States, of course, cannot directly control the balance of institutional and community care for elderly and Medicaid enrollees with disabilities. Balance is instead the result of each state's Medicaid LTSS eligibility and payment policies, regulation, and the extent of communication and coordination with providers and enrollees. Medicaid policy naturally becomes more community-friendly when it covers personal and home health care without strict limits on the quantity of services and when it is covered under the state plan, rather than under waivers that can limit the number of enrollees who can be served or the communities where it is offered. In addition, states must set personal needs allowances at a level that is realistic for a person living in the community. Even generous coverage of community LTSS will fail if people cannot retain enough income to maintain themselves in a home or apartment. Wenzlow et al. (2011) found that availability of Medicaid consumer-directed services, state plan personal care coverage, and availability of state SSI supplements for people living in the community were each positively associated with greater levels of community care.
States can control, and take steps to promote, the availability of residential (facility-based) care settings other than nursing homes and ICFs/IID. Historically, the Medicaid definition of "home and community-based services" has included coverage of assistive services, but not room and board provided in residential care facilities other than those defined as "institutions" where Medicaid reimbursement does cover room and board costs (hospitals, NFs, and ICFs/IID). In the early years after Medicaid was enacted, the numbers and bed capacity in such residential care facilities appear to have declined because Medicaid coverage and reimbursement rules greatly encouraged providers of residential LTSS to meet Medicaid institutional "conditions of participation" and become certified for the more generous Medicaid payment rates. Initially, Medicaid-covered only "skilled" nursing homes. In 1972, however, coverage was extended to "intermediate care" nursing homes (where aides could be supervised exclusively by licensed practical nurses rather than registered nurses) and facilities formerly labeled "state schools" for people with ID/DD could be redefined as medical institutions and become eligible for Medicaid reimbursement as ICFs/MR.
In the late 1970s and early 1980s, studies comparing the cost effectiveness of HCBS as a substitute for institutional care using experimental design methods sometimes found that diverting low-income elderly seeking nursing home admissions into alternative residential care settings (variously termed personal care homes, domiciliary care, board and care, or adult foster care homes) could be cost effective (Doty 2000). Before the 1990s, these alternative residential settings for the elderly catered primarily to those who qualified for SSI cash assistance.
The 1990s saw the rise of the "assisted living" industry. A handful of states (Oregon and Washington in particular) were active in promoting and vocal in advocating to other states the use of assisted living and small adult foster care homes for Medicaid beneficiaries as an alternative to nursing home placement. Although assisted living residential care, especially facilities offering primarily private apartments and other amenities, caters primarily to private payers, the number of facilities accepting Medicaid residents and the actual number of Medicaid residents has increased. ASPE research in the early 2000s found that about one-third of all residential elder care beds were in facilities other than certified NFs (Spillman et al. 2002). The ASPE-sponsored 2011 Residential Care Survey found that more than 730,000 Americans lived in residential care facilities in 2010 (Park-Lee et al. 2011). Other data sources, such as the National Health and Aging Trends Survey, that define residential elder care even more broadly estimate the numbers and percentage of elderly residing in non-nursing home residential care settings as opposed to "at home" in ordinary housing not designed for elder care to be even higher.
Wenzlow et al. (2011) found that greater availability per 1,000 elderly population of beds in non-nursing home elder care facilities ("assisted living" broadly-defined) was associated with "re-balancing" toward HCBS for the elderly. For younger adults with developmental disabilities, the initial trend toward "de-institutionalization" involved closing down large state institutions for this population and transferring residents to smaller "group homes." The difference between "institutional" and HCBS settings was often blurred because states could choose to establish small ICFs/IID with 15 or fewer beds that were still eligible for coverage of room and board costs but operated under special Medicaid regulations. These facilities could be state-run as well. Increasingly, most states transitioned former residents of large ICFs/IID into small fewer than 16 bed "group homes" under private for-profit or non-profit auspices that were eligible for Medicaid reimbursement of HCBS only. "De-institutionalization" through the downsizing and closure of large ICFs/IID and their replacement by smaller, less costly residential settings with 15 or fewer beds was associated with a substantial increase in the numbers of individuals with ID/DD receiving Medicaid-funded services. This resulted in rapid "re-balancing" toward HCBS for Medicaid recipients with ID/DD receiving LTSS. Since the Supreme Court's 1999 Olmstead ruling, advocacy for people with ID/DD has increasingly promoted HCBS delivered "at home" to individuals residing with family members in the family home or to individuals in supported living arrangements (persons with ID/DD residing in homes apartments with 1-2 unrelated roommates and a paid helper) or in small-group homes with no more than six residents (Smith et al. 2007). According to Charlie Lakin and colleagues at the University of Minnesota, the number of residents in homes with six or fewer people with ID/DD increasing from 20,400 people in 1977 to 321,500 people in 2010. By 2010, 11 states had no state-operated residential facilities for 16 or more people with ID/DD (Lakin 2011).
On January 16, 2014, CMS issued a final rule defining "community care" that restricts Medicaid HCBS spending to residential care settings that are "non-institutional" in character (HHS 2014). In other words, facilities that are not certified as institutions eligible for Medicaid reimbursement for room and board as well as services may nevertheless be determined to be also ineligible to be HCBS providers because they are considered de facto "institutions" that are overly restrictive and do not offer residents adequate privacy.
Wenzlow et al. (2011) had no measure of non-home/non-ICF/IID residential care use among the Medicaid population with ID/DD receiving LTSS, but this report does include such a measure. We do not hypothesize a relationship between availability of non-nursing home residential care settings and beds and re-balancing toward HCBS for the population of Medicaid LTSS users under age 65. ASPE's 2011 Residential Care Survey did find some residents under age 65, and compared to elderly residents, they were disproportionately more likely than private payers to be on Medicaid (Green et al. 2013). Still, there is little evidence of a movement toward placement of younger adults with physical disabilities in alternative residential care settings rather than in nursing homes or "at home" in their own or family homes. Advocates for younger adults with physical disabilities oppose age/disability segregated residential settings for their constituency, and they consider assisted living to be such a form of segregated housing. Because of this opposition, the MFP grant program explicitly denies the enhanced federal matching payments available to states that help nursing home residents who transition back to the community (most of whom are adults under age 65) if they go to live in assisted living facilities (Reinhard 2012). Advocates for younger adults with spinal cord injuries and other physical disabilities hope to promote accessible public housing in scattered sites so that such people can be integrated into the community and reside as neighbors alongside people of all ages with and without disabilities (see for example, http://wheelsofprogress.org/scatter.html). Nevertheless, lack of affordable housing that is also accessible to people with severe physical disabilities is one of the most often cited barriers to transitioning nursing home residents back to community living.
Re-balancing can also be encouraged through regulation and incentives aimed at nursing homes and ICFs/IID. Some states, for example, have set numerical goals for reductions in institutional beds (Kane et al. 2008). Others allow facilities to place beds on layaway status for several years to ease the path toward eventual delicensure. Measures like these, appropriately used, can ensure that institutional care is provided when in the best interest of the recipient, but not simply because it is the default approach to providing LTSS.
Finally, re-balancing can be accelerated by focusing on system accessibility and efforts to estimate the importance and availability of informal caregivers. The literature suggests that having "a single entry point" (SEP) or "no wrong door" model for LTSS allows participants to more easily navigate the complex array of services available, but states vary in the services these SEPs provide and the populations they serve, which makes predicting the overall effects of an SEP model on re-balancing difficult (Kassner et al. 2010; Reinhard et al. 2011; Mollica and Gillespie 2003). Finally, because research suggests that shifting the balance toward HCBS affects families and caregivers by shifting some work from paid providers to informal caregivers (Feinberg and Newman 2004; Rozario and Palley 2008), it is also important to assess the level of support for these informal caregivers across states.