Understanding Medicaid Home and Community Services: A Primer, 2010 Edition. Misperceptions About Medical Bias in Nursing Facility Service Criteria


A common criticism of nursing facility level-of-care criteria is that they are “medically biased,” that is, (a) they do not adequately assess functional limitations and how they affect the need for long-term care, or (b) they give greater weight to nursing and medical needs than to functional limitations caused by physical or mental impairments. However, no Federal statute or regulation mandates that states adopt such a medical approach when setting nursing facility level-of-care criteria.

The term medically necessary does not imply a distinction between medical conditions and functional limitations caused by physical or mental impairments. The correct sense of the term is that services need simply to be “necessary” (i.e., needed by the individual). Determining medical necessity is the process states use to determine whether a specific person requires a covered service. States must provide covered services to eligible individuals who require them. States also make medical necessity determinations to control utilization and avoid wasting resources on unneeded services.

There is no Federal definition of medical necessity for specific services, so states are free to define it broadly (e.g., medically necessary services are those that promote optimal health and functioning). Thus, the requirement that services be medically necessary does not mean a state is required to use only medical--or even any medical--service criteria to determine eligibility for nursing facility services. Oregon, for example, uses only functional criteria.27 Nor must a state give greater weight to medical and nursing needs than to functional needs.

No clear line separates functional from medical needs. Health status and functioning are closely interrelated; immobility due to paralysis or even frailty can lead to serious medical problems in multiple body systems. Thus, failure to address functional limitations can result in serious medical problems that require not only nursing home care, but hospitalization as well. The primary reason people need long-term care services is because they have functional limitations. Even if people require specialized health care (e.g., injections or catheterization), research has shown that people can meet these needs themselves if they are not physically or mentally impaired. Thus, the single most important measure of need for long-term care is a person’s functional limitations.

Another common misperception is that a physical illness or disability is required in order to be eligible for Medicaid coverage of nursing facility care, rather than assistance with ADLs or IADLs due to functional limitations caused by cognitive deficits or mental illness. In fact, §1915(a)(1)(C) of the Social Security Act clearly states that while the overallfacility must not be primarily for the treatment of mental diseases, a nursing facility provides health-related care and services to individuals who because of their physical or mental condition require, on a regular basis, care and services (that are above the level of room and board), which can be made available to them only through institutional facilities. However, a Federally required process called Preadmission Screening and Resident Review requires states to ensure that individuals with serious mental illness or an intellectual disability are admitted to a nursing facility only if the facility can meet their needs.

Another common misperception about Medicaid level-of-care criteria is that an institutional standard requires a severe level of medical need or functional limitation. There is no such Federal requirement. In addition to having criteria for a skilled level of care, states’ nursing facility benefit must include minimal criteria that comports with the Federal definition of the former ICF criteria: a need, on a regular basis, for health-related care and services by individuals, who because of their mental or physical condition, require care and services (above the level of room and board), which can be made available to them only through institutional facilities.28

However states define their nursing home level-of-care criteria, many people who meet those criteria will remain in the community, even without formal services. A study in Connecticut, for example, found that some people with severe functional limitations (three or more ADL impairments), who met the nursing facility level-of-care criteria, chose to go without nursing home and waiver services rather than spend down to Medicaid eligibility or be subject to estate recovery provisions.29 States’ concerns about increasing the number of people admitted to nursing facilities are understandable. However, states can prevent unnecessary institutionalization by screening people prior to nursing facility admission to determine whether services could be provided in home and community settings (i.e., establish pre-admission screening or nursing facility diversion programs). Other steps that states can take to reduce the number of people in nursing facilities include the establishment of nursing facility transition programs and “money follows the person” policies to allow institutional funds to follow nursing facility residents to home and community settings. Implementation of such programs and policies can help to ensure that only those who truly cannot be served safely and cost-effectively in the community will be admitted to and remain in nursing facilities.30

Illustrative Use of Functional Measures to Determine Eligibility for Nursing Facility and Waiver Services: Oregon

Oregon’s level-of-care criteria specify 18 functional levels with 1 representing the most impaired and 18 the least impaired. The State does not consider medical or nursing needs to determine eligibility. The State assesses the need for assistance with mobility (ambulation and transferring), eating, and elimination (toileting, bowel and bladder care), and assistance due to impaired mental status (cognition and behavior.) The definitions of ADL assistance recognize that the need for assistance can be the result of a physical impairment, limited endurance, or cognitive impairment.

The State assesses mental status, with measures of memory, orientation, adaptation to change, awareness of needs, and judgment. Memory is defined as the ability to remember and appropriately use current information, which affects an individual’s health, safety, and welfare. Behaviors that may affect living arrangements and/or jeopardize the safety of self or others are also assessed; these include wandering, those that pose a danger to self or others, and those that negatively affect living arrangements, providers, and/or others.

Threshold Eligibility Requirement. Depending on available funding, the State sets different levels as the threshold eligibility requirement. In the past 15 years, it has varied from level 13 to level 18.

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