U.S. Department of Health and Human Services

State Assisted Living Policy: 1996

Executive Summary

Robert L. Mollica and Kimberly Irvin Snow

National Academy for State Health Policy

November 1996

This report was prepared under contracts #HHS-100-94-0024 and #HHS-100-98-0013 between the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging, and Long-Term Care Policy (ASPE) and Research Triangle Institute. In addition to ASPE, other support for the study, A National Study of Assisted Living for the Frail Elderly, has been provided by the American Association of Retired Persons, the Alzheimer's Association and the National Institute on Aging. For additional information about the study, you may visit the DHHS home page at http://aspe.os.dhhs.gov or contact the ASPE Project Officer, Pamela Doty, at DHHS/ASPE/DALTCP, H.H. Humphrey Building, Room 424E, 200 Independence Avenue, SW, Washington, DC 20201. Her e-mail address is: Pamela.Doty@hhs.gov.

This study reviewed the assisted living and board and care policies in each of the 50 states. Fifteen states have existing licensure regulations for assisted living facilities. Regulations are being developed by an additional nine states. Twenty two states reimburse, or plan to reimburse, assisted living as a Medicaid service including states that do not have a licensure category for assisted living. Six states provide Medicaid payments for services in board and care settings and thirteen states had created a task force or a process within a state agency to make recommendations for the development of assisted living rules.

While a common or standard definition of assisted living is unlikely, state approaches share some common components. This new model for providing long term care is developing as a residential, rather than institutional, model. While many observers equate institutional with medical, the distinction between medical and social lies less with the services delivered than the setting itself. State rules generally require residential settings in which personal care and health related services are provided. Even though the setting is residential, health or medical services are provided, either by facility staff or through contracts with community agencies.

Policies in fourteen states include a statement of philosophy that describes assisted living as a model which emphasizes consumer or resident independence, autonomy, dignity, privacy and decision-making.

During interviews, state policy makers talked about the limits of regulations to ensure safety and quality of care. Instead, assisted living approaches in many states reflect attempts to combine minimum standards with market forces to produce quality. In many states, new rules reflect a combination of market trends and the lobbying influence of organizations with a stake in the shape and direction of the rules. It is also clear that regulations set the parameters for assisted living while owners/operators define the practice. Despite regulations that may allow a higher level of care, facilities themselves may set their admission/retention policy to care for less impaired residents than the rules allow and provide a less intensive service package than allowed. Though strong market demand from moderate and upper income residents for residential settings supports this practice, changes are likely over time as the number of facilities expands, residents age in place and providers adjust to maintain high occupancy rates.

The three major issues addressed by state policies are the requirement for the living unit, tenant admission/retention criteria and the level of services. Existing or proposed policy in fourteen states would require apartment settings while twelve states allow both facilities with apartments and facilities with shared rooms to be licensed or reimbursed as assisted living. Shared rooms meet the minimum standards in four states.

New Jersey and Oregon have the broadest admission/retention criteria. New Jersey's rules require 20% of the residents in each facility meet the nursing home level of care criteria within three years of licensure. Two primary approaches have been used to set criteria. States typically either require that residents have stable medical conditions and do not need 24 hour skilled nursing care or the policy lists a series of conditions that residents may or may not have to be served. The services that facilities provide parallel the admission/retention criteria.

In creating a new model, either through licensure or Medicaid, states are supporting an alternative to nursing homes for elderly recipients who need personal care and routine, scheduled nursing services. States seek to provide these alternatives both in response to beneficiary demand for non-institutional care and because of the high cost of nursing home care. About 35% of Medicaid spending pays for long term care. In 1993, recipients who were disabled made up 5.5% of the caseload and 37% of spending. Elderly recipients accounted for 11.5% of total recipients and just under 32% of all spending. Expenditures per recipient averaged nearly $9300 of which $2365 was spent on acute services and $6907 paid for long term care. Just over $5800 of the long term care spending paid for care in a nursing home. While disabled recipients account for higher total spending, per capita spending was less than for aged recipients at $7900 with $4500 covering acute care and only $924 per recipient paid to nursing homes. These patterns highlight the importance of addressing long term care spending for elderly recipients and acute care spending for disabled recipients for states that are interested in affecting Medicaid spending.

Finally, states are refining their Medicaid reimbursement methodologies to pay for assisted living. Washington state has developed a methodology that reimburses for three levels of care with regional variations. Rate components were developed for nursing services, operations (including personal care and other service costs) and capital costs. Newly constructed facilities also receive a "capital add on." New Jersey and Texas have created rates that vary by type of setting. Other states have set flat rates but plan to refine their methodology and develop a tiered or case mix adjusted rate as they gain experience with the program. One state will reimburse assisted living facilities on a fee for service basis as providers of Medicaid home and community based services.