Medicaid beneficiaries with limited income may not be able to pay residential care facilities' room and board rates. As noted earlier, Medicaid pays for room and board only in institutions, except in limited circumstances such as respite care and meals that are served as part of a day care program (§441.360(b)). For Medicaid purposes, room and board comprises real estate costs (debt service, maintenance, utilities, and taxes) and raw food. The costs of preparing, serving and cleaning up after meals can be covered as a waiver service.
Although Medicaid beneficiaries are responsible for room and board costs, states have a range of options to make them affordable.
- Limit the amount facilities can charge Medicaid clients for room and board to the federal SSI benefit, which in 2004 is $564 minus a small personal needs allowance;
- Provide a state supplement to the SSI payment for persons living in residential care settings, and limit the amount that can be charged to the combined SSI plus state supplement payment;
- Use the 300 Percent of SSI Income Standard for waiver eligibility and set the maintenance allowance at a level that allows residents to retain sufficient income to pay for room and board;
- Provide housing subsidies for low-income persons;
- Allow family supplementation to increase the funds available for room and board, particularly to pay the difference in cost between a shared and a private room; and
- Use the federal Food Stamp Program, when possible, to reduce board costs.
Each of these options is discussed below.
Limiting the Amount Facilities Can Charge for Room and Board
States can limit the amount that can be charged for room and board by setting a combined rate for Medicaid beneficiaries that includes service costs and room and board costs, essentially capping the room and board rate that Medicaid beneficiaries pay. See Table 1-11 for a list of states that do so. Medicaid programs that specify how much facilities may charge Medicaid beneficiaries for room and board usually limit the charges to the state's SSI payment for a single elderly beneficiary living in the community, plus a state supplement, if any. This approach guarantees that Medicaid beneficiaries can afford room and board costs.
If providers feel that the room and board rate is too low to cover costs, they may decide not to admit Medicaid beneficiaries. Only New Jersey has passed a law requiring that facilities licensed after September 2001 set aside 10 percent of their units to serve Medicaid residents within 3 years of licensing.
Persons in residential care settings who qualify for SSI receive a basic federal SSI payment ($564 in 2004). In settings that do not have housing subsidies, they retain a personal needs allowance (PNA), typically $30 or higher as determined by the state, and the remaining income is paid to the facility for room and board. If the resident lives in a Department of Housing and Urban Development (HUD) 202 subsidized unit in which the tenant's share of the costs for rent and utilities is limited to 30 percent of the resident's income, the resident may have additional income that could be used to pay for services. If a person is SSI eligible and received $564 a month, they will pay 30 percent of this amount for rent ($169.20), and have $394.80 left over.
HUD's housing subsidy rules do not allow residential care settings to impose an additional charge for rent and utilities, but they can charge the resident for board (i.e., meal costs) or for services that are not covered by the Medicaid state plan in a residential care setting. The amount of the permitted meal charge depends on the scope of the Medicaid service payment (i.e., whether it includes the cost of meal preparation). In all cases, Medicaid may not pay for raw food.27
Under HCBS waivers, the cost of preparing and serving food may be covered under the service payment. If preparing and serving meals is covered, the meal cost charged to tenants would be lower. If not, charges for a meal program would include raw food, preparation, and serving. States covering personal care in residential care settings under the state plan may also allow payment for the preparation and serving of meals but may not include the cost of food.
Medicaid beneficiaries with incomes over the SSI level must contribute income above the amount of room and board (minus a small personal needs allowance) to pay for services. Medicaid then pays the difference between the resident's payment and the maximum service rate. Because beneficiaries in this category have more income than SSI beneficiaries, when they live in subsidized units, they will pay a higher rent, because the rent is calculated as a percentage of income. They also may have more income available after the rental payment is made.
Providing State Supplements to the SSI Payment
To increase access for SSI beneficiaries in areas with high development costs, states can create a special SSI state supplement for persons in residential care facilities and limit what providers may charge to the amount of the federal payment plus the state supplement.28 Many states have such State Supplemental Payment (SSP) programs to supplement the federal SSI payment, which in 2004 is $564 a month; the payment is adjusted each January based on the cost of living. Individual states may use a specific term to refer to their supplement and some use the term SSI to refer to both the federal payment and any state supplement.
State supplements are totally state-determined and vary widely.29 Of the 28 states that have a supplement, 21 provide less than $100 a month.30 States may pay different supplements based on a person's living arrangement. A few states have developed a supplemental payment rate specifically for beneficiaries in residential care settings to provide them with sufficient income to afford room and board.
Some policymakers might question the efficiency of providing 100 percent state funding to enable residents to pay for room and board. However, it is important to consider the net state cost of services in a residential setting compared to a nursing home. If the program diverts people from entering a nursing home or allows individuals to move from a nursing home to the community, states may fund a fairly substantial supplement to the federal SSI payment and still reduce their net state cost. For example, the net state cost for a state with an average nursing home payment of $3,000 a month and a 50 percent federal match is $1,500. A state could use a portion of the state match that would normally pay for nursing home care to raise the payment standard for residential care settings. Policymakers would have to determine how many people would be covered if the supplement were increased in order to calculate whether the change is "budget neutral" (or better) relative to the amount of the supplement.
Providing Housing Subsidies for Low-Income Persons
Many states are exploring ways to combine Medicaid funding and subsidized housing to develop residential care options for low-income persons. Housing subsidies can reduce housing costs for Medicaid beneficiaries and other low-income persons, and are available through a number of programs:
- Low Income Housing Tax Credits;
- HUD Section 202 Assisted Living Conversion Program;
- Section 8 Rental Assistance Vouchers;
- HUD Fair Housing Act Section 232 Mortgage Insurance Program;
- Federal Home Loan Bank Affordable Housing Program;
- Low Interest Bonds;
- U.S. Department of Agriculture (USDA) Housing Services Programs;
- Community Reinvestment Act; and
- State, City, and other Local Programs.31
Some federal housing programs either provide direct grants to public housing agencies and to developers or they reduce the debt incurred by the owner and, therefore, the revenue that needs to be raised through tenant rental fees. Others provide rental assistance directly to low-income tenants who would otherwise be unable to afford even reduced rents.
The HUD Section 8 Housing Choice program contains some provisions that states can use to subsidize housing costs for waiver clients in residential care settings. Housing Choice offers two broad voucher programs: Fair Share and Special Purpose.
Fair share vouchers are allocated to serve people on waiting lists for Section 8 assistance. They are awarded through a competitive process and an additional 15 points are given to proposals that set aside 15 percent of the vouchers for people with disabilities. In addition, proposals qualify for 5 points if they demonstrate collaboration with Medicaid waiver programs and set aside 3 percent of the vouchers for waiver participants. Special purpose programs offer mainstream vouchers to help people with disabilities find affordable private housing, which can include residential care settings.
Typically, multiple public programs are needed to provide an adequate housing subsidy. For example, one affordable assisted living development in Vermont was financed by a combination of funds from HUD's Section 202 Assisted Living Conversion Program, the Vermont Housing and Conservation Board, the Community Development Block Grant and City Trust, HUD Special Purpose Funding, and tax exempt bond financing through the Vermont Housing Agency. However, because housing subsidy programs and Medicaid operate under different requirements, including those related to eligibility, extensive planning and collaboration is needed to enable multiple programs to work together.
Using the 300 Percent of SSI Income Standard and Providing an Adequate Personal Maintenance Allowance
States have the option to cover persons in an HCBS waiver program using the special income standard, which sets eligibility at up to 300 percent of the federal SSI payment (i.e., a person's income must be at or below 300 percent of the maximum SSI benefit--in 2004, $1692 per month). This option is attractive for waiver programs that cover services in residential care settings, because it expands the program to include beneficiaries who are better able to afford room and board costs. To make this option effective, however, states must allow eligible persons to retain enough of their income to cover "maintenance needs" including the room and board charges in residential care settings. Setting a higher maintenance allowance may allow more beneficiaries to be served in residential care settings; however, it will increase Medicaid's service payment since it reduces the "excess income" that is applied to the cost of services.
Under Medicaid's post-eligibility treatment of income rules for HCBS waivers, states are allowed to use "reasonable standards" to establish the maintenance allowance, and may vary the allowance based on the beneficiary's circumstances. For example, states can permit Medicaid beneficiaries to keep sufficient income to pay for the needs of a dependent, health care costs not covered by Medicaid, and other necessary expenses.
Beneficiaries living in residential care settings may have different income needs depending on the type of facility: private market-rate facility or subsidized housing facility. The "rent" component of the monthly fee charged by facilities built with low-income housing tax credits will be lower than the rent charged by privately financed facilities. Through tax credits, rents in assisted living can be reduced to around $400 a month. Setting the allowance based on the area's average monthly charge for room and board may be overly generous when applied to residents in subsidized units. On the other hand, setting the maintenance allowance based on the amount paid by residents in subsidized units may be too low for private market facilities and create access barriers. If a state wants to improve access to both private and subsidized assisted living facilities, it can set a separate maintenance allowance for each setting.
Interaction with housing subsidies. Under HCBS waivers using the 300 percent eligibility option, treatment of the additional income retained by residents because of rent subsidies depends upon the threshold set by the state for the maintenance allowance. If the state sets the maintenance allowance at the SSI level, all income above that amount is applied to the cost of Medicaid services. If the person has income between SSI and the maximum ($1,692 in 2004), residents receiving housing subsidies may have additional income that is protected. For example, a person with $1,000 a month in social security and other income would have a maintenance allowance of $564 and apply the excess income ($436) to the cost of services. However, instead of paying $564 (less the PNA) for rent and utilities, if the resident is living in HUD Section 202 subsidized housing, the resident pays 30 percent of his or her income ($300) and keeps $264 for other expenses.
If the maintenance allowance is higher, the resident can retain the additional income and use it to pay for other costs. For example, if the resident is allowed to keep the entire $1,000 a month, the resident's portion of the rent and utility charge would be $300 a month and the resident keeps $700. States typically set one maintenance amount for all waiver participants. However, there can be differences among beneficiaries. Those who do not receive a rent subsidy have a greater need for income to pay for room and board than those with subsidies. Yet, they have the same maintenance allowance and pay different amounts for room and board.
Separate maintenance allowance. Medicaid rules allow states to set different maintenance allowances, for example, for beneficiaries whose rent is subsidized. The Medicaid manual (3590.9 (A)(1)) states: "You may establish a different amount for each individual, or for groups of individuals, if you believe that different amounts are justified by the needs of the individuals or groups." A lower maintenance amount for individuals with rent subsidies means more income is available to share the cost of services.
States face many challenges in their efforts to expand the supply of affordable assisted living by combining available housing programs and Medicaid funding. Housing subsidies may not be available in a particular area or, as is often true with waiver services, waiting lists may exist for rent vouchers. To be effective, a rent subsidy voucher must be available when a waiver participant applies and at the same time that a facility is available that will accept the voucher as well as Medicaid payment. From application to implementation, close collaboration is needed between public housing agencies, waiver programs, and service providers. These challenges require knowledgeable housing operators and local housing authorities and state policymakers who are able to identify and address the barriers.
Family members may be able and willing to help with room and board costs when the beneficiary is unable to pay them. As presented in Table 1-12, 21 states reported that they allow family supplementation, and nine states have not set a policy on this issue. Twelve states do not allow supplementation compared to fourteen in 2002 and eight in 2000. The remaining states either do not cover services in residential care settings or did not report whether they have a policy on supplementation.
States set their own rules governing family supplementation. Since Medicaid does not pay for room and board in residential care settings, rules regarding supplementation in nursing facilities do not apply (e.g., families of nursing home residents may not supplement Medicaid payments, which cover room and board and services). Several states indicated that supplementation is permitted to allow beneficiaries to upgrade to a private unit.
While supplementation is not prohibited, it is considered in determining eligibility for SSI. Federal SSI regulations contain provisions for treating unearned income during the eligibility determination process. A family contribution paid directly to an SSI beneficiary is counted as unearned income. Consequently, supplementation can lead to a reduction in the SSI payment or the loss of SSI altogether, and with it, potentially Medicaid as well.
If, however, the family contribution is paid directly to a residential care facility on the beneficiary's behalf, it is treated differently, as an "in-kind" payment, and reduces the monthly SSI benefit by one-third or, if documented, the actual amount of support provided if it is lower than one-third of the federal benefit. The maximum reduction is one-third even if the payment exceeds one-third of the SSI payment.
For example, a facility may have a room and board rate of $800, and because the SSI payment is not high enough to cover the charge, family members agree to help pay the cost. If the payment is made to the resident, it is considered unearned income and the federal SSI payment is reduced $1 for every $1 in unearned income, after a $20 per month exclusion. If the payment is made directly to the facility, the amount of the payment is considered "in-kind," and the one-third reduction rule applies (i.e., the federal benefit is reduced by one-third, or less if documented).
If the room and board rate is $800, the difference between that rate and the SSI benefit of $564 is $236. If the family pays $236 directly to the facility, then the individual's SSI benefit is reduced by one-third ($188) to $376. The family would then have to pay to the facility an additional $188. The consequence of the one-third reduction, then, is that the family must increase its supplementation from $236 to $424.
Because the rule states that the SSI payment will be reduced by up to one-third, there is no federal limit on the amount of money that can be paid to a facility on behalf of the SSI beneficiary. If a family chooses, they can subsidize services other than room and board, as well as pay for room and board costs in more expensive facilities, without jeopardizing an individual's eligibility for SSI.
However, states that provide SSI supplements may choose to set a limit on in-kind payments. Florida, for example, limits the amount families may contribute to twice the amount of the combined SSI payment and state supplement, which is $643. Thus, families or other third parties can provide up to $1,284 directly to the facility, and the beneficiary will still receive a federal payment of $376 plus a $79 state supplement, and remain eligible for Medicaid. However, the state reduces the state supplement dollar for dollar for any payment above $1,284.
Family supplementation also has implications for Medicaid eligibility. Since Medicaid income and resource rules follow SSI rules, payment to a residential care setting would be considered in-kind income to the beneficiary. If the individual still receives SSI, and therefore remains a Medicaid beneficiary, there is no impact.32 Beneficiaries who are eligible through spend-down or the 300 percent special income level might be affected if the supplementation raises their income above the medically needy income standard or the 300 percent level.
To prevent beneficiaries from losing Medicaid eligibility, states could explore submitting a state plan amendment to exempt in-kind income that supports a person's accommodations or services not covered by the Medicaid payment in residential care settings. Section 1902(r)(2) of the Social Security Act allows states to use such less restrictive income and resource methodologies in determining eligibility for most Medicaid eligibility groups than are used by the cash assistance programs, such as SSI. States can elect to disregard different kinds or greater amounts of income and/or resources than the cash assistance programs, giving states more flexibility to design and operate their Medicaid programs.33