Residential Care and Assisted Living Compendium: 2007. Medicaid Financing for Services in Residential Care Settings

11/30/2007

States have several options for using Medicaid to fund services in residential care settings (see Table 1-8): the Medicaid state plan, HCBS waivers (also called 1915(c) waivers), and Section 1115 demonstration programs. States most often use the HCBS waiver. See Table 1-9 for the sources of funding each state uses to pay for services in residential care settings. There has been no increase in the total number of states actually using Medicaid to cover service in residential care settings since 2004. States that did not implement approved waivers were dropped from Table 1-9.

TABLE 1-8. States Using Medicaid to Cover Services in Residential Care Facilities

  Waiver Only (29)     State Plan Only (7)     Waiver & State Plan (6)  
Alaska
Arizona
California
Colorado
Connecticut  
Delaware
Georgia
Hawaii
Illinois
Indiana
Iowa
Kansas
Maryland
Mississippi
Montana
Nebraska
Nevada
New Hampshire  
New Jersey
New Mexico
North Dakota
Ohio
Oregon
Rhode Island
South Dakota
Texas
Utah
Washington
Wyoming
Maine
Massachusetts
Michigan
Missouri
New York
North Carolina  
South Carolina
Arkansas
Florida
Idaho
Minnesota  
Vermont
Wisconsin

Congress authorized HCBS waivers in 1981 under Section 1915(c) of the Social Security Act. Under this provision, states may apply to HHS for a waiver of certain federal requirements to allow states to provide home and community services to individuals who would otherwise require services in an institution.

Under the HCBS waiver authority, states can provide services that are not covered by a state’s Medicaid program, such as personal care not covered by the state plan, home delivered meals, ADC, personal emergency response systems, respite care, environmental accessibility adaptations, and other services that are required to keep a person from being institutionalized. The waiver authority also allows states to provide waiver participants a greater amount, duration, and scope of services than are provided under the state plan.

Additionally, the waiver authority allows states to limit services to specific counties or regions of a state and to target services to certain groups -- strategies that are not normally allowed under Medicaid. State Medicaid agencies must ensure that waiver programs have provisions to ensure the health and welfare of participants. In addition, states must establish in advance how many people they will serve during the course of a year. Thus, in contrast to the regular Medicaid program, states may establish waiting lists for waiver programs.

TABLE 1-9. Sources of Public Funding for Services in Residential Care Settings

State Source of Funding State Source of Funding
  Medicaid  
Waiver
Medicaid
  State Plan  
State
  Funds  
  Medicaid  
Waiver
Medicaid
  State Plan  
State
  Funds  
Alabama a     Missouri Planned X  
Alaska 1915 (c)     Montana 1915 (c)    
Arizona 1115     Nebraska 1915 (c)    
Arkansas 1915 (c) X   Nevada 1915 (c)    
California 1915 (c)b     New Hampshire   1915 (c)    
Colorado 1915 (c)   X New Jersey 1915 (c)    
Connecticut 1915 (c)   X New Mexico 1915 (c)    
Delaware 1915 (c)     New York   X  
DC d     North Carolina   X  
Florida 1915 (c) X   North Dakota 1915 (c)    
Georgia 1915 (c)     Ohio 1915 (c)    
Hawaii 1915 (c)     Oregon 1915 (c)    
Idaho 1915 (c) X X Pennsylvania d    
Illinois 1915 (c)     Rhode Island 1915 (c)    
Indiana 1915 (c)   X South Carolina   X  
Iowa 1915 (c)     South Dakota 1915 (c)   X
Kansas 1915 (c)     Texas 1915 (c)    
Maine   X   Utah 1915 (c)    
Maryland 1915 (c)   X Vermont 1915 (c) X  
Massachusetts     X   Virginia     X
Michigan c X   Washington 1915 (c)    
Minnesota 1915 (c) X   West Virginia      
Mississippi 1915 (c)     Wisconsin 1915 (c) X  
        Wyoming 1915 (c)    
  Total 35 13 7
  1. A waiver was approved by CMS but not implemented.
  2. Limited pilot program.
  3. Waiver services can be delivered to residents in unlicensed buildings that are called ALRs. The state is considering a waiver amendment to provide services in licensed settings.
  4. Waiver coverage was authorized by the legislature.

Finally, average expenditures for waiver beneficiaries must be the same or less than they would have been without the waiver (no more than average Medicaid nursing home costs).25 Importantly, while Medicaid may cover services in residential care facilities, it will not cover room and board. Medicaid can cover room and board only in institutions, such as nursing homes, ICFs-MR, and hospitals.

From the inception of the waiver program, states have used waivers to pay for services in residential care settings as an alternative to ICFs-MR. In 1981, Oregon became the first state to use the waiver program to fund services in residential care settings for elderly persons, but few states followed suit until the 1990s.

In the revised HCBS waiver application (version 3.4), assisted living is no longer listed as a separate service.States may list assisted living or services in assisted living and other residential settings under “other.” The guidelines CMS uses to review waiver applications ask the following questions about services in larger residential settings: “Is a home-like character maintained in larger settings (i.e., the facility is community-based) provides an environment that is like a home, provides full access to typical facilities in a home such as a kitchen with cooking facilities, small dining areas, provides for privacy and easy access to resources and activities in the community?” States may also choose to provide waiver services in congregate housing even if the waiver does not specifically cover a service category called “assisted living.”


25. States can use either a fixed per capita amount for each beneficiary or they can average expenditures across waiver beneficiaries. The latter method provides more flexibility because it allows some beneficiaries to exceed the nursing facility cost as long as costs for others in the program are lower and the average waiver cost does not exceed the average nursing facility cost. States have the option of setting a cap on waiver services at a percentage of nursing home costs (e.g., 80 percent).

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