Using Medicaid to Cover Services for Elderly Persons in Residential Care Settings: State Policy Maker and Stakeholder Views in Six States. Introduction of Medicaid Personal Care Services in Adult Care Homes


In the late 1980's to mid-1990's advocates for elderly persons urged the state to address perceived quality of care problems in adult care homes. In particular, their concerns focused on the retention of persons requiring a nursing home level of care in these homes, who not receiving appropriate or adequate services. During the same period, the development of a new model of residential care--market-rate assisted living--had become widespread throughout the state. Advocates also urged the state to provide this new care model to elderly persons who needed services in a residential care setting.

The state convened a domiciliary care team that met for 18 months and consulted with a number of experts to assist in the development of new residential care policy. In 1994, the state commissioned a study of North Carolina Domiciliary Care Home Residents.8 The study found that residents in domiciliary care homes in North Carolina had significant levels of impairment, with nearly two-thirds having moderate to severe cognitive impairment. Comparisons to domiciliary care home residents in ten other states showed that the North Carolina domiciliary home residents had much higher levels of ADL impairment, cognitive impairment, and incontinence.

These findings were a major impetus for the policy decision to use Medicaid to pay for additional personal care in domiciliary homes. Other important factors included pressure from advocates to increase the amount of care provided in these homes, pressure from providers for higher payments, and U.S. Congressional discussions about block granting the Medicaid program. In response to the latter, many in the state felt it would be advantageous to draw as much Medicaid money as possible before the program was block granted.

By using Medicaid to pay for these services, the state's domiciliary care team developed a budget neutral strategy that would increase the amount of personal care provided in adult care homes and provide case management to oversee residents with heavy care needs. The state reduced the Special Assistance payment and used the savings as the state match for the new federal funding.

Because the State was concerned about the cost of the new benefit, it established three fixed reimbursement levels for personal care in domiciliary care homes--basic and two enhanced levels--to be determined by a case manager.

8. Hawes, C., Lux, L., Wildfire, J., Green, R., Packer, L. E., Iannacchione, V., and Phillips, C. Study of North Carolina domiciliary care home residents. (February 15, 1995). Report submitted to the North Carolina Department of Human Resources.

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