New Freedom Initiative -- Preliminary Report: Health Care Structure and Financing

U.S. Department of Health & Human Services

Initiative ~ Executive Order ~ HHS Role ~ News & Additional Resources

Delivering on the Promise: Preliminary Report

Federal Agency Actions to Eliminate Barriers and Promote Community Integration

Health Care Structure and Financing

"Institutional bias" stems largely from the way in which the Medicaid program was structured nearly 40 years ago, when few community-based alternatives were available. Today, despite the possibility of community alternatives, approximately 73 percent of Medicaid long-term care funding goes to pay for institutional care, while only 27 percent is directed toward home and community-based services. Federal agencies, and particularly HHS, identified a number of actions to address the barriers to community integration that result from the structure and financing of health care through Medicaid and Medicare.

Department of Health and Human Services

HHS will establish a Medicaid Community Services Reform Task Force to advise the Department on actions that may be advisable to remove barriers and promote community living for people with disabilities. The Task Force would include representatives of all age and target groups within the disability community as well as representatives from key national, state and local organizations and government associations.
HHS will propose a coordinated package of regulatory or potential legislative improvements that would quickly reduce some of the barriers to community living and reduce institutional biases in the Medicaid program, in consultation with states, tribes, and people who have a disability or long term illness. Among other things, this reform package may include proposals that: (a) make waiver renewal requirements less burdensome; (b) clarify the ability of Medicaid to cover individuals' one-time transition costs from institutional settings; (c) allow states that tighten eligibility for hospitals and Intermediate Care Facilities for the Mentally Retarded (ICF-MRs) to do so without simultaneously narrowing eligibility for Medicaid Home and Community Based Services (HCBS) waiver eligibility; and (d) let states disregard state-specified income or assets of HCBS waiver recipients specifically for those individuals who meet an institutional level of care and are served through home and community-based services waivers (rather than apply such disregards to an entire Medicaid eligibility group).
HHS will examine the costs and benefits of a statutory change to establish a state option enabling presumptive Medicaid eligibility for people determined to need nursing facility or Intermediate Care Facility for the Mentally Retarded (ICF-MRs) level of care who are being discharged from hospitals or other institutions to the community, similar to the presumptive eligibility for pregnant women but retaining the asset test. Hospitals now represent the single most frequent source of nursing facility admissions. Presumptive eligibility in this circumstance may make it more feasible to discharge a hospitalized person to the community rather than to a nursing facility or similar institution, or ensure that the institutional placement is one of short duration.
HHS will propose statutory improvements to create a ten-year Home and Community-Based Services demonstration as an alternative to Medicaid-funded psychiatric residential treatment centers. The demonstration would allow states to set up home and community-based alternatives for children who would typically be served in psychiatric residential treatment facilities.
HHS will allow Durable Medical Equipment, prosthetics, orthotics, and supplies (DMEPOS) to be furnished in a skilled nursing facility prior to discharge.
HHS will establish an Office on Disability and Community Integration. The Office on Disability and Community Integration will oversee the coordinated development and implementation of policies, programs and special initiatives within HHS that impact people with disabilities regardless of age or type of disability. The Office on Disability and Community Integration will serve as the focal point within the Department for disability issues, including the coordination of disability science, policy, programs and special initiatives within the Department and with other federal agencies. The Office on Disability and Community Integration will be led by a senior-level HHS official.
HHS will develop a multi-pronged strategy to address quality of care issues in home and community-based services. This strategy will include: (a) establishing defined expectations for home and community-based services; (b) assisting states in using the results of HHS quality reviews of community placements; (c) providing technical assistance to states and HHS regional staff in effective systems design or quality improvement strategies; and (d) implementing new quality assurance and improvement systems uniquely suited for services in one's own home.
HHS will review current Medicare and Medicaid discharge planning policies to ensure that institutions participating in Medicare and Medicaid provide more effective discharge planning for adequate and appropriate community-based care.
HHS has already begun taking steps to help ensure that individuals with disabilities are able to live in their communities by awarding $70 million in "Systems Change Grants for Community Living" to more than 38 states and territories. HHS received over $240 million in proposals in response to the FY 2001 solicitation. These grants assist states as they improve or redesign their Medicaid and long-term care systems to enable individuals to reside and participate in their communities. The Administration believes these grants will help states implement the Olmstead decision.
HHS' Health Resources and Services Administration (HRSA) will take the lead, in partnership with states, tribes, and other organizations, in developing and implementing a plan to achieve appropriate community-based service systems for children and youth with special health care needs and their families.

Department of Veterans Affairs

VA will consider expanding its authority to pay for assisted living or board and care home services following evaluation of a pilot program for VA-paid assisted living. Many veterans who could reside in a less restrictive environment are placed in nursing homes because they do not have the income to pay for assisted living or board and care. The Veterans Health Administration currently has statutory authority only to pay for nursing home care. However, Public Law 106-117 provided for a pilot program for VA-paid assisted living. Evaluation of this pilot program will determine the feasibility of expansion.
VA will increase the availability of mental health services at its community-based outpatient clinics. Currently, some of the clinics do not offer basic mental health services. The clinics will now be required to submit plans for the provision of mental health services to veterans receiving care in the clinics in fiscal year 2002.
VA will evaluate its community-based programs (e.g., Contract Adult Day Care Program, providing services to veterans who would otherwise be placed in institutions, Homemaker and Health Aide Program, and HomeBased Primary Care Program) to determine whether any of these could be expanded or modified to further promote service to veterans with disabilities in community-based settings.
VA will focus resources on reducing a backlog of over 661,000 claims for benefits and appeals. Adjudicating these claims -- starting with those pending longest, and from the oldest veterans -- will result in enhanced opportunities for veterans with disabilities.

Last revised: April 9, 2002