Academic journal article Health Care Financing Review

Cost Effectiveness of Home and Community-Based Care

Academic journal article Health Care Financing Review

Cost Effectiveness of Home and Community-Based Care

Article excerpt

Cost effectiveness of home and community-based care

Medicaid section 2176 waivers allow States to provide home and community-based care to Medicaid eligibles who, but for these services, would enter Medicaid-funded nursing homes. One of the conditions required by Congress for granting these waivers is that this substitution results in no additional Medicaid spending (budget neutrality). The results of case studies of two of these waiver programs, one in California and one in Georgia, are presented in this article. The case studies contain a description of the operation of these programs in some detail. Next, the data and techniques needed to assess the ability of these programs to achieve budget neutrality are presented, and the performance of these programs along this dimension is evaluated.


Section 2176 of the Omnibus Budget Reconciliation Act of 1981 authorized the Secretary of Health and Human Services to grant waivers to States permitting Medicaid reimbursement for certain home and community-based health and social services provided to Medicaid eligibles who, but for these services, would receive Medicaid-funded nursing home care. In applying for these waivers, the States must show that the cost of the waiver services will be offset by a reduction in nursing home costs resulting from the substitution of these services for nursing home care. This cost offset is called "budget neutrality." Thus, by reducing the use of institutional care, these waivers are seen by Congress as a potential strategy for controlling the cost of long-term care (LTC) for this population.

Presented in this article is an evaluation of the ability of two specific waiver programs for the aged and disabled--the Multipurpose Senior Services Program (MSSP) in California and the Alternative Health Services (AHS) program in Georgia--to meet the condition identified above, i.e., the congressional requirement that the programs be budget neutral. Because there is a great deal of diversity in the waiver programs for the aged and disabled across the country, the results of the evaluation of these programs may not apply to waiver programs in other States.

The original research that forms the core of this analysis is focused on four central questions: * Targeting efficiency--What percent of waiver

program enrollees would have gone to the nursing

home in the absence of the waiver? * Service efficacy--Did the services provided under

the waiver deflect or defer these people from the

nursing home? * Cost effectiveness--What is the net cost of the

waiver services? * Client characteristics--What type of person should

a waiver program attempt to enroll?

In the sections that follow, we present our assessment of these questions for the California MSSP and the Georgia AHS program. First the programs are described, followed by descriptions of their targeting process and of the services they offer. Next, the costs of these programs are reviewed; then the methods and data used to answer the four questions posed previously are described. Finally, the results of the analyses for both programs are presented along with our conclusions.

Description of the waiver programs


The California MSSP received its section 2176 waiver on July 1, 1983. However, this program began operation as a demonstration funded by the Health Care Financing Administration (HCFA), and it has been serving clients since April 1980. The purpose of the demonstration was to understand the effect of the program on client outcomes and costs. In their evaluation of the California MSSP, researchers at the University of California, Berkeley, found that, although this substitution of home and community-based care for nursing home care was possible, the magnitude of this substitution effect was not large enough to make the program budget neutral (Miller et al. …

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