Medicaid

More than 300,000 adults with developmental disabilities--typically mental retardation--receive long-term care paid for by Medicaid or, to a lesser extent, state and local programs. Such long-term care often involves supervision and assistance with everyday activities, such as dressing or managing money. Persons with developmental disabilities receive more than $13 billion annually in public funding for long-term care, second only to the elderly. Recently, states have begun to significantly expand the use of the Medicaid waiver program, which seeks to provide alternatives to institutional care for persons with developmental disabilities. The waiver program has two advantages. First, it helps states to control costs by allowing them to limit the number of recipients being served. In contrast, states must serve all eligible persons in the regular Medicaid program. Second, it permits states to meet the needs of many persons with developmental disabilities by offering them a broader range of services in less restrictive settings, such as group or family homes, rather than in an institutional setting. This report examines (1) expanded state use of the waiver program, (2) the growth in long-term care costs for individuals with developmental disabilities, (3) how costs are controlled, and (4) strengths and limitations in states' approaches to ensuring quality in community settings.

GAO found that: (1) based on national data and three case studies, states' use of the waiver program has changed long-term care for developmental disabled persons by providing such persons with a broader range of services that they and their families prefer; (2) the waiver program has increased the number of persons served and the use of group home settings while allowing states to close many institutional care facilities and to expand services to persons in state-financed programs; (3) states now serve more developmentally disabled persons through the waiver program than the institutional program; (4) the waiver program has allowed states to pursue distinct strategies and achieve different program results; (5) from 1990 to 1995, Medicaid costs for long-term care for developmentally disabled persons increased an average of 9 percent annually due to increased costs for waiver and institutional program services, but per capita costs and cost increases varied by state; (6) the cap on the number of program recipients and state management practices helped contain these costs; (7) changes in the Health Care Financing Administration's (HCFA) process for setting waiver program caps could increase program costs, but HCFA believes that state budget constraints could limit program growth; and (8) although states are changing their quality assurance procedures for waiver program services, such as customizing quality assurance to individual circumstances, more needs to be done to improve quality oversight mechanisms and reduce participants' risk as these mechanisms evolve.