HEALTH AND FUNCTIONAL CRITERIA FOR SERVICE ELIGIBILITY
In addition to general coverage criteria required by Federal Medicaid law, states set health and functional criteria to determine who in the large group that is financially eligible will receive home and community services in specific programs. For every Medicaid service, states have to answer two basic questions: (a) how to define medical necessity and (b) how to manage overall utilization. This chapter discusses health and functional criteria for service eligibility with respect to three major Medicaid service categories: the mandatory home health benefit, the personal care option, and HCBS waiver programs.
Federal law and regulation specify the general eligibility and coverage requirements for mandatory and optional Medicaid home and community services. States are permitted to use additional service criteria to specify who, within the general eligibility group, will receive services. States use a number of different terms to describe these criteria: health and functional criteria, level-of-care criteria, targeting criteria, and service criteria. These terms are basically interchangeable. This Primer uses the term service criteria. How free states are in setting these service eligibility criteria depends on whether the service is Federally mandated or a state option and, if optional, whether it is offered under the state Medicaid plan or through a waiver program.
Service criteria generally include measures of functioning, which are typically defined in terms of everyday activities an individual is unable to perform without assistance because of physical or mental impairment. Such activities can include what are termed Activities of Daily Living (ADLs) and Instrumental Activities of Daily Living (IADLs). ADLs include eating, bathing, dressing, toileting, transferring from bed to chair, and maintaining continence. IADLs are tasks that require higher cognitive functioning than ADLs, and include activities such as light housework, laundry, meal preparation, transportation, grocery shopping, using the telephone, medication management, and money management. While IADL performance requires higher cognitive functioning than does ADL performance, assistants who provide help with most IADLs (e.g., shopping, housekeeping) will generally need less training than assistants who provide help with ADLs. This is particularly true when assistance with an ADL requires activities covered by Nurse Practice Acts (e.g., catheterization).
For Federally mandated services (e.g., home health), states may set only two types of service criteria. They may make service eligibility criteria based on medical necessity and they may impose controls on utilization. Both these criteria in fact allow considerable leeway, because they are not defined further in Federal law or regulation. The medical necessity limitation is often interpreted as requiring preauthorization--namely, authorization by a medical professional before the service begins--but these services do not have to be medical services (see further below).
Controlling utilization is typically understood to mean placing limits on either the number of times a service may be provided, or the period over which it can be provided, for a given condition.
Optional benefits provided under a states Medicaid plan (e.g., personal care services) carry no Federal statutory or regulatory provisions regarding the type or level of impairment a person should have to receive benefits. The only Federal rule is that the state must make the service equally available to all recipients who satisfy the service criteria that have been set. Within the parameters of the Federal definition of personal care services, for example, states are permitted to choose the measures they use to assess need, and the particular level and/or combination of needs a person must have. For example, one state may require a person to have 2 out of 5 impairments in ADLs. Another might require a person to have 3 out of 12 impairments in ADLs and IADLs. This freedom has resulted in considerable variation in states personal care service criteria.
Designing Medicaid service criteria can be a major challenge for states, because competing policy objectives are involved. On the one hand, states want to ensure that service criteria identify all individuals who have legitimate needs for assistance. On the other hand, states must operate their Medicaid programs within financial constraints set by their state budgets. Since the number of people served is a major determinant of total program costs (the other being cost of the service), setting service criteria is a fundamental component of state financial decision making.
The complications implied by the tradeoff between coverage and costs can arise through unintended effects on other parts of the long-term care system. Take, for example, the issue of setting service criteria for nursing home admission. Since long-term care services delivered in an institutional context are extremely expensive, a state may wish to require applicants to meet stringent criteria of medical need or have a severe level of functional limitation. Supporting home and community services through an HCBS waiver program can be considerably less expensive. But Federal law requires that the service criteria a state sets for HCBS waiver applicants be the same as those applied to nursing home applicants. Stringent institutional criteria can be an obstacle to serving people in HCBS waivers, because some people who meet the criteria may be too impaired to be cared for safely and cost-effectively in the community unless they have extensive informal help. Very stringent service criteria may also result in premature institutionalization, if informal care networks burn out because paid assistance is not available until a person is severely impaired.
Alternatively, states may decide they would rather serve more people and control utilization (and therefore costs) by limiting the amount of services provided. The problem here is that the more restrictions the state imposes on the amount, scope, and duration of services, the more likely it is that people with significant needs will be inadequately served in the community and end up in an institution--with substantially increased costs to the state.
There is no correct decision regarding service criteria. An approach that is appropriate in one state may not work in another. Each approach has tradeoffs and, as with most Medicaid decisions, each states tradeoffs will vary depending on its unique service system. This underscores the need to make decisions about service criteria within the broader context of a states long-term care system--which includes both institutional and home and community services and, with respect to the latter, several alternative funding streams.
States use various approaches to ensure that the service criteria for each program within its long-term care system not only match the policy goals for that program but also fit into the larger system. Several states achieve the combination of goals by using an assessment process that starts with an eligibility determination for the highest level of need--nursing facility/waiver services. If applicants do not meet the nursing facility level-of-care criteria, they are then considered in succession for other long-term care programs that have progressively lower need requirements. The waiver program may require three ADL limitations, for example, but the state-funded personal care program may require only two.
The remainder of this chapter provides information about Federal provisions related to the selection of service criteria for three home and community benefits: home health services, personal care state plan services, and waiver services. These three benefits account for the vast majority of Medicaid spending on home and community services. While similar services may be covered by all three benefits (e.g., assistance with ADLs), the three benefits differ in major respects. First, and most importantly, home health services are mandatory; the other two are optional. Second, home health services require physician authorization; the other two do not. Third, waiver beneficiaries have to meet institutional level-of-care criteria; home health and personal care beneficiaries do not.
Home Health Services
Home health services are a mandatory benefit for all individuals entitled to nursing facility care under a states plan.
To receive home health services, Federal regulations specify that the services must be ordered by a physician as part of a written plan of care. Beyond this authorization procedure and the general requirement that services be medically necessary, a person is required to meet no additional Federal requirements in order to receive home health services.
Misperceptions are common, however, that additional Federal requirements do further restrict who may receive home health services. First, many assume that individuals must be eligible for nursing facility care in order to receive home health services (i.e., that they must meet a states nursing facility level-of-care criteria). This misunderstanding has most likely arisen because people have misinterpreted the word entitled to nursing facility care to mean eligible for nursing facility care. The Federal requirement specifies only the minimum coverage group and does not require that the individual meet a nursing facility level of care (i.e., be eligible). Second, it is widely but incorrectly believed that states must use Federal eligibility requirements for the Medicare home health benefit to determine eligibility for Medicaid home health services. In particular, many incorrectly believe that to be eligible for Medicaid home health services, a person must meet the Medicare requirements of being home-bound and in need of skilled services.
In fact, states may not limit Medicaid home health services to individuals who require skilled services as defined by Medicare (i.e., skilled nursing and therapy services).
Additionally, while Federal regulations state that home health services must be provided in the home, there is no requirement that the beneficiary be homebound. Indeed, as a recent letter from HCFA to State Medicaid Directors clarifies, a homebound requirement violates Medicaid comparability requirements.
Medicaid home health services must be provided by Medicare-certified home health agencies. This requirement does not create a linkage between the two programs, however. Federal Medicaid policy permits states to provide home health services to persons with a wider range of needs than is possible through the Medicare program.
Ways to Address Cost Concerns
States can address cost concerns without using the impermissible homebound criterion. For example, instead of using a blanket homebound requirement, a state may set limitations based on medical necessity, which take account of beneficiaries unique needs (consistent with the Office of General Counsel examples quoted earlier in this chapter). Colorados home health regulations provide a good example of how the provision of home health services can be limited to appropriate situations without instituting a homebound requirement.
States can also control costs for the home health benefit by limiting the amount, scope, and duration of home health benefits--as long as all services in the state plan category are sufficient to meet the needs of most persons who need the services. For example, some states limit the number of home health visits to no more than one visit per day, combined with exceptions based on preauthorization. Others require preauthorization for additional visits or for more than four hours of service per day. And some states have blanket preauthorization requirements to ensure appropriateness.
For states that have capitated Medicaid health care benefits, and have provided contracts to private managed care organizations to provide those benefits, the extent of the home health benefit needs to be specified with particular care. The situation in Tennessee, where recent reductions in capitated home health benefits have resulted in a lawsuit, provides a good example of the issues raised. Prior to capitation of the home health benefit in 1993, Tennessee limited home health services to 60 visits per year and required beneficiaries to be homebound. When HCFA granted an 1115 waiver creating TennCare, home health services were among the benefits covered by the capitation rate. One of HCFAs waiver conditions was removal of the homebound requirement and the limit on number of home health visits. The state agreed to these provisions and promulgated consistent regulations.
In 1997, however, the managed care organization providing Medicaids home health services in the state sought to exclude all custodial services from their contract, and to require home health beneficiaries to meet the same definition of medical necessity that the organization uses for its commercial market enrollees. This definition requires home health users to be homebound and excludes coverage for beneficiaries who require care on a custodial basis or over a long period. Disabled beneficiaries not meeting the new definition are directed to nursing homes--at greater cost to the state but reduced cost to the plan. A lawsuit was subsequently brought to bar the state from continuing to deny medically necessary home health services to TennCare members and from requiring disabled TennCare beneficiaries to be placed in nursing homes in order to receive services.
The general issue for states is how to ensure that managed care contracting does not result in denial of necessary services to beneficiaries. Clearly, when home health benefits are included in a managed care contract, the contractor has an incentive to restrict provision of such benefits in order to contain costs. To guard against this potential, it is very important for states to specify in their managed care contracts who will determine eligibility for home health benefits and what service criteria will be used. Clear and precise terms are crucial. Eligibility criteria that are framed in very general terms--medical necessity, for example--can be interpreted very differently in a managed health care plan that customarily provides acute care benefits than in a state plan designed to provide long-term care services.
The appropriate context for making decisions about limits on home health benefits, as noted, is the whole state system of home and community coverage. A state may opt to cover a very limited number of registered nurse and home health aide visits through the home health benefit, for example, but provide additional coverage for those with greater needs through its waiver program. (This leaves any additional service needs of individuals not eligible for waiver services unmet, of course. Chapter 4 and Chapter 5 discuss in detail the factors to consider when making such coverage decisions.)
Personal Care Option
Personal care services provided through the state plan are an optional benefit. When personal care services were first authorized, services had to be prescribed by a physician in accordance with a plan of treatment. In 1993, Congress removed the requirement for physician authorization and gave states the option to use other methods to authorize benefits in accordance with a service plan approved by the state. There are no other Federal statutory or regulatory requirements regarding coverage under the personal care option. Nor are there guidelines for minimum or appropriate service criteria. Within the broad parameters of the Federal definition of personal care services, states are free to determine criteria for service eligibility as well as the amount, scope, and duration of the benefit.
In the absence of prescriptive requirements for service criteria, the Federal definition of personal care services becomes the primary guide for establishing service criteria. The State Medicaid Manual defines the scope of personal care services as:
Persons with cognitive impairments can also be offered services through the personal care option. As the Medicaid Manual states:
Given the Federal Medicaid definition of personal assistance, it follows that appropriate service criteria should be based on a need for assistance with ADLs or with IADLs. There is a considerable body of research on ADLs and IADLs to guide states in designing their service criteria. Generally, ADLs are more frequently used than IADLs to determine service eligibility, because they are widely believed to measure a greater level of need. But a number of states use both ADLs and IADLs in their service criteria. This is consistent with research showing that dependencies in multiple IADLs also indicate a high level of need. Limitations in performing some IADLs, such as meal preparation and medication management, may actually pose a greater health risk than an ADL limitation in bathing and dressing. Recent research has shown, for example, that inability to use the telephone actually indicates a very high level of impairment.
An important consideration when selecting service criteria is that the level of impairment required for eligibility match the services covered. For example, if a state requires applicants to be severely impaired, the maximum number of service hours permitted should be sufficient to enable such people to remain in the community even if they have little informal care. Otherwise, requiring too high a level of impairment could prevent those without informal care from receiving necessary services.
It is also important to ensure that assessment and authorization methodologies do not inadvertently exclude certain categories of potential beneficiaries, such as persons with cognitive impairment. Failure to include criteria that measure the functional limitations relevant to these individuals--such as the need for cueing to perform ADLs--can lead to their exclusion. States may be inadvertently making such exclusions. Even though 26 states offered personal care services in their state plans, for example, a survey of state agencies serving persons with developmental disabilities found that services through the personal care option play little or no role in paying for long-term services for this group.
Historically, Michigan used to be the most noteworthy example of a state that optimized the personal care benefit as a means of funding home and community services for people with developmental disabilities. Michigan built many of its community services on personal care as the baseline core benefit, for example, weaving it into foster home settings and other types of living arrangements. However, in the 1995 amendments to the states HCBS waiver program for people with mental retardation and developmental disabilities, Michigan started moving to waiver funding of services for these groups.
In effect, states have a very high level of discretion to determine who will receive personal care services through the state plan. However, states may not violate Medicaid comparability requirements by restricting services to those with a particular diagnosis or condition (e.g., by making benefits available only to people with spinal cord injuries or people who use wheelchairs, or to people who are likely to require nursing facility services).
Given that personal care services are subject to statewideness and comparability requirements, states understandably have cost concerns about increasing access to these services by using less stringent service criteria, even though they can control costs by limiting the amount, scope, and duration of services. As mentioned at the beginning of this chapter, there is no correct decision regarding service criteria. Whether or not particular service criteria are appropriate and make sense depends on the broader context of a states policy goals for its entire long-term care system (i.e., whether the criteria fit logically into the overall plan for providing services to people with long-term care and support needs through multiple programs).
To ensure that their programs do make sense within their particular service systems, some states design wraparound state-funded programs to provide services to people who do not meet either Medicaids financial criteria or the states service criteria. The Connecticut Home Care Program for Elders has three levels of service, for example, with Level One and Level Two funded solely with state funds. Level One serves people who meet neither the Medicaid asset test nor the waiver service criteria. Level Two serves people who meet the waiver service criteria but not the asset test. Level Three serves those who meet both financial and service criteria. In this framework, the stringency of the institutional service criteria is not a major issue, because there is an alternative source of services for those who do not meet them.
HCB Waiver Program Services
To be eligible for HCB waiver services, individuals must first meet a waivers targeting criteria, such as age and diagnosis or condition. For example, a state may have a number of waivers targeting different groups: persons age 65 and older, persons ages 18 to 65 with physical disabilities, children who are technologically dependent, persons with mental retardation and other developmental disabilities, persons with AIDS, and persons with traumatic brain injury. (See Chapter 4 for a full discussion of waiver programs.)
Individuals who meet the targeting criteria must then meet service criteria, which for HCBS waiver programs are the level-of-care criteria used to determine eligibility for either a hospital, nursing facility, or ICF/MR. Level-of-care criteria explicitly describe the type and level (or severity) of functional limitations or needs an individual must have in order to be admitted to an institutional setting.
These criteria usually include measures of need for assistance with ADLs and for other services, including nursing and medically related services. A determination that a person meets the required level-of-care criteria is based on information gathered through a formal assessment process carried out when a person applies for services. In the case of ICF/MR services, the person must have mental retardation or a related condition and be found to need various supports necessary to improve or maintain functioning. In the case of nursing facility services, the need for skilled and unskilled nursing care is generally assessed, as is the need for assistance with ADLs and other aspects of functioning.
The requirement to use the same or equivalent service criteria for HCB waiver services as for institutional placement stems from the waiver programs primary purpose: to offer an alternative to institutionalization. This is a statutory requirement added by Congress in part to address concern about the cost of expanding HCB services: States must demonstrate that they are providing waiver services only to people who are eligible for institutional placement. HHS cannot waive this requirement or lessen its impact by regulation. Thus, states would only be able to use substantively different service criteria for waiver than for institutional services (i.e., criteria not based on the need for institutional services) if Congress amended Medicaid law.
When the waiver authority was enacted in 1981, home and community services could be provided under a waiver program only to persons who met the level-of-care criteria for either an SNF, an ICF, or an ICF/MR. In 1987, the Omnibus Budget Reconciliation Act eliminated the distinction between SNFs and ICFs and mandated a new nursing facility benefit, which included ICF services, all of which were previously optional. The former ICF level of care is now the minimum institutional standard. The only Federal requirement for persons to receive an ICF level of care is that the individuals need either health-related care and services that are above the level of room and board or, due to their mental or physical condition, require supportive services that can be made available only through institutional facilities. Within this broad definition, states are free to set whatever service criteria they choose for nursing facility care, which (or their equivalent) are then used to determine eligibility for waiver services.
A common criticism of nursing facility level-of-care criteria is that they are medically biased, that is, (a) they do not adequately assess functional limitations and their impact on the need for long-term care, or (b) they give greater weight to nursing and medical needs than to functional needs. However, no Federal statute or regulation mandates that states adopt this medical approach when setting nursing facility service criteria.
Medicaid law does require that institutional services be medically necessary. But, as noted, there is no Federal definition of this term, and states are free to define it broadly (e.g., medically necessary services are those that promote optimal health and functioning). Thus, the requirement that services be medically necessary does not mean a state is required to use only medical--or even any medical--service criteria to determine eligibility for nursing facility services. Nor must a state give greater weight to medical and nursing needs than to functional needs.
No clear line separates medical from functional needs. Health status and functioning are closely interrelated; immobility due to paralysis or even frailty can lead to serious medical problems in multiple body systems. Thus, failure to address functional limitations can result in serious medical problems that require not only nursing home care, but hospitalization as well. The primary reason people need long-term care services is because they have functional limitations. Even if people require specialized health care (e.g., for injections or catheterization), research has shown that people can meet these needs themselves if they are not physically or mentally impaired. Thus, the single most important measure of need is what functional limitations a person has.
For ICF/MR placement, all states use functional measures in their level-of-care criteria. Kansas determines eligibility for either ICF/MR or HCBS waiver services, for example, with an evaluation instrument called the Developmental Disabilities Profile (DDP). The DDP measures the extent to which a person is able to carry out certain life activities or might need services to address various needs (e.g., medical needs or behavioral issues). Other states use alternative instruments (e.g., the Inventory for Client and Agency Planning, ICAP), or specify other types of assessments that must be conducted to determine the need for assistance in various functional domains.
Another common misperception about Medicaid level-of-care criteria is that an institutional standard requires a severe level of medical need or functional limitation. There is no such Federal requirement. However, states are concerned that making their institutional level-of-care criteria less stringent will result in many more people being eligible for (and placed in) nursing facilities. But research shows that the overwhelming majority of persons with long-term care needs would rather be served in the community. And people who do not want to go to a nursing home are unlikely to change their minds just because the bar for nursing home eligibility has been lowered. The same is true for people with mental retardation or developmental disabilities. Stringent criteria have unintended effects on HCBS waiver programs, such as limiting assistance states can provide to those who need only a small amount of help to remain in the community.
However states define their nursing home level-of-care criteria, many people who meet those criteria will remain in the community, even without formal services. A recent study in Connecticut, for example, found that many persons with severe functional limitations (three or more ADL impairments), who met the nursing facility level-of-care criteria, chose to go without nursing home or HCB waiver services rather than spend down to Medicaid eligibility or be subject to estate recovery provisions. (Most of the people interviewed in that study were able to remain in the community because they had extensive informal care supplemented by small amounts of privately paid care.)
States concerns about increasing the number of people admitted to nursing facilities are understandable. However, this effect can be minimized, if not avoided completely, if states initiate steps to screen persons prior to nursing facility admission to determine whether services could be provided in home and community settings. Oregon and Colorado are examples of states that have pursued this strategy successfully. Implementation of such programs (called nursing home diversion programs) to ensure that as many people as possible are served in home and community settings--whether through services in the state plan, the personal care option, or waiver--will help ensure that only those who truly cannot be served safely and cost-effectively in the community will be admitted to nursing facilities.
Availability of HCB services can and does reduce the demand for institutional services. The best evidence of this phenomenon is found in the mental retardation/developmental disabilities sector, where, since the advent of HCBS waiver programs, (a) the number of individuals served in large public institutions has declined (from 128,000 in 1980 to under 50,000 in 1999), and (b) the total number of individuals served in large institutional ICFs/MR of all types (public and private) dropped by more than 40 percent between 1982 and 1998. The most important likely result of broadening institutional eligibility criteria is that states are able to furnish important services and supports to individuals in the community, which will help them remain independent and enjoy a better quality of life.
With regard to states concerns about induced demand (large numbers of persons who would never have gone to a nursing home applying for home and community services once they are available), caps on waiver enrollments enable states to control utilization and overall outlays. This explains in part why every state operates HCBS waiver programs but only about half cover personal care services through the state plan.
Major Considerations in Setting Service Criteria: A Recap
Federal policies with respect to service criteria establish a framework within which states have wide latitude to chart the course of action that best suits their unique long-term care service system.
Three considerations, in particular, should guide state choices in setting their service criteria: