Statement by
Mark B. McClellan, MD, Ph.D
Centers for Medicaid and Medicare Services
Department of Health and Human Services

Long-Term Care and Medicaid: Better Quality and Sustainability By Giving More Control to People with a Disability
Subcommittee on Health
House Committee on Energy and Commerece

April 27, 2005

Chairman Deal, Congressman Brown, distinguished members of the subcommittee, thank you for inviting me here today to discuss long-term care and the need for transformation in the Medicaid program. There are a number of public programs that play a role in our long-term care system. Medicare plays a major role, but Medicaid is the largest public source of funding for long-term care in the United States. It is, and must remain, an essential lifeline for the most vulnerable Americans. In 2000, Medicaid paid for 45 percent of the total amount spent on long-term care services in the United States. State and federal financing of long-term care costs is a significant issue both for state and federal budgets. In FY 2004, total federal and state Medicaid expenditures on all long-term care reached $100.5 billion and accounted for 35.7 percent of all Medicaid spending.

Spending by the federal government and states for long-term care services through Medicaid has been growing rapidly. This growth in long-term care expenditures will continue to increase as our population ages. At the same time, Medicaid needs to keep pace with the long-term care needs of an aging population that wants to remain as active and engaged as possible. Medicaid should ensure that people with a disability are able to contribute to society to the greatest extent possible. With the growing demands on Medicaid, we cannot afford to wait to take steps that contribute both toward improved quality of life for more people with a disability and toward the long-term viability of the program. It is critical for us to respond to these challenges by ensuring that those who cannot afford to pay for long-term care services are protected by benefits that reflect the best and latest evidence on how to get quality results in long-term care, while encouraging and supporting those who are capable of paying for their own care to plan for their future in a manner that gives them control and does not require substantial public funding.

For all of these reasons, it is critical to give Medicaid beneficiaries and their family members and caregivers more control over how they get their care. As I will describe in more detail, properly done, beneficiary control means better quality and more people served for the same or lower cost. In its current form, however, the Medicaid program does not generally allow such flexibility. Reflecting the delivery of long-term care in institutions when the Medicaid statute was enacted in the 1960s, the Medicaid program does not rely on the community-based long-term care that best meets beneficiaries' needs. Long-term care in 1965 was centered on institutions, while today it should be focused more on the person and the supports and services the person needs. Care in a nursing home is the best option and the preferred option for many Medicaid beneficiaries, especially with recent quality improvement initiatives undertaken by many nursing homes. But progress over the last several decades in supportive technologies and ideas for supportive care means that the decision about how to receive long-term care services should be a personalized decision for the beneficiary. Because the Medicaid program has not kept up with progress in long-term care, thousands of Medicaid beneficiaries today do not have the opportunity to choose the most appropriate place for receiving long-term care services. It is time to give beneficiaries the control they deserve to enable Medicaid to get much better value for its money.

Medicaid is Currently the Primary Public Program for Financing Long-Term Care
For beneficiaries in the Medicaid program, most of their long-term care services, including medical and non-medical care, are provided by Medicaid. Most long-term care is intended to assist individuals with activities of daily living, such as getting in and out of bed, eating, bathing, dressing, and using the bathroom. It may also include care that most people do themselves, such as using eye drops or oxygen, and taking care of colostomy or bladder catheters. These services may be provided in either institutional or community-based settings.

Unlike Medicaid, Medicare does not cover most long-term care services. Medicare pays only for medically necessary skilled care in a nursing facility or home that is needed to treat, manage, observe, and evaluate care. Generally, under Medicare, post-acute skilled care is available only for a short time after a hospitalization and beneficiaries must meet certain conditions for Medicare to pay. Examples of skilled care include intravenous injections and physical therapy. Medicare skilled nursing care and home health aide services are only covered on a part-time or "intermittent" basis as part of the home-health benefit.

Eligibility for Medicaid Long-Term Care Varies by State
States have considerable discretion in determining who their Medicaid programs cover and the financial criteria for Medicaid eligibility. As a result, income and asset eligibility tests vary by state. However, to be eligible for matching federal funds, states are required to provide Medicaid coverage for most individuals who receive federally assisted income maintenance payments, as well as for certain related groups not receiving cash payments. States also have the option of providing Medicaid coverage for other "categorically needy" and "medically needy" individuals. The medically needy option allows States to extend Medicaid eligibility to additional qualified persons who may have too much income to qualify under the mandatory or optional categorically needy groups, but have significant medical expenses. The medically needy option allows individuals to "spend down" to Medicaid eligibility by incurring medical and/or remedial care expenses to offset their excess income, thereby reducing it to a level below the maximum allowed by that State's Medicaid plan.

Medicaid Coverage of Long-Term Care is Out of Date
When Medicaid started in 1965, institutional care was the norm for long-term care services; thus, a nursing home benefit was and continues to be a mandatory benefit that states must provide. States have the option to provide home- and community-based services through waivers, but they must develop and submit a waiver, and obtain support in the state for the waiver implementation, in order to provide these services. As a result, there is an institutional bias in many Medicaid programs that often keeps Medicaid beneficiaries from choosing where they receive long-term care support and services. Institutional care remains an essential part of long-term care today and may be the best approach for a portion of the elderly and individuals with disabilities who cannot safely be cared for in other settings, especially with the improvements in quality and capability that have occurred in recent years in many nursing homes. Those individuals who need the specific types of medically intensive, skilled services nursing homes provide, and an even larger number of their family members, friends, and relatives, must be able to count on nursing homes to provide such care reliably and with consistently high quality. For this reason, to help beneficiaries who need nursing home services get better care CMS has undertaken some major quality reporting and quality improvement initiatives, which are discussed later in this testimony.

Today, however, institutional care is only one part of a range of long-term care options that should be available to Medicaid beneficiaries. This is especially urgent because so many Medicaid beneficiaries would prefer to receive their long-term care supports and services in home-or community-based settings. Not all individuals currently cared for in nursing homes need or want that type of institutional care. In spite of the bias in the Medicaid statute, we have worked hard with advocacy groups, states, and our other partners to expand consumer options with regard to home- and community-based services. The key concepts here are consumer choice and control. By working to give individuals choice and control over supportive services in the community, the home- and community-based waivers that we have implemented in some states have simultaneously increased personal autonomy while promoting better decision-making about supports and services. These programs have shown that, often, the most cost-effective place to provide care is where most people would prefer to receive their care: living in their homes, connected to their communities, surrounded by friends and family. And that means better outcomes without higher costs in Medicaid - a result that we cannot afford to pass up any longer.

Medicaid's Long-Term Care System Must Change
Mr. Chairman, to ensure Medicaid can serve more beneficiaries at a lower cost, the institutional bias in Medicaid long-term benefits resulting from lack of beneficiary control must be addressed. CMS has been working hard to promote consumer choice and home- and community-based services over institutional care when it is appropriate for beneficiaries. Both consumers and states are very receptive to this approach, and the evidence from the programs developed so far is that it is a win-win effort.

The progress we have made with the President's New Freedom Initiative (NFI) points us in the right direction. We have undertaken a number of efforts to rethink, redesign, and re-balance a program that has traditionally been institutionally biased. The President's FY 2006 Budget includes NFI legislative proposals to make this happen. The President's Budget requests $385 million in budget authority for FY 2006 and $2.2 billion in budget authority for the five-year budget window. We made inroads with this legislation in Congress last year, and this year we want to work with Congress to go further and enact the proposed legislation.

Medicaid Proposals in the President's Budget Would Improve Long-term Care Services
CMS plays a unique role in identifying and supporting effective, innovative state Medicaid reforms that save money and maintain and, in some cases, substantially improve quality of care and quality of life. The President's FY 2006 budget includes several policies to promote home- and community-based care options. These policies, including the Money Follows the Person Demonstration, build on the President's New Freedom Initiative, which is part of a nationwide effort to integrate the elderly and people with disabilities more fully into society.

The New Freedom Initiative Promotes Independence and Choice
The President's New Freedom Initiative represents an important commitment toward ensuring that all Americans have the opportunity to develop skills, engage in productive work, choose where to live, and participate in community life. The President's Initiative, which we are working to implement throughout the government, is about the promise of freedom for every elder and person with a disability. It is a promise of independence, choice, and dignity. Our goal with our long-term care initiatives is to work with states to get to the point where consumer choice is the norm in our long-term care system - including in Medicaid. The budget includes a package of six New Freedom Initiative legislative proposals, including the centerpiece of our community-based proposals, Money Follows the Person, which promote home- and community-based care options for elders and people with disabilities.

Money Follows the Person Promotes Community-Based Living
As part of the New Freedom Initiative legislative package, the President's FY 2006 budget authorizes $350 million in each of five years, a total of $1.75 billion over five years, for the Money Follows the Person demonstration. In the initiative, the federal government will pay the full first-year cost, with no state match required, for a package of home- and community-based services for eligible individuals who move from institutions into the community and after the first year costs will be shared with the states at the existing Federal Medical Assistance Percentage (FMAP) rate. This will assist states in their efforts to reorganize and rebalance their long-term care service and support programs and integrate this demonstration into the Medicaid program. We believe individuals and families make better decisions for themselves than the current institutional-based, provider-driven systems.

While states are making efforts to develop infrastructures designed to support community-based services, progress in reducing dependence on institutional care has been difficult to achieve due to the fiscal challenges states are facing. The initiative will help states achieve a more effective balance between the proportion of total Medicaid spending on institutional services and the proportion of funds used for community-based support in their state plans and waivers. States will be encouraged to develop and adopt a coherent strategy for reducing reliance on institutional-care. The initiative also will help states design flexible financing systems for long-term services and supports that allow funds to move with the individual beneficiary's preferences to the most appropriate and preferred setting as the individual's needs and preferences change.

Earlier we said the 100 percent FMAP assists states. Again, for individuals who move voluntarily from a Medicaid-certified institution to the community, in this five-year demonstration project, the Federal government will fully reimburse states for one year of home- and community-based Medicaid services for such individuals. At a minimum, the package of services available in the community must be equivalent to the services that a state could provide under a Medicaid waiver. After the initial year, a state will be reimbursed by the Federal government for services provided at FMAP rates. States must commit to serve Medicaid eligible demonstration participants for as long as they need home- and community-based services.

CMS is one of five sponsors for the HCBS clearinghouse website for the Community Living Exchange Collaborative. The clearinghouse is intended to facilitate sharing information, tools, and practical resources across states and local entities based on information from grantees, states, academic institutions and others. For example, Medstat, a contributor to HCBS.org, highlighted several promising practices in the Money Follows the Person initiative, including those discussed below. As a result of the Real Choice Systems Change grants, states have made steps in making home- and community-based services available to individuals, and the following state examples illustrate the progress we have made.

The Texas legislature added Rider 37 to the two-year state appropriations act that took effect in September, 2001. This rider allows the Texas Department of Human Services (TDHS) to move Medicaid funding from its nursing facility budget to its budget for state and Medicaid-funded home and community-based services (HCBS) when a Medicaid participant transitions from a nursing facility into a community-based residence. Any Medicaid nursing facility resident may apply for transition into the community and immediately use community supports, rather than be placed on a waiting list as was required before the rider. Each month TDHS identifies people who left nursing homes using the rider and estimates the cost of their community services for the rest of the fiscal year. TDHS moves the cost of the community services from the nursing home budget to the community supports budget. Over 1,900 Medicaid participants in Texas have transitioned from nursing facilities into the community under Rider 37. The Texas legislature extended the rider for a second biennial budget (until August, 2005).

To ensure people know about their options before entering a nursing home, Maine required pre-admission screening and periodic reassessment for all nursing home residents, regardless of the payment source. Maine also implemented a case-mix payment system for Medicaid nursing facilities and tighter Certificate of Need controls on nursing home growth. The state rapidly expanded HCBS options and encouraged development of more community residential care. Between 1995 and 2002, the number of Medicaid nursing home residents in Maine decreased 18 percent while the number of people receiving Medicaid and state-funded home and community-based services increased 78 percent. The proportion of state and Medicaid long-term support spent on HCBS increased from 16 to 39 percent. Total long-term care expenditures increased by only 17 percent over the seven-year period.

In 2002, Indiana began an initiative to provide HCBS to people at imminent risk of nursing facility admission. Area Agency on Aging case managers work with hospital discharge planners to identify hospital patients who may be admitted to a nursing facility from the hospital. The case managers offer these people home and community-based services options. Some people use community supports immediately after their hospital discharge, while others use the services after a short nursing facility stay. Since 2002, Indiana has diverted 1,400 persons from institutional care.

Oregon, Washington, and Wisconsin
Oregon, Washington, and Wisconsin have taken a systems approach to rebalancing their long-term care systems and allowing the Medicaid funding to follow the person's preferences. These systems approaches to rebalancing combine legislative action, market-based approaches, and linkages. For example, Oregon and Washington established a single long-term care budget and Wisconsin passed legislation to create an entitlement to home- and community-based services in counties with the Family Care services benefit. In addition, these states made market-based changes (such as the institution of single point of entry and preadmission screening) to ensure that persons in need of long-term care are quickly identified, assessed, and informed of long-term options. In Oregon and Washington linkages were formed to merge administrative and regulatory responsibilities at the state and local level. In Wisconsin over half of the membership of state and local governing councils and boards is held by program participants. As a result of these systemic changes, over half (57 percent) of Oregon's Medicaid long-term care spending for seniors and adults with physical disabilities is devoted to home- and community-based care. And in state fiscal year 2002, Washington served almost two and a half times as many participants in the community as they served in nursing facilities.

Home- and Community-Based Care Demonstrations Provide More Options
The FY 2006 budget includes proposals to encourage home- and community-based care for children and adults with disabilities, such as demonstrations to provide respite care for caregivers of adults and children. Another demonstration will evaluate the effectiveness of providing home- and community-based alternatives to psychiatric residential treatment for children enrolled in Medicaid.

Presumptive Eligibility will Help Beneficiaries in Transition
To reduce the prevalence of individuals entering nursing facilities from hospitals due to the length of time required to determine Medicaid eligibility for home- and community-based services, the President has proposed to offer states the option of providing those individuals who need Medicaid home- and community-based care with services for up to 90 days while Medicaid eligibility is being determined. Under this proposal, the Federal government will pay its share of the first 90 days of home- and community-based services whether or not the individual is ultimately deemed eligible for Medicaid.

Existing Initiatives Demonstrate Success of Home- and Community-based Long-Term Care
CMS is putting a lot of effort into identifying and supporting effective, innovative state Medicaid reforms that improve quality of care and quality of life for the same or lower Medicaid costs. It is the most effective way not only to make Medicaid sustainable, but also to improve the quality of life of our beneficiaries. There are several existing initiatives underway, which are helping the elderly and people with disabilities live meaningful, productive lives in the community, including the Real Choice System Change grants, Independence Plus Initiative, and home- and community-based waivers, all of which are discussed below.

Real Choice System Change Grants Foster Choice
While Real Choice System Change grants have provided much evidence of the success of home- and community-based services, it is time to shift resources and move ahead with more systematic, large-scale reforms such as the multibillion dollar Money Follows the Person initiatives in the FY 2006 Budget. We have learned much from the 238 grants in the Real Choice Systems Change grants program, totaling $188 million, to help states and others develop programs that allow the elderly and individuals with disabilities to live meaningful, productive lives in the community. These grants are intended to foster the systemic changes necessary to allow elders and those with disabilities to access quality services from their choice of providers in accordance with their living preferences and priorities. Including the states we highlighted earlier as good examples for progress in Money Follows the Person activities, CMS has partnered with every state in the nation, the District of Columbia, and the U.S. territories to provide these grants from which we have developed new innovative ways to rebalance the Medicaid system. As shown in the state examples earlier, with this support, states are continuing to address issues such as personal assistance services, direct service worker shortages, transitions from institutions to the community, respite service for caregivers and family members, and better transportation options. CMS has also implemented an ambitious national technical assistance strategy, including the Community Living Exchange Collaborative mentioned earlier, to share information and support states' efforts to improve community-based service systems and enhance employment supports.

Independence Plus Initiative Increases Choice and Control
In 2002, CMS launched the Independence Plus Initiative to afford Medicaid participants increased choice and control that results in greater access to community living. Independence Plus is based on the experiences and lessons learned from states that have pioneered the philosophy of consumer directed care. The Initiative expedites the process for states to request waiver or demonstration projects that give individuals and their families' greater control over their own services and supports. Independence Plus programs not only deliver service in the community setting, but also allow a growing number of individuals and their families to decide how best to plan, obtain, and sustain the services that are best for them, giving beneficiaries the opportunity to control how they should receive the services they need. The Independence Plus programs allow participants to design a package of individualized supports, identify and attain personal goals, and supervise and pay their caregivers. CMS has approved eleven Independence Plus waivers, including eight 1915 (c) IP waivers (New Hampshire, Louisiana, South Carolina, North Carolina (2), Maryland, Delaware, and Connecticut) and three "1115" IP waivers (California, and two others that are extensions of the original "cash and counseling" demonstration waivers in Florida and New Jersey).

Independence Plus programs have built on the very successful "Cash and Counseling" demonstrations. The Cash & Counseling Demonstration and Evaluation Program is a three-state experiment to determine the feasibility of offering a cash payment option in lieu of traditional agency services to recipients of personal assistance services. The demonstration enables people to hire whomever they want to provide their care by redirecting personal assistance funds to the consumers themselves (instead of to agencies). There are three original Cash and Counseling section 1115 demonstration programs (Arkansas, New Jersey, and Florida), two other states with section 1115 self-direction demonstrations similar to Cash and Counseling (Oregon and Colorodo), and a multitude of states that offer self-directed program options under their section 1915(c) home and community based waivers.

Home- and Community-Based Waivers offer Alternatives to Institutional Care
Home- and community-based service (HCBS) waivers show that Medicaid can be an effective source of support for community living. Using HCBS waivers, states can provide alternatives to institutional care by allowing beneficiaries to live at home, where they can enjoy family, neighbors, and the comfort of familiar surroundings. States can only do this as long as the waiver remains budget neutral, meaning that the costs of providing services under the waiver do not exceed the costs that would be incurred if the services were provided in an institution.

Vermont and New Hampshire illustrate how institutional and home- and community-based care can lead to different results. Vermont has a highly developed home- and community based health care system. New Hampshire continues to rely on institutional care. In Vermont, 85 percent of the Medicaid population over age 65 still lives at home. In New Hampshire, only half can live at home. As a result, Vermont spends less than half as much per elderly person on Medicaid as New Hampshire, permitting more people to get the better results.

The trend towards home- and community-based care is rapidly increasing. The numbers tell the story very clearly: state and federal expenditures on long-term care have increased from $13.9 billion in FY 2001 to an estimated $20.7 billion in FY 2004. And over that period from 2001 to 2004, a total of $68.7 billion has been spent to support home- and community-based waivers generally. More money has been spent in those four years than was spent during the previous eight years combined [$56.6 billion]. Taking further steps to incorporate HCBS-based approaches into the Medicaid program will provide further momentum for this important trend.

Transition/Diversion Grants Awarded
When individuals try to move out of an institution for a more independent life, they may need assistance with certain one-time expenses, such as security deposits and essential household furnishings. In May 2002, CMS announced a clarification in policy to allow home- and community-based waivers to cover transition costs. In addition, CMS granted funds to states in support of these transition/diversion activities. To date, approximately 2,300 individuals have been transitioned from, or diverted from, nursing homes into the community with this grant assistance from CMS.

Resources and Support for Obtaining Effective Long-Term Care Services
CMS and the Administration on Aging (AoA) launched the Aging and Disability Resource Center (ADRC) Program in 2003. The Program provides competitive grants to states to assist them in developing and implementing "one stop shop" access to information and individualized advice on long-term support options, as well as streamlined eligibility determinations for all publicly funded programs. The long-range goal is to have ADRCs serve as "visible and trusted" places at the community level nationwide where people of any age, disability, or income can get information on all available long-term support options. The program also reduces government fragmentation, duplication, and inefficiencies. To date, 24 states have received grants to begin implementing ADRC pilots; another 18 to 20 states will receive grants in FY 2005.

Promoting Personal Responsibility and Planning for Long-Term Care Expenses
In addition to making more home- and community-based long-term care options available, we need to improve the financing of long-term care and encourage Americans to plan for their future. For Medicaid to remain sustainable for those who truly need it, we must ensure that Medicaid does not become an inheritance protection plan for those who can pay for their own long-term care. The CMS budget proposal to reform transfer of asset requirements is one part of this process. Furthermore, we also need to help individuals take advantage of private financing options to help pay for their long-term care, including long-term care insurance and reverse mortgages. Finally, support for education and planning about long-term care is needed, and CMS is working in conjunction with other components of HHS and other organizations to conduct outreach and to educate people about their long-term care options. CMS continues to work to identify ways to help people take more control of their future long-term care service and support needs, when they have the means to do so.

Reforming Transfer of Asset Requirements will Preserve Program Dollars for those in Need
The budget proposes to strengthen existing requirements for asset transfers as one element of a broader approach to promote personal responsibility and planning to meet long-term care expenses. To qualify for Medicaid long-term care services, an individual may only retain nominal assets. Current law requires individuals applying for Medicaid long-term care services to spend all but a minimum level of assets before becoming eligible. However, creative estate planning often allows individuals to become eligible for Medicaid legally, without spending their own available assets for needed care first. Several states are developing initiatives to curb this practice.

To help Medicaid funds go further for the beneficiaries who have no alternative source of support, the Administration's proposal would enable states to require more individuals to pay for some period of long-term care before Medicaid would pay the bill. This would be accomplished by changing the asset transfer penalty period. Currently, when an individual who applies for Medicaid has transferred assets at less than the fair market value within the three year look-back period, the amount of those assets are used to determine a period of ineligibility for long-term care services under Medicaid. However, the penalty period for such asset transfers currently begins on the date of the asset transfer. The result is that even for assets transferred within the look-back period, the penalty period is over before the individual requires long-term care services or applies for Medicaid.

This proposal would change the penalty period to the date when an individual is enrolled in Medicaid and is receiving long-term care services either in an institution or, in certain circumstances, in the community. This would make it less likely that individuals could plan ahead and transfer their assets, so that the penalty period expires prior to their needing long-term care.

Partnerships Instead of Asset Transfers for Sustainable Use of Long-Term Care
In effect, Medicaid today acts as a long-term care insurance policy for most people, not just those who lack the means to provide for their own long-term care needs. This is perhaps one reason that Medicaid coverage is often limited in quality and in scope: by providing access only to certain kinds of institutional care, for example, Medicaid may be used more as coverage of last resort. Although the specific coverage varies by state, Medicaid programs generally do not cover assisted living, and only some programs cover adult day care, both of which are coverage options in long-term care insurance policies. And as I have already discussed, many Medicaid programs limit coverage in the community. Supporting alternatives to Medicaid funding like long-term care insurance may consequently promote the availability of more community-based services in Medicaid. At a minimum, such steps would help make sure that more beneficiaries who really need Medicaid help would be able to obtain it. Long-term care insurance can help pay for a broad array of long-term medical and non-medical care, such as help with activities of daily living, that people with a disability often prefer to the limited Medicaid benefits.

The Partnership for Long-term Care is a very promising approach to this policy challenge, formulated to explore alternatives to current long-term care financing by blending public and private insurance. This blend provides an alternative to individuals either spending down all their assets or transferring all of their assets in order to qualify for Medicaid. The partnership between Medicaid and long-term care insurers is currently permitted to operate in only four states.

The four Partnership States-California, Connecticut, Indiana and New York-have focused on creating affordable products that encourage people to insure themselves for at least some of the long-term care costs they might incur, and that enable purchasers to obtain better protection against impoverishment, and that reduce long-term care costs for the Medicaid program. In these states, private insurance is used to cover the initial cost of long-term care. Consumers who purchase Partnership-approved insurance policies can become eligible for Medicaid services after their private insurance is utilized, without divesting all their assets as is typically required to meet Medicaid eligibility criteria.

Although people in these states who buy long-term care insurance policies almost never have significant Medicaid spending, Congress has prohibited such Partnerships. The President's budget proposes to eliminate the current legislative prohibition on developing more Partnership programs.

Reverse Mortgages can Help Individuals Pay for Long-Term Care Expenditures
A reverse mortgage is a special type of home loan that lets an elderly homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to the elderly homeowner. But unlike a traditional home equity loan or second mortgage, no repayment is required until the mortgagor(s) no longer uses the home as their principal residence. Funds obtained from reverse mortgages can be used by elderly home owners to pay for long-term care services and supports as well as other needs. It is estimated that forty-five percent of households at financial risk for "spending-down" to Medicaid could take advantage of a reverse mortgage to help them pay for long-term support. On average, these households could expect to get $62,800 from a reverse mortgage. More widespread use of this financial option for long-term support services could potentially result in Medicaid savings.

The US Department of Housing and Urban Development's (HUD) Home Equity Conversion Program (HECM) of reverse mortgages provides these benefits. It is federally-insured by FHA and funded by lending institutions such as mortgage lenders, banks, credit unions, and savings and loan associations. To obtain a HECM reverse mortgage, an individual must be 62 years of age or older, own their home outright or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan, and the home must be the individual's principal residence. The HECM reverse mortgage loan becomes due when the mortgagor dies (and there is no surviving mortgagor), the mortgagor sells the property, or the mortgagor no longer occupies the home as the principal residence.

Alternatively, an individual can obtain a reverse mortgage from the private reverse mortgage market. At the same time, such an individual can use the proceeds of the private reverse mortgage to buy a reverse annuity. This has the same requirements as a reverse mortgage. In such cases, when the individual sells his home, no longer lives in the home permanently, or dies, the individual or estate will have to repay the money received through the reverse mortgage (whether it was in the form of an annuity or otherwise), plus applicable interest and fees, from the proceeds of the home's sale.

CMS Is Expanding Efforts to Educate Americans About Long-Term Care Planning
Better understanding and support for long-term care planning can help lead to more private support and thus more Medicaid sustainability and personal control. To help provide this support, the Own Your Future Campaign was launched in 2004 to encourage more people to plan ahead for their long-term support needs. The project is a joint effort of CMS, AoA, the Assistant Secretary for Planning and Evaluation, the National Governors Association, and the National Conference of State Legislatures. It has been piloted in five states (Arkansas, Idaho, Nevada, New Jersey, and Virginia) and involves the use of various outreach techniques, including the targeted mailing of HHS materials and a letter from the Governor of each state to every household headed by an individual between the ages of 50 and 70. The letter includes a toll free number people can call to request a Long-Term Care Planning Tool Kit that covers a wide range of topics. Over 2 million letters have been mailed, and preliminary results within 3 months of the mailings showed about a 10 percent response rate - significantly higher than the 1 to 2 percent rate which is the norm for commercial marketing campaigns. We are encouraged by the early results of this campaign and will be conducting an evaluation of it to learn more about how best to provide this information.

Quality Improvements will Reduce Costs and Improve Outcomes
Providing better support for high quality, efficient providers is the best way - in fact, I think its the only way - to enable our beneficiaries to have access to modern medicine, to continue to get improvements in medical care and how it's provided, while ensuring continued Medicaid coverage of long-term care whether these services are provided in the home or community or in an institutional setting.

Quality Care must be the Standard in HCBS Programs
The Administration has consistently worked to ensure that HCBS waiver programs allow people the independence to stay in their own homes while receiving quality care and support in a community setting. In the last three years, CMS has implemented a standard quality review protocol for regional office use in monitoring state programs; begun the first complete inventory of state HCBS quality assurance and improvement techniques; and begun developing a uniform national format describing key components of any quality assurance and improvement program for HCBS waivers.

CMS is working with the major state associations, including representatives of state agencies for developmental disabilities, head injuries, Medicaid, and aging, to assure all our forms and applications reflect our focus on quality in HCBS waivers. CMS developed a draft revised waiver application for all HCBS waivers, incorporating our quality expectations, and is also developing a new state annual report form to capture better information about states' quality management activities.

The Administration is committed to providing quality services in the home- and community-based setting and continues to engage in improving its role to ensure quality outcomes through federal and state monitoring.

Improving Quality in Nursing Homes is an Essential Part of Effective Long-Term Care Policies
Quality improvement also needs to extend to nursing facilities. We are working to improve quality while avoiding unnecessary costs and expensive, preventable complications for patients in nursing homes through the Nursing Home Quality Initiative (NHQI) and the parallel initiative known as the "Quality First" initiative. Though the NHQI, the Quality First Initiative, CMS has published public reporting of nursing home and home health quality measures. These initiatives have been very successful in measurably improving the quality of care in the nation's 18,000 nursing homes in every state and territory. For example, data from NHQI indicates that the long-term care prevalence of pain has improved every quarter over the last two years in 100 percent of states. On average, the prevalence of pain in long-term care patients has declined 38 percent over the last two years.

Another measure of quality in nursing homes is the daily use of physical restraints, which has declined in 92 percent of states. On average, the daily use of physical restraints has declined by 23 percent over the last two years. Another measure, the short stay (post-acute) prevalence of pain has improved in 96 percent of states. On average, the prevalence of pain in short stay residents has declined by 11 percent.

Quality improved even more dramatically in those nursing homes around the country that partnered more intensively with their state quality improvement organizations (QIOs). We strongly encourage nursing homes who wish to join in this effort to contact their state QIO to learn more about quality improvement programs and to obtain resources to help in their quality improvement efforts.

Although our initial efforts have yielded great results, we still have a long way to go. Some quality measures are proving more challenging to improve. For example, the pressure ulcer measure has remained essentially unchanged nationally over the last two years, although a few states now seem to be making some progress on this measure.

And it is important to remember that quality improvement is not a static process - for example, we are constantly working to enhance our measures and broaden from clinical to patient experience of care and systems of care measures. Our goal should be to create an environment of continuous quality improvement, of sharing and cooperation among the QIOs, State Survey Agencies, nursing homes and professional organizations, and even our beneficiaries and their families together we create an "environment of quality."

In order to achieve this goal, CMS believes that we will have to keep re-examining the way we accomplish our work, and even to re-invent the nature of the public-private partnership. The "Quality First" initiative and the National Commission for Quality Long-Term Care are examples of reinvigorated new partnerships that can propel the quality agenda forward at an ever-increasing pace. To make the participation of our partners easier, in December we created the CMS Long-Term Care Task Force of the Quality Council. The Long-Term Care Task Force (LTCTF) was created to coordinate the long-term care (LTC) program within CMS and to serve as an internal advisory panel for the Administrator.

Helping Beneficiaries Make Informed Choices
Through NHQI, CMS has expanded its efforts to inform consumers about the care available in the nation's nursing homes through the Nursing Home Compare Web site at www.medicare.gov. Nursing Home Compare web allows consumers to search by state, county, city, zip code, or by facility name for information on any of the 18,000 Medicare- and Medicaid-certified nursing homes. The web site includes data on the facility's care record for regular and complaint surveys, staffing levels, number and types of residents, facility ownership, and quality measure scores in comparison to state and national averages. Over the last two years the number of clinical topics covered by the publicly reported quality measures has increased from eight to fifteen. Nursing Home Compare is one of the most popular sites on www.medicare.gov, receiving an average of 13 million page views in 2004.

Mr. Chairman, Medicaid's current system of covering long-term care is outdated, yet it remains one of largest sources of funding for long-term care for the elderly and persons with disabilities. We are at a crossroads. Today, most Medicaid funds for long-term care goes to institutional services that are relatively costly on a per-person basis and even though beneficiary-controlled services can clearly lead to substantial improvements in the quality of life of beneficiaries, and even though many elders and people with disabilities who are now in institutional care have expressed their clear preference and desire is to remain in their own home. To improve quality in Medicaid, to help Medicaid dollars go further, and most importantly to give people with a disability control of their long-term care services, we need to address the institutional bias in Medicaid. We look forward to working with you to strengthen Medicaid and enable the program to provide better support for the millions of Americans who count on it.

We know that community-based services are not for everyone and for this reason we will continue to ensure quality services are offered in institutional settings. However, today we have the opportunity to continue the work the President has begun and forward the cause of community living for those who prefer it to institutional care. If we believe that every American - young and old - has the right to live in the community, if we have really learned that this can be achieved, the time is now to go farther down the "road to independence." It is time for action by Congress to give individuals the choice and control over their future that they deserve.

If Congress were to create the Medicaid program in 2005, extensive regulatory hurdles to get a waiver would almost certainly be required for a state to provide an institution-only benefit. When we know how to make Medicaid better, when we know we can get better results and serve more people without spending more money, it is time to change the law along the lines of the proposals in the President's FY 2006 budget.

Thank you, Mr. Chairman, for the opportunity to speak to you today about the impact of long-term care on Medicaid costs and the need to eliminate the institutional bias in the Medicaid program. I look forward to working with you as we move forward with Medicaid reform. I would be happy to answer any questions you may have.

Last Revised: April 28, 2005