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Testimony to
The Commission on Affordable Housing and Health Facility
Needs for Seniors in the 21st Century
November 7, 2001
Dr. Robyn Stone

I'm very pleased that we don't have the five-minute bell which I'm actually used to in most of the testimony that I've done on Capitol Hill.

I've actually been asked to do a couple of things here today but primarily to talk about the role of Medicaid and other government programs in supporting home-and-community-based services for seniors, to try to highlight some of the demographic challenges facing these programs as baby-boomers retire, and to make some policy recommendations.

Our Institute for the Future of Aging Services which is an applied and research and policy center at AAHSA, designed to bridge the worlds of policy practice and research, has identified the development of affordable housing services as a major signature area.

We believe that the current and future role of public funds in stimulating the development and expansion of community-based, residential care options for low-and-modest-income seniors should be a priority issue for consumers, providers and policy-makers.

The financing of long-term care in the community is a patchwork of funds with federal, state and local levels and private dollars.

Medicaid is the major public program covering long-term care for seniors. Despite the public's tremendous interest in and demand for home-and-community-based services, Medicaid continues to exhibit a strong bias toward institutional care.

Out of the 59 billion dollars spent by Medicaid on long-term care in 1997, a little less than one quarter was spent on home-and-community-based services.

Three quarters of the states devoted less than 15 percent of their long-term care resources to home-and-community-based services, and in half the states, home-and-community-based share was less than eight percent.

The home-and-community-based care sector, however, has experienced tremendous growth with spending on these services increasing much faster than spending on nursing home care.

Between 1993 and 1994, for example, total Medicaid spending for long-term care increased by just nine percent, while spending for waivers and personal care increased by 36 percent.

Much of the growth in home-and-community-based spending is due to the implementation and/or expansion of Medicaid waivers. Collectively, the 50 states operate about 250 distinct home-and-community-based waiver programs.

A small but growing number of states -- North Carolina, New York, Oregon, Texas and Washington -- are spending a substantial share, at least 20 percent of their long-term care resources, on home-and-community-based care.

It is important to point out, however, that a large proportion of these dollars are spent on individuals under age 65, and I'm not sure that everybody knows this.

In 1997, over three quarters of all waiver dollars covered services for people with mental retardation and developmental disabilities. The remainder supported services for seniors and younger people with physical disabilities.

In addition, there's tremendous disparity in the annual amount that is paid per capita.

Annual waiver spending in '97 averaged $2,760 for an elderly person, $9,000 for a younger client with physical disabilities, and almost $28,000 for a client with mental retardation or developmental disabilities, and this is a major issue in terms of the amount of resources that go into senior care.

There are a number of other programs which I won't talk about -- Older Americans Act, Block Grant, Department of Veterans Affairs -- that also pay for home-and-community-based care, but the major chunk of change really does come from the Medicaid program.

I want to talk specifically real quickly about two program issues that are relevant to this commission. The first is consumer-directed care.

Home-and community-based service programs are frequently criticized for operating under a so-called medical or professionally managed model.

Consumer-directed programs enable individuals to hire, fire, schedule, train and supervise their own aides, attendants or personal care workers with few restrictions on who can be employed.

Until recently, consumer-directed models have been seen as appropriate mainly for younger people because this concept originated in the independent living movement. However, research suggests that consumers of all ages and their families would like to be more active in planning and directing their care and in having more flexibility to use public resources.

And, consequently, many states are now beginning to look at consumer-directed options in their Medicaid or state-funded programs.

This is particularly relevant for housing with services because, if these dollars are more flexible, they can be used in a variety of settings to purchase whatever is needed including things like home modifications and assistive devices.

Given a choice, most people with long-term care needs would prefer to receive services in their own homes; however, we do know that there are some that would prefer living in congregate settings, and there are others who require this type of service, of residential care option because their needs have increased and they lack informal supports and/or environmental supports to remain in their own homes.

Motivated by the desire to offer a full long-term care continuum and the pressure to reduce nursing home use, many states have begun to experiment with using Medicaid funds to cover services in residential care.

By June of 2000, 38 states were using Medicaid to support the service dimension of residential care with the majority providing coverage through a waiver program and six covering services in their state plans through the personal care option.

Oregon, Washington and Colorado have developed aggressive residential care programs to reduce nursing home use.

While there is anecdotal evidence that these strategies have succeeded, empirical research has been equivocal on the issue of substitutability and cost savings of residential care compared to nursing home placement.

In fact, housing with services is more likely to be a substitute for living in one's home than a nursing home, and I think this is an important point for the commission to understand, that we need to think about housing with services more as a part of the continuum when folks can no longer remain in their home than simply a substitute for nursing home care.

The nursing home population today has much higher acuity and looks very different from your average residential care resident.

One of the impediments to the expansion of these services in residential care and assisted living is the fact that many providers find the Medicaid payment rates too low to warrant participation.

A number of states like Arizona, Delaware, Oregon and Washington use tiered rates to enable people with deteriorating conditions to remain in assisted living rather than having to move to a nursing home because they have to spend down the Medicaid.

Several other states -- Minnesota, Massachusetts, Wisconsin and New York -- use case mix rates that create incentives to accept people with high needs and to retain residents whose needs increase.

Now, let me quickly go to the demographics and then my policy recommendations.

The demographic trend suggests that there will be an increased demand for long-term care services as the baby-boomers age, although this demand will vary tremendously by geography. If you live in Alaska, you probably don't need to worry.

Long-term care will remain a women's issue and will become increasingly ethnically and racially diverse, and finally, while more seniors may be able to pay for services in the private market, it is very clear a number of economists including Joe Quinn and Bob Clark have indicated that there are large segments of the population, particularly the old, old and women living alone -- and these two actually go together -- who will require public subsidization to help meet the need for long-term care.

It is essential, therefore, that public policy begin to address the needs of moderate-income seniors who will be facing long-term care decisions in the future, and I recommend that Medicaid and state-based programs become more aggressive in the following areas, and I have -- very quickly will do six points.

States must follow the lead of such innovators as Oregon and Washington in expanding residential care options for low-and-moderate-income seniors through increased use of waivers and other public funds.

Second, consumer-directed care including the potential for receiving cash rather than a service package should be offered as an option to qualifying seniors and their families to enable them to use public resources more creatively and efficiently.

Third, states must find creative ways to expand options to a larger subset of seniors who do not qualify financially for Medicaid coverage but who nevertheless need public subsidization to access services. This includes increased use of state revenues like lottery dollars and tobacco settlement money.

There must be better communication and coordination between HHS and HUD and state Medicaid programs and housing programs including public housing and financing authorities to create and sustain affordable housing with services.

There needs to be a balance between regulation and individual choice in negotiated risk to ensure quality of care and quality of life while at the same time not creating another nursing home industry.

And, finally, states must examine regulatory barriers such as nurse practice acts that prevent delegation of important functions, particularly medication administration, to paraprofessional staff.

These front-line workers are the primary care-givers in residential care and must be empowered to do their work.

Finally, I want to end with one other conclusion which may be somewhat provocative.

Today, Medicaid nursing home coverage is an entitlement while home-and-community-based services are only available through waivers or personal care options.

If states had the authority to pull their nursing home and home-and-community-based dollars, the potential for creativity and provision of options would be greatly enhanced. Dollars would follow the person rather than a particular setting.

The implementation of such a strategy would undoubtedly be difficult and would require significant political will and public support to achieve.

In my view, however, it is the most efficient and effective way to use public funds to help create a range of community-based options for low-and-modest-income seniors.

Again, I appreciate the opportunity to testify, and our staff will continue to work on our applied research and policy agenda to help create affordable and effective service systems for seniors. Thank you.

The page was last modified on November 29, 2001