Using Medicaid to Cover Services for Elderly Persons in Residential Care Settings: State Policy Maker and Stakeholder Views in Six States. North Carolina


North Carolina uses only the Medicaid state plan personal care option to cover services in adult care homes. Prior to 1995, North Carolinaprovided Medicaid personal care only to individuals in their own homes. The state funded a small amount of personal care in adult care homes through a relatively generous state supplement called Special Assistance (SA), which is available only to residents of adult care homes.16 The combined SSI+SA payment is set each year by the state as the rate for adult care homes to provide room, board, and custodial care. In 2003, the SA supplement for an SSI recipient is $560.

In the late 1980s to mid 1990s, advocates for the elderly lobbied the state to address perceived quality of care problems in adult care homes. In particular, there were concerns that persons requiring a nursing home level of care were residing in these homes and were not receiving appropriate or adequate services.17 In response, North Carolina commissioned a study, whose findings confirmed these concerns. The study found that adult care home residents in North Carolina had significant levels of impairment.18 It also found that compared to persons in residential care settings in ten other states, North Carolina residents had much higher levels of incontinence, ADL impairments, and cognitive impairment, with nearly two-thirds having moderate to severe cognitive impairment.

These findings led to pressure from advocates to increase the amount of care provided to residents of adult care homes and pressure from providers for higher payments. In response, the state decided to expand the Medicaid personal care program to cover services provided in adult care homes. The expansion was budget neutral because the state reduced the state supplement and used the savings as the state match for the federal funds.

According to one respondent, another factor influencing North Carolina's decision to expand its personal care program to cover services in residential care settings was congressional consideration of a proposal to block grant Medicaid. At the time Congress was discussing the proposal, many in the state felt it would be advantageous to draw as much Medicaid funding as possible before the program was block granted. Even so, the state was concerned about the cost of the new benefit, and so it established three fixed reimbursement levels for personal care in adult care homes -- basic, and two enhanced levels -- to be determined by a case manager. In addition to paying for one hour of personal care per day, the Medicaid program also provides case management to oversee residents with heavy care needs.

North Carolina has chosen not to use the waiver program to cover services in adult care homes because these homes are licensed to provide only custodial care and some personal care. State licensing rules specifically prohibit adult care homes from serving persons who need a nursing home level of care. Thus, residents of adult care homes are not eligible for waiver services even if their condition deteriorates. Residents who need skilled nursing services or skilled therapies receive them through the Medicaid or Medicare Home Health benefit. If North Carolina wanted to serve waiver clients in residential care settings, it would have to either amend adult care home licensing requirements or create a new type of residential care setting with appropriate licensing and regulatory standards.

  1. In 2003, the state approved a measure which will allow 800 persons with disabilities living in their own homes to receive the state supplement.

  2. Bolda, E. (1991). Initial Report on North Carolina Domiciliary Care Policy. The Long Term Care Resources Program, Duke University Center for the Study of Aging and Human Development.

  3. Hawes, C. et. al. (1995). Op. cit.

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