Medicaid Waivers: A (Partial) Backstory

I am a big fan of Star Trek and have watched every series from the reruns of the original series that fueled my childhood imagination to Star Trek: Picard that launched just last year, which brings back Patrick Stewart as Captain Picard (not so much as the Star Fleet hero, but as a bit of a renegade who is out to atone for certain Starfleet decisions that he regrets and to assist certain people on the margins that Starfleet seems to have forgotten). Watching all of the series—not to mention the feature films—has deepened my understanding of the Star Trek universe, but it has complicated it as well. With so many sources of partial information, it can be difficult to put together the entire picture of what goes on. In a distantly analogous way, there are many sources of information on the multiverse that is state Medicaid-funded services, and it can be difficult to see how each state’s fits together.

I emphasize with clients, and also to potential clients through this blog, the importance of people with disabilities, qualifying for Medicaid. For some people, indeed, Medicaid is their only, or perhaps most consistent route to healthcare coverage. But the real value of Medicaid is the funding it can provide for services, via channels called Medicaid waivers. A Medicaid waiver is an action by the federal government to waive rules in Medicaid, which allows individual states to accomplish certain Medicaid-related goals for certain clients. Each state has its own configuration of Medicaid waiver plus, in some cases, programs that run through Medicaid but are not technically waivers. This blog is intended to explain in part the different channels through which Medicaid funds support services and how these channels came about.


The Social Security Act Amendment of 1950 created a program of cash payments to people experiencing financial hardship due to disability. This was a precursor to what we currently know as Supplemental Security Income (SSI). In 1965, President Lyndon B. Johnson signed into law Title XIX, which provided an amendment of the Social Security Act. This legislated Medicaid. At first, Medicaid just provided health insurance to people, whose incomes were low enough to qualify them for cash assistance, described above. In addition, Medicaid could pay for long-term care support services, but only in an institutional setting. The problem with that restriction, as we all are now well aware, is that it required people, who needed long-term care, to accept institutionalization in a nursing home, even if they only needed a far lower amount of care, particularly non-nursing care, and even if that care could be provided just as well within their own homes in the community.


The bias towards nursing home care, created by the Medicaid requirements was bad enough when applied to seniors whose average duration requirement for long term care is around 3 years. It is even worse when applied to people with disabilities significant enough that they require some form of long-term care from their young adulthood through to their old age, which could be upwards of 80 years. Institutional or large congregate settings have been eliminated in some states but still remain in others, including my home state of Illinois. An institutional setting is far from the “least restrictive environment”, which the disability-services industry is expected to implement as a best practice AND, as a kind of nursing home, it is way more expensive. The National Council on Disability has collected this data, which compares the cost of providing care in a large institution to the cost of providing care in the community. The average cost of supporting a person in the community here in my home state of Illinois is listed as $32,264, while the average cost of supporting people in an institution is given as $144,175/year, and this data is already out of date, being from 2009. The Case for Inclusion report, published annually by United Cerebral Palsy (UCP) in collaboration with the Ancor Foundation has a wealth of data on, among other things, the comparative cost of supporting someone with “Home and Community Based Services” (abbreviated HCBS), and supporting them in an institutional- or facility-type setting, called an Intermediate Care Facility for Individuals with Intellectual Disability (abbreviated ICF/IDD). You can see that data for your home state here. Based on 2015 measurements, the average cost of supporting someone in an ICF/IDD in my home state of Illinois, was $91,102, while supporting a person in the community averaged $37,304. I want to be clear that some people who are served in the community require a very low level of support compared to those who live in institutional settings. However, it has been found that even people with high-support needs can be supported much less expensively in the community.


The fact that we have data on the cost of community support, compared to the cost of institutional support is the success of the Omnibus Budget Reconciliation Act of 1981, which created opportunities for states to “waive” the requirement that people had to live in nursing homes in order to receive long-term care support services. As a result, the funding streams that also channel Medicaid dollars to long-term care services that provide in settings in the general community, are called Medicaid Waivers. There are several (somewhat) distinct flavors of waivers and waiver-type programs, enshrined in section 1915 of the Social Security Act. States can pick and choose from among them, which is one of the reasons that Medicaid-funded non-medical services vary so much from state to state, both in their organization and in their eligibility requirements. All have these points in common. First, they are fee-for-service. An agency bills for each different support service that it provides. Second, each state has criteria for need, and frequently has income and asset limits that the service recipient must meet.


Section 1915(b) permit states to develop Medicaid-managed care plans. Medicaid then contracts with Managed Care Organizations (MCOs) to coordinate and provide care. The Home and Community Based Services waivers (referenced above) fall under section 1915(c). Generally, a person must be determined to meet an institutional level of need, but also desire supports in the community. Another way of putting it is that 1915(c) provides services in the community to people, who (without those services) would need to live in an institution. Section 1915(i) allows states to provide long-term cares supports in the community to people with disabilities, who do not meet and institutional level of care, and to do so through their regular state Medicaid plans. Thirteen states have this option. Section 1915(j) waivers provide for the individuals receiving services to self-direct their services, which is an option, particularly attractive to people, whose disability does not limit their ability to understand and to explain their needs for care. Section 1915(k), also called “Community First Choice” provides another consumer-directed option. Finally, the so-called Research and Demonstration Project 1115 waivers allows the federal Department of Health and Human Services (DHHS) to approve pilot projects that provide for new services and methods of service delivery that provide those promote the general objectives of the Medicaid statute.


All the various story lines within the Star Trek universe have a few things in common. They require a spaceship (Deep Space Nine was a space station, but in an emergency, it was able to move), require adherence to the prime directive unless there is a good reason for exception, and have an overall goal of creating the best possible creative solution from insufficient resources. The various state Home- and Community-based service programs require Medicaid, require adherence to income and asset limitations with some exceptions, and attempt to employ support resources in a more creative solution.

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