March 2004
Developmental Disabilities Program — Market Analysis
State of Montana — Department of Public Health and Human Services
State of Montana — Department of Public Health and Human Services DDP — Market Analysis
Contents
1. Executive Summary ................................................................................................... 1
2. Introduction ............................................................................................................... 3 3. National Policy Directions ......................................................................................... 4
; Federal Policy Directions ..................................................................................... 4
; State Policy Directions ......................................................................................... 6
; Self-direction/Consumer Choice........................................................................... 9
; Deinstitutionalization ......................................................................................... 10
; Quality Management and Improvement .............................................................. 11 4. State Trends ............................................................................................................. 13 5. Local Trends ............................................................................................................ 21
; Overall Population ............................................................................................. 21
; Median Income .................................................................................................. 23
; Unemployment .................................................................................................. 25
; Housing ............................................................................................................. 27
; Safety and Security ............................................................................................ 28 6. Cost ......................................................................................................................... 30
; Direct Care Compensation ................................................................................. 30
; Pay ..................................................................................................................... 30
; Discretionary and Non-Discretionary Benefit Costs ........................................... 33
; Service Expenditure Patterns within the DD Population ..................................... 35
7. Closing Comments................................................................................................... 54
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State of Montana — Department of Public Health and Human Services DDP — Market Analysis
1
Executive Summary
The State of Montana Department of Public Health and Human Services Developmental Disabilities Program (DDP) is redesigning its approach to allocate individual resources for persons with developmental disabilities. As part of this redesign effort, Mercer Government Human Services Consulting (Mercer) conducted a market analysis of current social, economic, and service delivery trends affecting Montana’s developmentally
disabled (DD) persons.
The market analysis reviewed national and state policy directions affecting people with developmental disabilities and examined cost, service utilization, access, and quality of care issues on a comparative basis nationally and with four peer states.
The Centers for Medicare and Medicaid Services (CMS), formerly the Health Care Financing Administration (HCFA), have increased the focus on Medicaid due, in large part, to the increasing number of people with developmental disabilities and their concomitant costs within the long-term care network. Among the results of this heightened vigilance are expectations that states develop sound and rational protocols specific to rate setting and resource allocation for persons with developmental disabilities enrolled in Medicaid services. Additionally, CMS is actively promoting increased consumer choice and self-direction, quality of care and cost control and are increasingly demanding that support systems incorporate components of consumer choice such as individualized budgets and service portability.
In broadest terms, changes in policy over the last few decades have promoted integration into the community and transferred management of programs for persons with development disabilities from public or state provided services to private networks often comprising both non-profit and for-profit organizations. Many of these changes were encouraged by CMS, which allowed states to obtain HCBS waivers to promote community-based forms of service delivery to people with developmental disabilities. As Mercer Human Resource Consulting 1
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State of Montana — Department of Public Health and Human Services DDP — Market Analysis
a result, many states, including Montana, have reduced their participation in the ICF/MR (Intermediate Care Facility for the Mentally Retarded) program. Other drivers of policy change include demands for increased consumer choice and self-direction and litigation.
To provide Montana with a comparison of service access and utilization trends, Mercer analyzed the experiences of four other states with developmental disabilities programs of similar size; these were termed ―peer states.‖ New Mexico, North Dakota, South Dakota, and Wyoming were identified as the peer states, and data related to these states was analyzed for possible implications on service access and utilization. Among these states, Montana has the second highest estimated population of persons with developmental
disabilities, consistent with the overall population for the state compared to the peer states, but has the lowest median income. Montanans have the second highest housing costs among its peers, presenting some challenges to securing affordable living situations. The crime rate is lower than the U.S. as a whole and third highest among peer states, presenting a favorable picture overall relative to securing safe living situations. At the
same time, unemployment in Montana was generally low, offering employment
possibilities, especially in and around metropolitan areas, for persons with developmental disabilities, but simultaneously suggesting that it may be harder to fill positions such as personal caregivers and habilitation workers.
Montana has made strides in serving the DD population. Between 1998 and 2002, there was a 56 percent increase in the numbers of persons served in Montana’s HCBS program, and continuing enrollment growth is planned. Additionally, by 2002, the average spending level per participant has almost tripled 1994 spending. Yet, HCBS spending per state resident is the lowest among peer states. The average number of DD residents per facility in 2001 in Montana (3.1) is higher than its peer states, but is the same as the average occupancy per facility for the nation as a whole.
Moving forward, capitalizing on progress, and addressing gaps will require implementing new tools ; individual needs assessment capabilities, individual budget allocations, and a new provider rate structure ; in a deliberate, thoughtful, and equitable manner that
addresses the needs of people with developmental disabilities, their advocates, care providers, and taxpayers.
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State of Montana — Department of Public Health and Human Services DDP — Market Analysis
2
Introduction
DDP is redesigning the approach to determining individual budget allocations for persons with developmental disabilities. Two goals of this redesign effort are: (1) to develop a needs assessment process that will authorize individual levels of support in a fair and equitable fashion; and (2) to link that service authorization process to standardized provider reimbursement rates.
As part of the redesign effort, the DDP contracted with Mercer Government Human Services Consulting (Mercer) to conduct a market analysis of current social, economic, and service delivery trends that may impact the future. This market analysis examines cost, service utilization, and access, and quality from the national and state perspective. The report’s next four sections deal with the following issues:
1. Key national policy trends which affect Montana service directions.
2. National trends concerning caseload enrollment, service utilization, and expenditures.
3. State service trends which examine geographical access and cost variances in service
delivery.
4. Benchmark data for calculating provider reimbursement factors, standardizing
individual needs assessment profiles, predicting caseload growth patterns, and
modeling shifts in service utilization.
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State of Montana — Department of Public Health and Human Services DDP — Market Analysis
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National Policy Directions
There are several major policy directions that impact publicly funded developmental disabilities services nationwide.
Federal Policy Directions
CMS is pursuing an increasingly activist policy agenda in the arena of Medicaid-funded services for people with disabilities. This agenda includes raising performance standards for state operation of Medicaid home and community-based services (HCBS) waiver programs.
Through much of the 1990s, CMS (then HCFA) quietly encouraged states to expand access to Medicaid home and community-based services. States were given considerable free rein to expand their Medicaid HCBS waiver programs for people with disabilities to allow them greater access to HCBS. This resulted from efforts to be more supportive of local communities and reduce governmental management of programs for persons with developmental disabilities. In 1994, CMS formally ended its efforts to control the number of individuals that states served in their waiver programs. Federal oversight of HCBS waiver programs was confined at that point mainly to paperwork compliance rather than in-depth assessment of service quality and effectiveness.
As a result, states were able to make the HCBS waiver program their main vehicle for financing community developmental disabilities services. Between 1993 and 2001, the number of HCBS waiver participants with developmental disabilities more than tripled from approximately 102,000 individuals nationwide to almost 328,000, and HCBS waiver spending for developmental disabilities services leapt from $2.2 billion to $10.9 billion. States refinanced existing services and leveraged state dollars through the waiver program to expand their service systems.
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Toward the end of the Clinton Administration, there was a noticeable shift in federal policy with respect to home and community services. Prompted by the 1999 U.S. Supreme Court’s decision in Olmstead v. L.C. and by other factors, the Administration
and DHHS/HCFA began to forcefully advocate that states expand access to Medicaid HCBS of all types. States were encouraged to develop ―Olmstead compliance plans,‖ and
federal grant dollars started to flow to states to improve and expand community services.
Concurrently, however, problems surfaced in the HCBS waiver programs in several states, especially with regard to programs for individuals with developmental disabilities. Federal officials found serious quality and other deficiencies in California, Illinois, Ohio, Indiana, and other states. There also was increasing pressure from Congress on CMS to step up its oversight of HCBS waiver programs. As a consequence, while encouraging states to expand access to Medicaid home and community services, CMS also stepped up its oversight of HCBS waiver program operations.
Today, CMS is pursuing three distinct policy directions:
; Expansion of Home and Community-Based Services. CMS continues to advocate
that states expand access to Medicaid HCBS. The Agency has funded two rounds of
―systems change‖ grants to aid states in identifying opportunities to expand Medicaid-
funded HCBS. Reportedly, there is likely to be a third round of these grants during the
next federal budget year. DHHS/CMS are key players in President Bush’s ―New
Freedom Initiative,‖ which centers on improving HCBS. To the extent permitted
under current law, CMS also has taken steps to remove some obstacles to community
reintegration of institutionalized persons and has addressed other barriers to the
provision of community services (as witness the recent relaxing of the Medicare
―homebound‖ regulation). There is active discussion in the Administration concerning
changing Medicaid legislation to expand eligibility for community services, to
eliminate the need for states to obtain waivers in order to provide HCBS, and to assist
states with HCBS across long-term care populations.
; Stepped-Up Oversight/Compliance Activities. In 2000, CMS issued an extensive
protocol to guide Regional Office reviews of HCBS waiver programs. The new
protocol covers a relatively wide range of topics. Also, in January 2000, CMS issued
Olmstead Letter #4, establishing more stringent and explicit requirements that HCBS
waiver programs operate in compliance with federal laws not specific to waiver
programs. Now, through Regional Office review of new waiver requests and waiver
amendments, CMS is tightening up on state compliance with statutory and regulatory
requirements regarding HCBS waivers and with other applicable provisions of federal
Medicaid law. Increasingly, federal compliance reviews are citing states for technical
compliance issues in such areas as free choice of provider.
; Quality Management and Improvement. Finally, over the past five years, CMS has
significantly increased attention to whether states are effectively safeguarding the
health and welfare of HCBS waiver beneficiaries. Federal review teams are probing, Mercer Human Resource Consulting 5
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in greater depth, the effectiveness of state quality management systems, including the
adequacy and effectiveness of case management, monitoring, and incident
management systems. There also is much stronger emphasis on determining the extent
to which individual service plans of care align with assessed individual needs.
(Federal reviews of state programs continue to surface significant quality deficiencies.)
To remedy deficiencies, CMS now is underwriting technical assistance to assist states
in strengthening their quality management systems. Shortly, the Agency will revise
the HCBS waiver application to mandate that states detail their quality management
strategies. CMS also is weighing various alternatives to require increased state
reporting in this arena.
It is evident that CMS is steadily increasing both the operational and quality performance thresholds that states must meet in their operation of HCBS waiver programs. CMS compliance standards are becoming more rigorous and more closely scrutinized. This direction is likely to continue due to the growth of the HCBS waiver program and increased pressure from Congress to be more proactive in overseeing waiver programs.
At present, DHHS/CMS is dominating federal policy direction. Congress has generated relatively little in the way of federal legislation in this arena in the past several years. (For the time being, Congressional focus is on the Medicare program — especially
prescription drugs — rather than Medicaid.) In large part, what little legislation there has been has taken the form of giving states additional options to expand Medicaid eligibility more broadly — e.g., to pay for health care for uninsured children. It appears unlikely that, in the near to mid-term, Congress will take up to any significant extent the thorny issues that surround long-term care. However, Congress may step in if it becomes dissatisfied with CMS’s oversight of HCBS waiver programs. Then, much as it did with the ICF/MR program, it could direct CMS to increase its ―look behind‖ capabilities with
regard to HCBS waiver services; this involves re-auditing the programs already reviewed by the states.
State Policy Directions
For more than a decade, the principal policy direction in the states has been to expand the scope and availability of community services. Strong state budgets helped fuel significant annual funding increases. Given a free hand to expand their HCBS waiver programs, states were able to refinance their community service systems and apply the resulting financial gains to fuel a large-scale expansion of community services nationwide. Between 1990 and 2001, the number of individuals participating in HCBS waiver programs increased more than seven-fold. The HCBS waiver program afforded states considerable flexibility in employing Medicaid dollars as they saw fit without the risk of budget overruns, because of the waiver enrollment caps. A comparison of the needs assessment, rate methodology and services covered by Montana and its peer states’
HCBS programs is provided in the following table.
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State of Montana — Department of Public Health and Human Services DDP — Market Analysis
MT NM ND SD WY
Needs Assessment
Does the state use a ICAP for Yes, Progress ICAP ICAP
standardized needs Vineland Assessment eligibility DOORS
Adaptive assessment tool? Review Individual Behavior Resource Scales or Allocation the AAMR-
ABS
When an individual has Yes Yes Yes Yes Yes
an exceptional need
outside the standard
plan, does the state
have a process for
approving the need?
Does the state have a Yes, Yes, Yes, Yes Yes
prior authorization informal informal informal
process?
Rate Methodology
What rate structure does Negotiation Negotiation Negotiation Fixed Rate Negotiation
with set the state utilize? Categories
limits
Is the rate system tiered Neither, Tiered rate Neither, Tiered Individual
rates are system rates are or a level rate? budgets
based on variable variable
individual’s
service
needs
Is there a rate distinction No, but No State does State does No, but
between agency-rates are not have not have some
provided services and independent independent flexibility to variable
independent contractor pay contractors contractors
differential provided services?
costs.
With the HCBS waiver program serving as a solid source of federal funding, states increasingly have abandoned the ICF/MR program. Between 1993 and 2001, ICF/MR utilization nationwide dropped by 22%. Few states use the ICF/MR program to any significant extent to underwrite new and expanded community services.
Unfortunately state budgets have been battered by the post 9/11 economic downturn. This will slow the pace of the expansion of community services, although some states with relatively large pools of unmatched state dollars likely will expand their HCBS waiver programs to offset state budget cutbacks.
States are grappling presently with several difficult challenges. These include:
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; Service Demand. Despite the rapid expansion of HCBS over the past decade, states
are still struggling to meet increasing service demand due to ―aging caregivers‖
(family members), the aging of clients, and a preference for HCBS rather than
institutionalization. Some states hold relatively large waiting lists for community
services now and face the prospect of having to expand system capacity at 3% to 5%
per year for the foreseeable future. States are attempting to address some of this
demand by bringing on line ―supports waiver programs‖ that do not include the costly
provision of round-the-clock residential services. These programs provide enhanced
services to individuals who live with their families, as witness the Oregon ―universal
access plan.‖
; Litigation. Since 1998, there have been a large number of lawsuits filed against states.
These suits challenge the practice of wait-listing individuals and other state HCBS
practices. Waiting list lawsuits have been filed in at least 22 states; more are about to
be filed. Some of these lawsuits have led to settlement agreements that feature
significant expansion of community services, and are making it increasingly difficult
for state policy makers to avoid addressing unmet service demand. Going forward, it
also is likely that there will be a rising volume of provider-initiated lawsuits
concerning payments for community services. In many respects, litigation will likely
prove to be a major factor in altering state management of community services.
; System Management. In the wake of the rapid-paced expansion of community
services, many states now find themselves operating very large and antiquated
contracting, quality management, and financial management systems. Many states
failed to recognize that the infusion of Medicaid dollars into community services
brought with it a markedly different and much more demanding set of system
management requirements. For example, states held onto their provider contracting
systems instead of realigning their policies and practices to better match the Medicaid
fee-for-service architecture. Additionally, expansion of community services was not
supported by concomitant investments in system infrastructure, whether in the form of
data/management systems or quality assurance capabilities. As a consequence, many
states are scrambling to catch up, often spurred on by CMS compliance reviews or the
threat of a review.
States have been making major investments in data systems (as witness
Pennsylvania’s $20 million ―Transformation‖ initiative and the revamping of their
quality management systems). There is considerable activity underway in the states to
improve financial management systems, including exchanging old-line contracting
practices for standardized pricing systems and implementing consumer-centered
resource allocation schemes. Wyoming, one of Montana’s peer states, initiated the
DOORS Individual Resource Allocation approach in 1998. An important factor that 1facilitated this transition was the availability of individual-specific data. There is
1 Smith, G. Wyoming DOORS: Setting IRAs for HCB Waiver Services, Policy & Practice Brief. February 1999. FOCUS: Individual Resource Allocations, National Association of State Directors of Developmental Disabilities Services, Inc.
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