September 2006

Commonsense Olmstead:

The Assisted Living Waiver Pilot Program (ALWPP) should not deny aging in place, waste medi-cal dollars nor force providers to pay for nurses for patients who do not need nurses.

Perhaps it is because the sufferers are frail and weak and their voices dim the problem continues unabated: everyday, in California, patients unnecessarily end up in Skilled Nursing Facilities (SNFs) not because they need to be there but because they are poor and medi-cal does not pay for any other 24-hour care option.

The California Little Hoover Commission estimates at least 30% of all SNF patients (there are approximately 140,000 SNF beds in California) have only custodial care needs (e.g. require assistance with medicine, wheelchairs, dressing, bathing,  incontinence, dementia and/or help out of bed) and could reside in affordable custodial care settings, such as Residential Care Facilities for the Elderly (RCFEs): small (4-6 bed) homes or larger (50-100 bed) hotel-like settings. Continuing to use public dollars to fund only expensive, overcare SNFs while denying tens of thousands of low-income patients (most of whom are elderly) the right to live in RCFEs is senseless, cruel and wastes millions of medi-cal dollars annually. 

The Supreme Court Olmstead decision

The Supreme Court Olmstead decision (1999, Olmstead v. L.C.) mandates states to provide alternatives other than institutions for the low income frail/disabled who would prefer to receive care in more home-like, community based care settings.

Even before Olmstead, most states, long ago, developed the mechanism to allow Medicaid funding for community based care settings for the elderly.  40 states, including some with the largest populations—Texas, Florida, New York—already allow this option: California is not among them.  

California’s inability to implement prudent Olmstead measures, like medi-cal funding for RCFE settings, may be due to its difficulty in overcoming formidable obstacles: the “overly complex” organizational structure, “perverse” funding incentives and “weak oversight” which, according to the Little Hoover Commission, plague the Department of Health and stall the implementation of many sensible, cost-efficient health care measures. Unless the state changes business as usual, Olmstead reform faces troubled times in the future.

The Assisted Living Waiver Pilot Program (ALWPP)

AB 499 (statute of 2000, Aroner) requires California develop a pilot program, called the Assisted Living Waiver Pilot Program (ALWPP), that would put into place the necessary components to allow medi-cal funding for RCFE settings.  

Olmstead advocates eagerly looked forward to ALWPP implementation (March 2006) when, over the period of three years, up to 1000 low-income frail/disabled participants considered "nursing home eligible" would be allowed the right to “age in place” in the “least restrictive”, most "home-like” setting.

AB 499 statute is straightforward and consistent with Olmstead reform that recognizes many patients end up in skilled nursing homes by default and not because they need nurses. AB 499’s eligibility requirements are consistent with standards used by the In Home Supportive Services (IHSS) program where recipients are considered at risk of premature institutionalization even though most do not require nurses.  

DHS misconstrues AB 499's simple intent by limiting ALWPP participation to only patients who need nurses and limiting providers to only those that have nursing services.  The point of AB 499, according to the author and stakeholder groups, was not to convert community based settings into mini-nursing homes but to allow participation by patients unnecessarily institutionalized or at risk of premature institutionalization.

The operative words in AB 499 are "nursing home eligible": statute does not limit participation to only patients who need nurses. This interpretation of AB 499 not only reflects a deep seated institutional bias which guts the spirit of AB 499 but results in a nonsensical pilot program that despite statute, denies aging in place (unless RCFEs pay for nurses for patients who normally do not need nurses) and eliminates from ALWPP participation, the most "home-like" of all care settings: small RCFEs, which have the highest staff to resident ratio of any care setting in the state.

ALWPP denies aging in place

Starting with a bad premise invariably leads to a bad result. Since Olmstead reform is senseless and backwards if relief is only offered to the sickest of SNF patients while denied to fellow residents with lesser care needs, it is perhaps for this reason the state plans to implement a ALWPP that, problematically, blurs the distinction between custodial vs. skilled nursing care.

According to the ALWPP scoring assessment tool, patients with only custodial care needs (who require assistance with dressing, bathing, incontinence, wheelchairs, etc.) are allowed to participate with ALWPP —but only when some care is provided by part or full time nurses. 

Requiring RCFEs to pay for nurses for ALWPP participants who may have identical care needs as current residents who do not require nurses is nonsensical and troubling—even if it does manage to fulfill statute requirements.  

Worse, though, is the twisted logic used to deny aging in place to current RCFE residents who, according to DHS, are ineligible for ALWPP participation since residents in these settings do not require nurses¹ .

The state cannot pretend ALWPP is consistent, prudent or fair when it allows an incoming ALWPP participant to use medi-cal to pay for a RCFE while denying this option to a fellow resident with identical care needs.  Olmstead reform in California is deeply flawed when ALWPP denies aging in place without any remedy for current RCFE residents forced into SNFs due to insufficient funds.²

ALWPP is not cost efficient

Problems other than inconsistent statute plague ALWPP.  Program designers have arbitrarily decided all participants should have private rooms even though the statute does not mandate this requirement. Claiming cost efficiency when ALWPP forces the state to spend twice as many dollars (shared rooms are half the cost) is disingenuous; contrary to state efforts to conserve precious medi-cal dollars and; since ALWPP involves new monies, defeats the best fiscal rationale for expanding the pilot program in the future. 

Once the state starts down the slippery slope of providing Cadillac services for some Olmstead participants there is no turning back.  Although ALWPP is a small pilot program it will have enormous fiscal consequences when used, as expected, with nursing home transition—progressive measures that allow current SNF residents to transfer with their medi-cal dollars to community based care settings (see nursing home transition at Publications). 

Nursing home transition does not involve new medi-cal dollars. Once it is adopted statewide tens of thousands of patients may choose to transfer to RCFEs.  Funding private vs. shared rooms for these patients eradicates the prospect of millions of dollars of cost savings: critical monies that could be used to offset new dollars needed to fund components of Olmstead (e.g. stopping patients from going into SNFs in the first place) that require new expenditures.

Implementing Olmstead measures that mandate private rooms for low-income residents when many private residents do not enjoy this luxury guarantees resentment among private-paid vs. public-financed residents who live in the same setting. Modeling future Olmstead measures on private rooms is also problematic when it obligates the state to upgrade RCFE residents in shared rooms to private rooms once measures are enacted to allow aging in place.

If DHS chooses not to develop a cost efficient ALWPP than, at a minimum, they should not mandate private rooms, especially when the reimbursement rates have been developed in the absence of any local market analysis³. If the reimbursement rates are sufficient to cover a private room, so be it; but ALWPP participants should be free to pick and choose among other than the lowest cost providers when limited medi-cal dollars might only cover the costs of shared rooms for RCFEs in more expensive housing areas.

ALWPP eliminates most small RCFE from participation

ALWPP was not designed with small RCFE settings in mind. Designing a pilot program that eliminates from participation the majority of "home-like" RCFEs in the state (80% of the estimated 7,500 RCFEs in California are small homes) which have the highest staff to resident ratio of any care setting in the state (usually 1 staff to 2-3 residents) is backwards, contrary to statute and forces ALWPP participants with high care needs into larger (50-100 bed) RCFEs that frequently have 1 direct care staff to 20-40 residents.

DHS expects providers to have nurses but does not incorporate nursing expenses into the reimbursement rates³. Unlike their larger brethran, small RCFEs do not benefit from economy of scale and cannot easily accommodate expensive new standards (private rooms and nurses) without adequate funding. Unless the use of nurses is merely a token requirement (1-2 hours/week), ALWPP tiered reimbursement rates will not meet market rate of even the lowest cost providers in certain geographic areas.⁴   

Failing to accommodate small RCFEs will also create intractable problems for ALWPP participation by patients with certain care needs. In Los Angeles, for example, most large RCFEs are not licensed to accept patients who are wheelchair dependent or who could wander: critical factors overlooked when developing ALWPP⁵.

Uncertain profit margins will result in limited, large and small, provider participation. ALWPP proposes to pay RCFEs a fixed tiered reimbursement rate but care coordinators arbitrarily determine the number of nursing hours with no absolute minimum or maximum number of nursing hours required at each tiered level of care⁶. RCFEs will be reluctant to accept any ALWPP participant when there are no fixed costs and they risk holding the bag to pay for services which are not covered.

Failing to notify RCFEs directly about ALWPP will further ensure limited provider participation⁷.

As of September, 2006, in Los Angeles, a pilot program site which encompasses California's largest metropolitan area, only 5 RCFEs have decided to participate with ALWPP . Four are non-profit. Of these, only one accepts patients who are wheelchair dependent and/or with Alzheimers. None are small providers.

ALWPP does not accommodate stakeholder concern

Large senior stakeholder groups—including the American Parkinsons Disease Association, the California Association for Nursing Home Reform, the California Alzheimers Association, the Grey Panthers, and the California Congress of Seniors,—as well as numerous discharge planners, social workers and other care professionals have written letters to the Department of Health opposing an ALWPP that denies aging in place and eliminates small RCFEs from participation.

The author of AB 499, Dion Aroner, opposes the proposed ALWPP which “defeats the spirit of AB 499” and “creates rather than removes barriers to Olmstead reform in California”.

DHS should consider the wisdom of designing smart pilot programs that match author, consumer and stakeholder expectations.

A conscientious architect would never submit plans to erect a building atop a flawed foundation. Riddled by critical flaws and negative opinion, the proposed ALWPP is unsound and creates intractable problems for Olmstead reform in the future. ALWPP must be fixed before it can be considered prudent public policy.

1. See below for DHS responds to Questions about ALWPP (DHS Responds), Answer #10

2. DHS Responds, Answer #11

3. DHS Responds, Answer #5

4.   In Los Angeles, private rooms in small RCFEs range from $2,000-$3,500/month. Total monthly provider reimbursement rate for ALWPP Level 1 patients is $2,430 ($1560 (ALWPP) plus $870 (the patient’s approximate SSI contribution). This reimbursement rate will only meet the expenses of the lowest cost providers, but only if a nurse (intermediate visits usually billed at $50-60/hour) is required for less than two hours/week: ($50-60/hour x 2 hours/week x 4 weeks= $400-480) = $2,400-$2,480 (minimum cost to provider). 

5. DHS Responds, Answer #6

6. DHS Responds, Answer #2

7. DHS Responds, Answer #9

A Summary of Problems with ALWPP

1. Is contrary to stakeholder, consumer and author expectations.

2. Promotes institutional bias and erects rather than removes barriers to Olmstead.

3. Miscontrues statute intent and limits participation to only patients who need nurses and only to providers that have part or full time nurses.

4. Converts community based settings into mini-nursing homes.

5. Imposes onerous new standards which ensure minimum provider participation.