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Factors to Consider When Choosing Coverage Options: Two Illustrative Services 93its own definition. 10 Assisted living is also oftenused as a marketing term for facilities that may belicensed under another category, such as residentialcare facilities and personal care homes. Theterm is even used by facilities that are not licensedto provide services but whose residents receiveservices provided by outside agencies. As discussedin Chapter 4, HCFA includes a definitionof assisted living in the standard HCBS waiverapplication, but states have the option to use a differentdefinition. (See Appendix I for the full textof HCFA’s definition.)Assisted living is used here to mean care that combineshousing and supportive services in a homelikeenvironment and seeks to promote maximal functioningand autonomy. Medicaid will pay for servicesprovided in assisted living facilities as long as the“homelike environment” is preserved. Thus,Medicaid will not pay for assisted living servicesif the assisted living facility is located in the wingof a nursing home (or ICF/MR). Emergence ofassisted living as a residential rather than an institutionalmodel—combined with changes in statelicensing regulations—has provided many peoplewho need supportive and health services with animportant alternative to the nursing home. Thistype of living arrangement is very popular amongprivate-pay older persons and their families.Covering assisted living through Medicaid providessafety net funding for this group, many ofwhom may one day be unable to afford it out oftheir own resources.The logistics of setting up an assisted living programcan be quite complex. Most important is therecognition that assisted living is more than just asetting for potentially cost-effective service delivery.It represents a philosophical approach to residentialservices that supports independent living,autonomy, and consumer choice—a philosophythat should guide decisionmaking for regulationsand payment policy. In making such decisions,states must address a number of key issues, eachof which is discussed in turn.Target PopulationDetermining what population will be served willdepend in large part on the state’s current longtermcare system and its policy goals. Is assistedliving intended to fill a gap in the current set ofoptions? Will the target population be differentfrom the population usually served in board andcare facilities? Is assisted living intended to enablepeople who cannot be served in their homes toavoid institutionalization?Once these questions are answered, the state mustdecide which age groups will be served, andwhether services will be designed to address thespecialized needs of specific populations (e.g.,persons with dementia). It is also crucial to makecertain that licensing and other facility regulationsin a given state match the target population. Forexample, if the state wants to target nursinghome-eligible beneficiaries, the assisted livingfacilities will need to be able to serve a populationwith a nursing home level of need.Service Delivery ModelsThe definition of assisted living varies from stateto state and sometimes from residence to residence.Some states have used regulations or licensingrequirements to define assisted living services.States using Medicaid HCBS waivers define theservice to suit the purpose of their particular program.A variety of service delivery models are possible.The assisted living residence may be theprovider of services, for example, or the serviceprovider may be a separate agency. Yet a thirdalternative is to consider the assisted living settinga person’s home; this permits a state to providehome and community services to persons in assistedliving through the existing delivery system.Whatever the model chosen, it is important tonote that assisted living in no way compromises aperson’s right to receive other Medicaid services.The overriding criterion for receipt of servicesunder any model is medical necessity.Personal Care Option or Waiver or Both?States can cover assisted living services througheither a waiver program or the personal careoption under the state plan or both. The waiverapproach is advantageous in that states can