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Creating Comprehensive Cost-Effective Systems: System Design Issues 157population—with different cost limitations foreach program based on beneficiary characteristics,living situation, or other factors.Managing to a targeted averageManaging its program to stay within a targetedper recipient cost average allows a state toapprove service plans above institutional cost levels,or the targeted average, in the expectation thatother plans of care will come in well below thoselevels—thus balancing the costs of the high serviceplans. HCBS waiver programs that operate inthis fashion are usually able to accommodate awider range of consumer needs than programsthat operate under fixed cost caps.Many HCBS waiver programs use the targetedaverage approach. Its main disadvantage is thatcosts are less predictable, especially for a new program,because they depend on whether enrollmentpatterns match the assumptions made. Costs aremore predictable in longstanding programs, becauseinformation is available on actual utilizationpatterns among program participants.One way states can achieve some predictabilityconcerning HCBS waiver per recipient costs, whileavoiding the disadvantages associated with theuse of hard caps, is to impose special controls overuse of services that might be particularly vulnerableto over-utilization. A state may impose unitlimitations on services and/or require that use ofcertain services beyond established threshold levelsbe subject to additional professional or clinicalreview, for example. A particular advantage of thisapproach is that it enables the state to better ensurethat the health and welfare needs of consumers areidentified and met. The disadvantage of such controlsis that, although costs are more predictable,the controls can cause problems in their own right,especially with respect to accommodating theneeds of particular individuals and families. Avariation on this approach is found in the Illinoissupported living option benefit described inChapter 8. This establishes an overall dollar limitthat governs a service group but affords flexibilityto the individual (or family) in deciding the exactmixture of services that will be used.Correcting common misperceptionsThere is no Federal requirement that dictates that thecosts of supporting a particular individual via anHCBS waiver program may not exceed institutionalcosts. States may extend HCB waiver services toindividuals who require extraordinary levels ofsupport. Many states accommodate individualswho require costly supports in the community byvirtue of their disability, while continuing to operateHCBS waiver programs that meet Federalcost-effectiveness tests. A state may find it necessaryto impose hard cost caps for budgetary orother reasons, but the use of such caps is not dictatedby Federal policy.The HCBS waiver cost-effectiveness test does not discriminateagainst individuals who have complex conditions.Since HCBS waiver cost-effectiveness ismeasured against the cost of institutional services,a state may find it difficult to accommodate certainindividuals, because the costs of serving themmay be many times the institutional average anda state might not be able to accommodate suchindividuals even using aggregate cost caps.However, Federal law gives a state the latitude,when requesting a waiver, to compare the costs ofserving individuals with these intensive needs in aninstitutional setting (rather than the average costsfor all people receiving institutional services). 14The average annual cost of nursing facility care ina state might be $36,000, for example. If the cost ofserving a person who has had a brain injury insuch a facility is $50,000, that higher figure may beused as the point of comparison.There is no requirement that HCBS waiver programsbe budget neutral with respect to Federal financial participation.Thus, Federal policy places no restrictionson the number of individuals a state mayserve in its HCBS waiver program(s). Each statemay establish whatever limit it chooses and maychange its limits whenever it wishes.Payment and Contracting PoliciesAn important aspect of system design for ensuringaccess to home and community services whilepromoting cost-effectiveness involves two intertwinedtopics: payment and contracting for serv-
158 UNDERSTANDING MEDICAID HOME AND COMMUNITY SERVICES: A PRIMERices. Payment policies should encourage the economicaland efficient delivery of services, whilealso enabling a sufficient number of serviceproviders to participate to ensure that the needs ofclients are met. Further, contracting policiesshould foster efficient service delivery and mayaid in expanding services availability.PaymentsIt is frequently, but mistakenly, believed thatFederal policy prescribes precise methods statesmust follow in purchasing Medicaid services. Infact, Federal policy requirements with respect toMedicaid payments are quite basic:• States may generally not pay a provider anymore than the provider charges other thirdparties for the same service.• Except in certain circumstances (discussedbelow), a state's payment must be tied to actualdelivery of a covered service to a particularbeneficiary.• State payment levels must be high enough toattract sufficient providers to meet the needsof beneficiaries.• States are expected to be "prudent buyers,"seeking out providers who will furnish servicesmost economically while avoiding providersthat have excessive costs.Within these broad parameters, Federal policygives states considerable latitude in the methodsthey use to make payments for home and communityservices. Thus, states may (and do) useany of a wide range of methods to determine theamount they will pay for home and communityservices. States may also use different methodsfor different services. Methods in current useinclude: 15• Fee-for-Service Price Schedules. The state establishesa uniform payment rate that appliesto all providers of a service (e.g., compensatingnursing services at the rate of $35 an hourregardless of the organization furnishing theservices). Personal assistance attendant servicesare frequently reimbursed on this basis.• Cost-Based Payments. The state bases paymentrates on the allowable costs incurred bythe specific provider, usually accompanied byupper limits on costs to encourage cost-effectiveservice provision.• Negotiated Rates. The state bases paymentrates on the specific provider's actual orexpected service costs.• Difficulty-of-Care Payments/Rates. The statepays providers amounts that vary based onexpected differences in the intensity of servicesand supports specific individuals require.Such methods seek to improve access to servicesfor individuals with particularly complexneeds and conditions.• Market-Based Payments. The state purchasesgoods and services from generic sources (as inthe case of engaging a contractor to install awheelchair ramp or to connect an individualto an emergency response system offered bythe local telephone company).Medicaid payments for services are unit-,encounter-, or item-based. Units are usuallyexpressed in terms of time (e.g., hours, days,months). Encounters may include contacts—anintervention (e.g., a mental health counseling session)that may differ in duration depending on theneeds of the consumer, or various other means ofestablishing a documentable tie between the paymentand an activity on behalf of the individual.Payment rates are tied directly to the billing unit orencounter established by the state. Medicaidaccountability requirements mandate that claimsfor service payment be based on defined activitiesperformed on behalf of eligible beneficiaries. Itembasedpayments are employed to secure home andvehicle modifications (e.g., installing a van-lift) aswell as equipment and supplies (e.g., communicationdevices). Item-based payments are used forone-time purchases or buying supplies fromapproved sources. (For managed care purchasingalternatives see discussion later in this chapter.)State payment methods for home and communityservices are not usually reviewed in depth by
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Understanding MedicaidHome and Comm
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IntroductionPeople of all ages with
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Introduction 31998—is the group m
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CHAPTER 1Medicaid Coverage of Home
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Medicaid Coverage of Home and Commu
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CHAPTER 2Financial Eligibility Rule
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