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LTC Bullet:

Will Olmstead Help or Hurt Long-Term Care?

Thursday August 3, 2000

Seattle--

A Supreme Court decision last year could undermine access to home and community-based long-term care services (HCBS) by impeding the sale of private long-term care insurance to pay for them. Ironically, the Court's objective was to expand HCBS, not to reduce such services. Here's the story:

In Olmstead v. L.C., 119 S. Ct. 2176 (1999), the U.S. Supreme Court interpreted Title II of the Americans with Disabilities Act (ADA) to require states to serve people with disabilities in community settings rather than in institutions (such as nursing homes) when appropriate and reasonable. The Court made clear that enforcement of this requirement with respect to any individual must take into consideration the cost of providing care in the community, the resources available to a state, and the ability of the state to meet the needs of others with disabilities.

Nevertheless, in a letter to the Medicaid Directors and Governors of all states, the Health Care Financing Administration (HCFA) and the Office for Civil Rights of the Department of Health and Human Services (OCR) emphasized the potentially dramatic fiscal impact of the decision: "Although Olmstead involved two individuals with mental disabilities, the scope of the ADA is not limited only to such individuals, nor is the scope of Olmstead limited to Medicaid beneficiaries or to services financed by the Medicaid program. In addition, the requirement to provide services in the most integrated setting appropriate applies not only to persons already in institutional settings but to those being assessed for possible institutionalization."

Advocates for seniors and the disabled have hailed Olmstead as a great step forward for de-institutionalization and for home and community-based care. On the other hand, state Governors are afraid this mandate to provide expensive, non-institutional services to many more Medicaid recipients will explode state budgets. Angst and conflict are growing rapidly over the Olmstead decision and its far-reaching ramifications. How can we make sense of what is going on?

Medicaid has a reputation for institutional bias. It pays heavily for nursing home care and very lightly for HCBS. Is this true because Governors, state legislatures, and Medicaid directors like nursing homes and dislike home care and assisted living? No! It is true because most people do not want to go to nursing homes-especially under-financed, heavily Medicaid-dependent nursing homes-and this fact helps to keep state Medicaid long-term care expenditures from spiraling out of control. Think of it as fiscal aversion therapy: the Medicaid program controls costs by providing mostly low-cost institutional care of questionable quality.

Consider these facts: for every person in a nursing home in America today, there are two or three more people living at home who have equal or greater disabilities, half of whom are bedbound, incontinent or both. If the Olmstead decision forces state Medicaid programs to pay for HCBS (which people want) instead of institutional care (which they don't want), three things will happen:

(1) Many (or most) who are managing at home now thanks to the heroic efforts of their families to keep them out of nursing homes, will eagerly seek public financing of home care and assisted living. Those who are already financially eligible for Medicaid will come out of the "woodwork" to apply.

(2) Those who need care and want HCBS, but are not yet financially eligible for public assistance, will seek out Medicaid estate planners, thus exploding this "cottage industry" of artificial impoverishment into a major sub-practice of law. When Medicaid planners can provide access to free or subsidized home care and assisted living, they will be in far greater demand than they were when they could only assure placement in a nursing home.

(3) Finally, to the extent the public perceives that the Olmstead decision assures public financing of desirable long-term care services, people will be even less likely than now to plan early, save diligently, and insure fully for the future risk of long-term care. If one can get publicly financed home and community-based services after the insurable event occurs, why start paying premiums for private insurance thirty years in advance? Thus, the country's best hope for a reliable source of private financing for long-term care-private insurance-will die aborning.

So, here's the fallacy in the Court's good intentions and the advocates' high hopes. To the extent the Olmstead decision is successful in compelling state Medicaid programs to pay for HCBS "not only to persons already in institutional settings but to those being assessed for possible institutionalization," Medicaid long-term care eligibility, utilization and expenditures will explode. Medicaid estate planning will expand. Long-term care insurance will contract. The tension between demand for publicly financed HCBS and the taxpayers' willingness to pay for such services will increase. Skyrocketing Medicaid budgets will force lawmakers to restrict services to cut costs. Access and quality will suffer even more than before. The poor will bear the brunt of deficient care while the well-to-do will shoulder even higher out-of-pocket expenditures. And, in the end, even fewer people will have access to high-quality, home and community-based long-term care than now.

For a much more sensible public policy that will improve access to home and community-based services for all Americans--rich and poor alike, consult the Center for LTC Financing's white paper "LTC Choice: A Simple, Cost-Free Solution to the Long-Term Care Financing Puzzle." [Order a copy ($24.95; free to media and lawmakers) by replying to this e-mail with your order or by contacting Sarah Allen toll free at 877-557-3627 or sarah@centerltc.com]