness and health education programs;
  • Hospice services;
  • Nursing consultation;
  • Primary and specialty physician services;
  • Podiatric and dental care;
  • Pharmacy or pharmacy services;
  • Physical, occupational and/or speech therapies;
  • Assisted living; and
  • Skilled nursing care.

Although significant variations in service delivery may occur, typical services that may be available at a CCRC include the following:

  • Meals, including prescribed diets;
  • Grounds and unit maintenance;
  • Routine and/or heavy housekeeping;
  • Social, physical, religious, recreational, cultural and activity programs;
  • Scheduled transportation;
  • Bed and bath linens;
  • Security systems; and
  • Social services and counseling.

Amenities may include banking, exercise rooms or postal services - to name a few.

CCRCs ownership is equally diverse. Non-profits, for-profits, partnerships, syndicates (i.e., a number of investors), residents or an individual may be involved in the ownership of a CCRC. Many are accredited by the Continuing Care Accreditation Commission (CCAC), an independent entity sponsored by the American Association of Homes and Services for the Aging (AAHSA) that evaluates quality and a variety of other factors before issuing its seal of approval to communities.

CCRC's are affordable to moderate-income seniors, especially those who own their own homes and can convert that asset to accommodate entry fees. Fee structures for CCRCs are as diverse as the CCRCs themselves. Many have different structures depending on the level of services required. Entry fees are usually tied to the size of the living unit.

Hundreds of thousands of seniors have availed themselves of the CCRC option and their popularity is growing. Creative structuring of agreements and other cost-saving mechanisms will likely make this option more widely available to future generations of seniors.

Comparing Costs in Promoting Aging in Place

In accordance with our Mandate, the Commission reviewed the comparative costs of housing production and housing vouchers in promoting aging in place.

In January 2002, the General Accounting Office (GAO) released a report that compared the costs of various Federal housing programs. 89 The study covered all active Federal housing programs, estimated the 30-year lifecycle costs of each,90 and found that the Housing Choice Voucher program is less costly than production programs.

In metropolitan statistical areas (MSAs), GAO found the average total 30-year cost of a one-bedroom unit to be $140,000 for vouchers, $151,000 for Section 811, $157,000 for Section 202, and $167,000 for tax credit projects. According to the Report, “for all of the programs except tax credits, the Federal Government pays the largest percentage of the average total per-unit costs (from 65 percent for vouchers to 71 percent for HOPE VI over 30 years). Under the tax credit program, the tenants pay the largest share of the total cost (54 percent over 30 years); however, they have higher incomes, on average, and pay a larger percentage of their income for rent than other assisted households.”

The Commission recognizes the importance of cost comparisons among Federal housing programs, but believes that both rental assistance and the production of new housing units are needed. In a response to the GAO study, David Smith states,91 “The biggest message of the study is not that the costs are different, but that they are roughly the same. Hence the focus should be less on choosing one form over the other, and more on providing a better mix of programs within markets and making each one work as efficiently as it can given its mission and parameters…The bottom line is that housing very poor households is expensive for the Federal Government under all programs.”

In addition, the GAO comparison, by focusing on housing costs only, does not take long-term health care costs into consideration. In assessing the benefits of the Section 202 program and other affordable housing programs relative to their costs, it is important to factor into the equation the longer-term financial consequences of inadequate health maintenance on other government programs serving the elderly such as Medicare and Medicaid. All too often, cost-benefit analyses in housing do not adequately evaluate the benefits of services.

Thus, a service-enriched project such as one sponsored under Section 202 can result in a cost saving to the government that is not immediately evident in an analysis of housing costs alone. Similarly, other production programs such as LIHTC, HOME, and CDBG programs, and RHS Section 515 programs can result in cost-savings if they can be redesigned to provide services and health maintenance programs to achieve these benefits. These programs are not exclusively dedicated to serving seniors, although the housing facilities produced through them can be “seniors only” facilities.

Olmstead Decision

The Olmstead decision provides a legal basis to advocate for community-based alternatives to institutional placement — including an expansion of housing- and community-based service options.

In July 1999, the Supreme Court issued the Olmstead v L.C. decision — a decision that upheld Title II of the Americans with Disabilities Act (ADA), which required that States administer their services, programs, and activities "in the most integrated setting appropriate to the needs of qualified individuals with disabilities." This decision creates a challenge to Federal, State, and local governments to increase opportunities for qualified individuals with disabilities to return to, or stay in, the community and to receive appropriate community-based services.

Medicaid is an important resource for helping States meet these goals because it is such an important source of funding for long-term care services. But, the decision's scope is not limited to Medicaid beneficiaries. ADA and the Olmstead decision cover services, programs, and activities provided or made available by public entities — government agencies at all levels — to all qualified individuals with disabilities, regardless of age or income.

Long-term Care Insurance

Private long-term care insurance (LTCI) was introduced during the past 2 decades and is, thus, a relatively new product. Sales of LTCI policies have grown substantially over the past 5 years, encouraged, in part, by the enactment of the Health Insurance Portability and Accountability Act (HIPAA). HIPAA established favorable tax treatment for “federally qualified” policies that meet certain consumer protection standards and developed minimum disability criteria needed for the beneficiary to trigger benefits. As of 1999, more than 6.8 million LTCI policies were sold in the United States. Private insurance pays for less than 7 percent of all long-term care costs. Thus, it plays only a small role in financing long-term care.

The cost of LTCI is substantial, especially for persons who wait until they are in their 70s to make a purchase. Policies are generally sold with a “level premium” — meaning that the insurer may not raise premiums based on individual circumstances, such as increasing age or the onset of disability. In practice, however, insurers can, and often do, raise premiums for “classes” of individuals; when this happens, the policy may become unaffordable. In addition, policyholders who let their insurance lapse generally lose their entire investment, and are left without coverage when they are most likely to need it.

Policies are most affordable if purchased during the policyholder’s 50s or 60s. These younger purchasers should expect to pay premiums for 20 or more years, because the risk of disability is greatest at age 80 and older. This fact makes the purchase of inflation protection critical; however, it also contributes to a more costly product. In 1999, average annual premiums for a policy that included inflation protection were $1,800 for purchase at age 65 and $5,900 for purchase at age 79.92 The cost of private LTCI is unaffordable for many, if not most, seniors. Many applicants are disqualified because they are unable to meet medical underwriting standards.

Despite its limited role, LTCI has a number of advantages. Persons who can afford coverage can insure themselves against the high cost of long-term care, preventing depletion of their assets and preserving an inheritance for their children. In addition, they preserve choices as to the type, setting, and provider of care — should they become disabled. LTCI enables individuals to act responsibly in planning for their future needs, thereby preserving limited Medicaid funds for the most needy.

Congressional legislation has been introduced to allow full deductibility of LTCI insurance premiums for individuals who have maintained continuous coverage over several years. Encouraging people who can afford to plan for their future by purchasing insurance and developing more affordable products can be part of an overall long-term care financing strategy that addresses the needs of persons with moderate incomes.

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The page was last modified on July 22, 2002