Cost-Related Community Integration Barriers in Medicaid: The EPSDT Program and Home and Community-Based Waivers

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2 Cost-Related Community Integration Barriers in Medicaid: The EPSDT Program and Home and Community-Based Waivers By Sarah Jane Somers Medicaid beneficiaries who are under 21 and receive home and community-based services through a waiver may be subject to a conflict between two parts of the Medicaid program. Advocates who represent these young clients may be familiar with the Medicaid program s Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) program and its mandate that states provide screening and treatment to ameliorate physical and emotional illnesses and conditions when a child who receives Medicaid benefits needs them. They may be also familiar with their state s home and communitybased waiver programs that provide costeffective services to people who require an institutional level of care. Both programs can provide an individualized package of services that can enable a child to live at home or in a community setting. However, an inherent tension between these two programs may arise and confound advocates for children and youth whom both programs affect. Because many home and community-based waiver programs serve both children and adults, case managers and administrators may not be familiar with the special Medicaid requirements that apply to services for people under 21. Thus a state may attempt to limit services for children 1 42 U.S.C. 1396a(a)(10) & (43), 1396d(a)(4)(B), 1396d(r) (2000). and youth who are enrolled in a home and community-based waiver program to services that fall under a certain cost cap. Advocates may therefore be required to determine whether such a limit is legal. In this article I explore this issue. In the first and second parts I review the requirements of the EPSDT program and the rules governing home and community-based waiver programs for people with mental retardation and developmental disabilities. In the third part I discuss the potential conflicts between these programs and the existing guidance from the courts and the Centers for Medicare and Medicaid Services, or CMS (formerly the Health Care Financing Administration), on these issues. Finally I discuss possible strategies for dealing with problems that the contradictions between the two programs present. I. EPSDT Overview The EPSDT program is a mandatory component of each state s Medicaid program. Under it, states must provide early and comprehensive preventive care and broad treatment services for children and youth under EPSDT requires states to provide four separate screening services for children: medical, vision, hearing, and dental. It also requires a broad package of treat- Sarah Jane Somers is a staff attorney, National Health Law Program, 211 N. Columbia St., 2d Floor, Chapel Hill, NC 27514; ; somers@healthlaw.org. MARCH APRIL 2002 JOURNAL OF POVERTY LAW AND POLICY 719

3 For many children, EPSDT can be used to assemble a service package that approximates what would be available under a home and community-based waiver program. ment services, consisting of all of the Medicaid mandatory and optional services listed in section 1396d(a) of the Medicaid Act, when the services are needed to correct or ameliorate physical or mental illnesses and conditions in a child. 2 Some of the required EPSDT services that are relevant to this article are home health services, which include nursing services, home health aide services and medical supplies, equipment, and appliances; private duty nursing services; physical therapy and related services; case management; rehabilitation services to reduce disability and restore an individual to the best functional level; and personal care services. 3 Thus, for many children, EPSDT can be used to assemble a service package that approximates what would be available under a home and communitybased waiver program. 4 One of the most important characteristics of the treatment component of EPSDT is that a child s individual needs, as the treating physician assesses them, should determine what care the child receives. Thus states may not place preset limits on the quantity of medically necessary services or put a monetary cap on a set of EPSDT services. 5 For example, states may not impose a cap on the number of physical therapy sessions that a child or youth receives. 6 Nor may states restrict expenditures for personal care services for children or youth to a set dollar limit. While EPSDT s coverage of services is broad, however, it is not unlimited. First, CMS has directed states to exclude services or items that are not medical in nature. 7 The agency also says that states may place utilization controls on services. States may require prior authorization for treatment services, so long as prior authoriza- 2 Id. 1396a(a)(43), 1396d(r)(5). 3 Id. 1396a(a)(10)(D), 42 C.F.R (2000) (home health services); 42 U.S.C. 1396d(a)(8) (private duty nursing services); id. 1396d(a)(11), 42 C.F.R (physical therapy and related services); 42 U.S.C. 1396d(a)(19) & (25), 1396n(g)(2), 1396t (case management); id. 1396d(a)(13); 42 C.F.R (d) (rehabilitation services); 42 U.S.C. 1396d(a)(24), 42 C.F.R (personal care services). 4 See, e.g., U.S. Dep t of Health & Human Servs., Dear State Medicaid Director (Jan. 10, 2001) (re Olmstead No. 4, attachment 4-B), available at (stating that EPSDT [Early and Periodic Screening, Diagnosis, and Treatment] must include access to case management, home health and personal care services to the extent coverable under federal law ). Advocates should be aware, however, that one of the most valuable services that states provide through these waivers is respite services. Notably CMS (Centers for Medicare and Medicaid Services) takes the position that respite care is not a covered Medicaid service and therefore can be available only through a waiver program, not through EPSDT. 5 Memorandum from Rozann Abato, acting director, Medicaid Bureau, to Medicaid, Atlanta Division, associate regional administrator (Sept. 5, 1990). See also Letter from George P. Holland, regional administrator, Region IV, Health Care Financing Administration Program Issuance Transmittal (Sept. 18, 1990) (available from National Health Law Program). 6 Letter from Albert Benz, associate regional director, Region X, to Jean Schooner, chief, Idaho Department of Health and Welfare Programs (Apr. 30, 1991). See also Letter from Christine Nye, director, Medicaid Bureau, to Region III regional administration director (May 7, 1991) (instructing states that they may not limit eyeglasses to one pair per year if more frequent replacement is medically necessary); Letter from Christine Nye, director, Medicaid Bureau, to Region VIII (FME-42) (1991) (informing Montana state Medicaid agency that it may not cap psychological or psychiatrist services for children). 7 See Letter from Rozann Abato, acting director, Medicaid Bureau, to state Medicaid directors (May 26, 1993). 720 CLEARINGHOUSE REVIEW MARCH APRIL 2002

4 tion does not delay delivery of care and is consistent with the preventive thrust of EPSDT; 8 place tentative limits on services so long as a process allows the child to go beyond the limit if medically necessary; 9 provide the service in the most economic mode so long as it is as efficacious as alternative services, does not delay services, and does not violate other federal laws such as the Americans with Disabilities Act; 10 and exclude services that are considered unsafe or experimental or are not generally recognized as accepted treatment. 11 II. Home and Community-Based Care Waivers The Medicaid Act allows states to request waivers of certain federal laws in order to provide services to persons at home or in the community. These waivers can provide a comprehensive benefits package that goes beyond traditional medical benefits that Medicaid typically provides. 12 The federal law lists specific provisions that the U.S. Department of Health and Human Services may waive. 13 First, states may request waiver of the statewideness requirement, which otherwise mandates that the Medicaid program be in effect throughout the state. Second, the department may waive the comparability requirement, under which assistance to any Medicaid beneficiary in a particular eligibility category may not be less in amount, duration, or scope than the assistance offered to any other Medicaid beneficiary in that same category. 14 And, third, it may waive some financial eligibility rules. 15 Thus under waivers states may provide respite services to beneficiaries needing intermediate care level services and target waiver programs to a limited number of such beneficiaries. States may elect to cover a limited number of individuals, offer different groups different sets of services, and offer the services only in certain geographic locations. Notably, however, states should not be able to waive provisions not listed in the statute, including, for example, the requirement of reasonable promptness and provision of services to all who are eligi- 8 H.R. Rep. No at 399, reprinted in 1989 U.S.C.C.A.N. 1906, 2125 (utilization review, while allowable, must be consistent with the preventive thrust of EPSDT). 9 Cf. Abato, supra note 7 (discussing state flexibility to use medical necessity or utilization controls, including tentative limits on services, which must not delay delivery of needed service or limit free choice of provider). 10 See Dallas Regional Medical Services Letter No (Dec. 19, 1991) (informing states that they may use most economic mode of delivering EPSDT services if determination does not delay delivery or limit choice. If service delivery is less costly in an institution than a home, the state may restrict services to that setting). See also Letter from Ronald Preston, associate regional administrator, to Richard J. Palumbo, Rhode Island Department of Human Services (Dec. 9, 1991) (same); Medicaid State Operations Letter No (Region II) (Dec. 18, 1991) (same). See also Title XIX State Agency Letter No (Region X) (Nov. 4, 1991); Memorandum from Christine Nye, director, Medicaid Bureau, to Regional Administration (Region VI) (Nov. 25, 1991); id. (Region I) (Oct. 15, 1991); id. (Region VIII) (Oct. 3, 1991); REGION VII MEDICAID ST. BULL. NO. 204, Nov. 21, 1991 (all letters on file with National Health Law Program). See also U.S. Dep t of Health & Human Servs., supra note E.g., Abato, supra note 7 (stating that services and items not covered include those that are unsafe or experimental or not generally recognized as accepted treatment) U.S.C. 1396n(c)(3). For an in-depth discussion of home and community-based waivers, see ROBERT B. DENTON, DISABILITY LAW CTR., MEDICAID WAIVERS: TOOLS FOR DEINSTITUTIONALIZATION (2001) (available from National Association of Protection and Advocacy Systems Inc., Washington, D.C.) U.S.C. 1396n(c)(3). The statute provides that [a] waiver granted under this subsection may include a waiver of three specifically enumerated parts of the Medicaid statute U.S.C. 1396a(a)(10)(B),1396n(c)(3), (d)(3), (e)(3) U.S.C. 1396a(10)(C)(i)(III), 1396n(c)(3), (d)(3). MARCH APRIL 2002 JOURNAL OF POVERTY LAW AND POLICY 721

5 ble, payments that ensure equal access, and EPSDT. 16 Several different types of waivers, including three types of home and community-based waivers aimed, respectively, at persons needing institutional care, the elderly, and very young children who have HIV (human immunodeficiency virus) or who are drug-dependent, may be granted in connection with the Medicaid program. Here I focus on the home and community-based care waiver for individuals who require institutional care in a hospital, nursing facility, or intermediate care facility for the developmentally disabled and mentally retarded. 17 Under such a waiver, sometimes referred to as a 1915(c) waiver after the section of the Medicaid Act that authorizes it, states may provide home and community-based services to individuals who would be eligible for Medicaid if they were in a medical institution and who would, without the waiver, need the level of care provided in an institutional setting. 18 In order to be granted a 1915(c) waiver, states must give several assurances to the secretary of health and human services. The state must guarantee that necessary safeguards... have been taken to protect the health and welfare of individuals provided services under the waiver and to assure financial recipients accountability for funds expended with respect to those services. 19 It must promise to evaluate a potential recipient s need for institutional services. 20 It must pledge to inform an individual determined to be likely to need the level of care provided in an institutional setting about the feasible alternatives, if available under the waiver, at the choice of such individual. 21 It must affirm that, under the waiver, it will spend less per capita than without the waiver. 22 It must promise to give to CMS annual information on the waiver s impact on the type and amount of medical assistance provided and on the health and welfare of recipients. 23 A. Financial Eligibility To understand how financial eligibility works for children receiving services through a 1915(c) waiver, one must understand the general Medicaid eligibility rules. 24 Most of the people who receive Medicaid have low incomes. For example, a child may qualify for Medicaid because the child s family s income is below a certain percentage of the federal poverty level. 25 A child also may qualify if otherwise eligible for Aid to Families with Dependent Children according to the rules in place when that program was U.S.C. 1396a(a)(8) (reasonable promptness and services to all who are eligible). The decision of several courts is that the reasonable promptness prong of section 1396a(a)(8) may not be waived in the context of home and community-based waivers. See, e.g., Lewis v. N.M. Dep t of Health, 94 F. Supp. 2d 1217, 1234 (D.N.M. 2000) (Clearinghouse No. 54,004); McMillan v. McCrimon, 807 F. Supp. 475, 482 (C.D. Ill. 1992). Regarding equal access see 42 U.S.C. 1396a(a)(30)(A); regarding EPSDT see id. 1396a(a)(43). 17 Id. 1396n(c). The other two types of home and community-based waivers are those described in id. 1396n(d) (for individuals 65 years and older who, but for waiver services, would be likely to require institutional care), 1396n(e) (for children who are under 5 and infected with AIDS [acquired immune deficiency syndrome] or drugdependent at birth). 18 Id. 1396a(a)(10)(A)(ii)(VI). 19 Id. 1396n(c)(2)(A); Makin v. Hawaii., 114 F. Supp. 2d 1017, 1031 (D. Haw. 1999) U.S.C. 1396n(c)(2). 21 Id. 1396n(c)(2)(C); Makin, 114 F. Supp. 2d at See also Benjamin H. v. Ohl, No. 3: , 1999 U.S. Dist. LEXIS 22469, *39-43 (D. W. Va. July 15, 1999) (Clearinghouse No. 52,677) U.S.C. 1396n(c)(2)(D). 23 Id. 1396n(c)(2)(E). 24 For a general discussion of eligibility for Medicaid, see JANE PERKINS, NAT L HEALTH LAW PROGRAM, AN ADVOCATE S GUIDE TO THE MEDICAID PROGRAM ch. 3 (2001) U.S.C. 1396a(a)(10)(A)(i)(IV) & (VI) (VII), 1396a(l)(1), (2). 722 CLEARINGHOUSE REVIEW MARCH APRIL 2002

6 repealed. 26 Children who receive Supplemental Security Income (SSI) or a state supplementary payment are automatically eligible for Medicaid in most states. 27 In both programs, beneficiaries incomes must be below a certain specific level. Ordinarily, when it determines eligibility for Medicaid, the state attributes, or deems, the income or resources of a spouse or a parent of a child under 21 to the potential beneficiary. 28 The income and resources of an individual who receives care in an institutional setting, however, are subject to different rules. After one month of institutionalization of a child, parents income is no longer deemed available to the child. 29 What this means in practice is that family income and resources may make a child who lives in the community ineligible for Medicaid but will not prevent that child, if living in an institution, from being eligible for Medicaid. The Medicaid Act gives states some options for making benefits available to individuals whose family incomes and resources would make them ineligible for Medicaid unless they lived in an institutional setting. States may provide Medicaid benefits to children who receive home and community-based services through a waiver. 30 Specifically the state may provide Medicaid to children with developmental disabilities or mental retardation if the children would be eligible for Medicaid if institutionalized and would require institutional care if they did not receive home and community-based waiver services. 31 States also may choose to cover disabled children, 18 or younger, who live at home and do not qualify for SSI or state supplementary payments because of their parents income or resources. The state may exercise this option only if (1) the child would qualify for Medicaid if the child were in a medical institution; (2) the child requires the level of care given in a hospital or nursing facility; (3) To ensure cost neutrality under Medicaid rules, states may refuse to serve individuals under a waiver if the services that they need are too expensive. home care is medically and otherwise appropriate; and (4) the cost of home care would not exceed the cost of appropriate institutional care. 32 Medicaid coverage under this standard is also known as the Katie Beckett option. Although it is sometimes referred to as a waiver, this characterization is incorrect; Katie Beckett coverage is, instead, an optional category of eligibility. Distinctions between 1915(c) waivers and the Katie Beckett option are crucial. If a state chooses to exercise the Katie Beckett option, it must cover all eligible children who fit into the category. 33 In contrast, as discussed above, states may limit the number of individuals who may participate in a 1915(c) waiver. 34 The state also may offer, under a 1915(c) waiver, services that are not available under EPSDT 26 Id. 1396a(a)(10)(A)(i)(I), 1396u Id. 1396a(a)(10)(A)(i)(II). A few states continue to use more restrictive definitions of blindness or disability or more restrictive financial eligibility rules than the Supplemental Security Income program. These are referred to as 209(b) states. Id. 1396a(f). 28 Id. 1396a(a)(17)(D); 42 C.F.R (a)(2) C.F.R , a (2000) U.S.C. 1396a(a)(10)(A)(ii)(VI). 31 Id. 1396n(c), 1396a(a)(10)(A)(ii)(VI). Also, children who are under 5 and have AIDS or HIV (human immunodeficiency virus) or were born dependent on certain illegal drugs may qualify. Id. 1396n(e); 1396a(a)(10)(A)(ii)(VI). 32 Id. 1396a(e)(3). 33 Id. 1396a(a)(10)(A)(ii), 1396a(a)(10)(B). 34 Id. 1396a(n)(9). States may not, however, limit the number of participants to fewer than 200. Id. 1396a(n)(10). See also Bryson v. Shumway, No M (D.C. N.H. Dec. 10, 2001) (holding that the Medicaid Act creates an entitlement to services under a 1915(c) waiver for up to 200 individuals) (available from National Health Law Program). MARCH APRIL 2002 JOURNAL OF POVERTY LAW AND POLICY 723

7 and thus not available to children covered under the Katie Beckett option. 35 B. Waiver Services Waivers are typically used to offer an array of targeted community-based services. States include in these packages optional Medicaid services (such as private-duty nursing) that are not generally available to adult Medicaid recipients and offer services that are not available through Medicaid and not strictly medical in nature. These include respite care, day treatment, and home modification. 36 Waivers typically feature a strong case-management component to ensure the delivery of a coordinated set of services enabling the child to live outside an institution. C. Cost Neutrality Section 1915(c) waivers must be costneutral, and, to ensure this result, states are required to satisfy two standards. First, before a waiver is granted, a state must make assurances to the secretary of health and human services that the average per-capita fiscal year expenditures under the waiver will not exceed 100 percent of the average per-capita fiscal year expenses that the state reasonably estimates it would have made in the absence of the waiver. 37 Specifically CMS requires each state to estimate the average annual per-capita cost of home and community-based services for each waiver recipient and the average annual cost of all other Medicaid services, such as acute care, that it provides to those waiver recipients and to add these two amounts. Then CMS requires states to estimate the average annual per-capita cost for institutional care each waiver recipient would incur if the waiver were not granted and add it to the estimated annual average per-capita Medicaid costs for all other services those recipients would receive in the absence of the waiver. The first sum must be less than or equal to the second sum. 38 To illustrate, consider West Virginia s 1999 waiver application. The state s Medicaid agency estimated that expenses in the waiver s first year would be as follows: $37,185 in average per-capita expenditures for home and communitybased service and $6,352 in average per-capita expenditures for all other Medicaid services, for a total of $43,537. In contrast, the state estimated $80,972 in average per-capita expenditures for institutional care for the same individuals if the waiver were not granted, and $4,010 in average per-capita expenditures for all other Medicaid services provided to those individuals if the waiver were not granted, for a total of $84, The first sum is less than the second sum; thus the initial cost-neutrality assurance is satisfied. Second, the state must assure that, once the waiver is operating, the actual total expenditures for home and community-based and other services it provides under the waiver will not exceed 100 percent of the amount it would have incurred for services for the same individuals in nursing facilities, hospitals, or intermediate care facilities for the mentally retarded. 40 To ensure cost neutrality under Medi- 35 For further discussion of these issues, see GARY SMITH ET AL., GEORGE WASHINGTON UNIV., CTR. FOR HEALTH POLICY RESEARCH, UNDERSTANDING MEDICAID HOME AND COMMUNITY SERVICES: A PRIMER (2000), available at U.S.C. 1396n(c)(4)(B); 42 C.F.R , Common home modifications include installation of accessibility ramps or accessible showers, although other more unusual measures are possible. E.g., Rhode Island has obtained a waiver to abate leaded windowsills in children s homes as a home modification. R.I. Dep t of Health, Rhode Island Lead Poisoning Prevention Program 31 (Oct. 2000), at family/lead/screeningplan.pdf U.S.C. 1396n(c)(2)(D); 42 C.F.R (e). 38 CTRS. FOR MEDICARE & MEDICAID SERVS., Instructions for Completing Form 372(S), in STATE MEDICAID MANUAL (N)(4) (1997), available at 39 W. Va. Dep t of Health & Human Resources, Home and Community-Based Services Waiver Application 86 (1999) (available from National Health Law Program) C.F.R (f). 724 CLEARINGHOUSE REVIEW MARCH APRIL 2002

8 caid rules, states may refuse to serve individuals under a waiver if the services that they need are too expensive. The statute allows a state to exclude an individual from the waiver if there is not a reasonable expectation that the cost of medical services for the individual under the waiver will be less than or equal to the cost of services for that individual without the waiver. 41 Some states implement this cost-neutrality provision by requiring home and community-based waiver individual budgets to meet a specific cost cap. North Carolina, for example, uses this approach; individual 1915(c) waiver recipients costs may not exceed the average cost of care in an intermediate care facility for the mentally retarded $86,058 per year as of April 1, This capped amount is intended to cover all waiver-funded services as well as regular Medicaid-funded services that the individual would receive in such a facility. Services that are not provided under a facility s per-diem rate, such as drugs, acute medical care, or physician visits, are not included in the individual budget. 43 People, including children, who receive services under this waiver must go through an annual budget process. Each year a caseworker and the waiver recipient or a family member use state-established prices to compile a list of the necessary services and the cost of each. If the projected needs exceed the budget amount, one may lose one s waiver slot. In practice, however, what frequently happens is that some services are simply eliminated to fit the needs within the budget. Currently in North Carolina confusion is rife as to whether children whose home and community-based service needs exceed the cost cap may receive supplemental EPSDT services. III. The Interplay between EPSDT and Home and Community- Based Waiver Services For children and youth who are under 21 and receive home and community-based waiver services, two conflicting principles are at play. On the one hand, states may refuse to serve individuals whose waiver services exceed a certain cost, and the state must assure the federal government that the home and community-based services provided will not exceed the amount that would be spent on institutional services. 44 On the other hand, states may not limit EPSDT services to a certain dollar amount. How these principles work together is not always clear, but what is clear is that all children receiving services through a home and community-based waiver are entitled to EPSDT services. CMS unequivocally states that children who receive services under home and community-based waivers are also entitled to all medically necessary EPSDT services even if the waiver is the sole basis for their Medicaid eligibility. 45 Moreover, according to CMS, while states may limit home and community-based waiver services, they may not limit medically necessary services covered under Medicaid for a child who is eligible for EPSDT U.S.C. 1396n(c)(4)(A). Moreover, CMS instructs states that, [u]nder the waiver, you may... exclude those individuals for whom there is a reasonable expectation that home and community-based services would be more expensive than the Medicaid services that the individual would otherwise receive in an institution. CTRS. FOR MEDICARE & MEDICAID SERVS., supra note 38, Letter to area directors from Paul R. Peruzzi, director, Division of Medical Assistance (Apr. 25, 2001) (on file with National Health Law Program). 43 Id. 44 In this article I do not discuss limited waivers, which are waivers that place a financial cap on the cost of services unrelated to the cost-neutrality requirement. States may offer these types of waivers to individuals on waiver waiting lists, for example. For a discussion of this issue, see Disabilities Law Project, Medicaid Waiver Q & A (2001) (available from National Association of Protection and Advocacy Systems). 45 U.S. Dep t of Health & Human Servs., supra note Id. See also Dear Ohio State Medicaid Director (July 6, 1992) (stating that a state Medicaid program must make EPSDT available to a Medicaid-eligible individual under 21, regardless of whether the individual is eligible under the state s home and community-based services waiver) (available from National Health Law Program). MARCH APRIL 2002 JOURNAL OF POVERTY LAW AND POLICY 725

9 However, CMS does not specifically address whether the broad EPSDT coverage requirements override the cost-neutrality requirement. In other words, what is unclear is whether a child who is receiving services under a waiver and has reached a certain level of cost, but for whom additional home and communitybased waiver services are medically necessary, may receive those additional services through EPSDT and still keep the waiver slot. For example, consider a state that has a 1915(c) waiver for children who have developmental disabilities and require an institutional level of care. Assume that the waiver is limited to case management and respite services and that the child has reached the cost cap with those services. A Medicaid-eligible child is also entitled to personal care services through EPSDT. If adding these services to the child s plan of care puts the cost of services over the cap, may the state remove the child from the waiver program? A. Categories of Children To consider this question, I discuss three categories of children: (1) those eligible for Medicaid only because of the waiver; (2) those who would be eligible for Medicaid if they were not covered under the waiver; and (3) those eligible for Medicaid who are on waiting lists for home and community-based waiver services. 1. Children Eligible for Medicaid Due Solely to a Waiver For some children, the only pathway to Medicaid eligibility is through the waiver because under the special waiver eligibility process their parents income and resources can be disregarded. Generally if the cost of necessary services exceeds the cost cap, the child does not qualify for the waiver and is no longer eligible for Medicaid. Thus, even if a child who is eligible for Medicaid only because of a waiver is entitled to all Medicaid services, if the services required are too expensive, the state may deny the child a waiver slot. Such denial would eliminate Medicaid eligibility. In practice, therefore, the child may not actually be able to receive all medically necessary EPSDT services. 2. Children Otherwise Eligible for Medicaid. Many children who receive services through 1915(c) waivers would be eligible for Medicaid in the absence of the waiver because they are eligible on some other basis, such as having a family income below a certain percentage of the poverty level. Thus, even if they lost their waiver slots because the home and community-based services they require were too expensive, they would remain eligible for Medicaid and EPSDT. As discussed above, EPSDT can provide services that enable a child to live at home or in the community even though the child s needs might otherwise require placement in an institutional setting. A home and communitybased services waiver is generally a more desirable option because one of its purposes is to assemble a package of services that provide a more cohesive plan of care. If a child cannot receive home and community-based waiver services, however, EPSDT may partially fill this gap. Even outside the waiver context, cost issues may present barriers that prevent a child from receiving EPSDT services in the community. As discussed above, CMS allows states to limit the provision of EPSDT services to the most economic mode and therefore would accept the option of institutionalizing some children for whom care in the community would be very expensive. 47 This concept is recognized in California, where a state regulation prohibits the Department of Health Services from approving a request to provide EPSDT services in home or community settings if the state Medicaid program incurs, for providing those services, a cost that is greater than the cost of equivalent 47 Medicaid State Operations Letter, supra note CLEARINGHOUSE REVIEW MARCH APRIL 2002

10 services at the level of care the beneficiary would need in an institution. 48 CMS Region IV touched on this issue in a guidance letter stating that if an individual who is under 21 and receives services under the waiver requires medical services unavailable through the state plan or waiver, EPSDT does cover those services. 49 However, these additional EPSDT services would be included in the cost comparison used under the waiver; the state may deny home and communitybased waiver services to any person for whom it can reasonably expect that the costs of services under the waiver would exceed the costs of institutional care. While advocates should be aware of this issue, they must keep in mind that the CMS guidance on institutionalization as the most economic mode predates the U.S. Supreme Court s decision in Olmstead v. L.C., which held that unjustified segregation of people with disabilities might violate the Americans with Disabilities Act. 50 Moreover, in a series of letters, the CMS guidance on Olmstead implementation, while not directly overruling earlier guidance on institutionalization and the most economic mode, clearly emphasizes community-based services for children. For example, according to CMS, the combination of EPSDT and [home and community-based services] waiver services can allow children with special health care... needs to remain in their own homes and communities and receive the supports and services they need. 51 Thus, if a state Medicaid agency threatens to institutionalize a child or youth based upon the older economic mode guidance, advocates should look to this more recent guidance as support for allowing the child to receive services in the community. 3. Medicaid-Eligible Children on Waiting Lists for Waiver Services When assisting children who are otherwise eligible for Medicaid and live in the community but are on waiting lists for home and community-based waiver services, advocates should be alert to opportunities to obtain services under EPSDT. At least one court specifically states that such children are entitled to EPSDT services. 52 Therefore children should be receiving EPSDT, not languishing on waiting lists without services. B. Americans with Disabilities Act Title II of the Americans with Disabilities Act, or ADA, prohibits discrimination on the basis of disability in access to public services. 53 Olmstead holds that the unjustified segregation of mentally disabled individuals in institutions, away from home and community life, constitutes unlawful discrimination. The integration mandate of the ADA is embodied in a federal regulation requiring that a 48 CAL. CODE REGS. tit. 22, (2001). This regulation was at issue in a lawsuit that challenged the Department of Health Services administration of California s EPSDT benefits. One of the terms of settlement was that a denial of treatment services on the basis of this regulation was required to state the basis for the determination that otherwise appropriate institutional care was available to the beneficiary. It further specified that an appropriate facility would be one with available space and within one hour s travel time for the family. See T.L. v. Belshé, No. CV-S LKK PAN (E.D. Cal. 1995) (settlement agreement available from National Health Law Program). 49 Letter from Health Care Financing Administration Region IV to Parent (Apr. 26, 2001) (available from National Health Law Program). 50 Olmstead v. L.C., 572 U.S. 581 (1999) (Clearinghouse No. 52,203). 51 U.S. Dep t of Health & Human Servs., supra note See Chisholm v. Hood, No , 2001 U.S. Dist. LEXIS 3033 (E.D. La. Feb. 21, 2001). Chisholm involved a class of current and future Medicaid recipients under 21 and on a waiting list for the 1915(c) waiver. The court held that all class members, as Medicaid recipients, were entitled to EPSDT services. Id. at U.S.C This section of the Americans with Disabilities Act holds that no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity. MARCH APRIL 2002 JOURNAL OF POVERTY LAW AND POLICY 727

11 public entity shall administer services, programs and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities. 54 Moreover, a public entity must make reasonable modifications of its programs when necessary to avoid discrimination unless it can demonstrate that modifications would fundamentally alter the nature of the service, program, or activity. 55 Olmstead leaves a number of defenses that states accused of discriminatory segregation can assert against orders requiring community placement. In Olmstead the Court holds that the ADA requires states to provide community-based services for persons with disabilities who would otherwise be entitled to institutional services when qualified professionals determine that placement is appropriate, the affected persons agree, and placement can be reasonably accommodated. The state may take into account its available resources and the needs of others receiving state-supported disability services. 56 If placement in the community would constitute a fundamental alteration in the program, the state is not required to make such placements. The factors that a court would use to determine whether an alteration is fundamental are the costs of providing services, the resources available to the state, and how providing the services affects the state s abilities to meet other obligations. 57 While the ruling is often considered a mandate to states to place people in community settings, Olmstead leaves a number of defenses that states accused of discriminatory segregation can assert against orders requiring community placement. Moreover, Olmstead does not deal with people at risk of institutionalization. 58 Showing that providing home and community-based care fundamentally alters a state s services for people with disabilities may be a defense. In making this determination, a court must consider the costs of community-based care and whether requiring community-based care would result in inequitable distribution of resources away from people with disabilities. Only a handful of cases decided since Olmstead apply and interpret the fundamental-alteration defense. Two are especially relevant. In Makin v. Hawaii the state, claiming that requiring it to move plaintiffs from institutions into community-based settings would not be a reasonable accommodation, moved for summary judgment. 59 First, the state claimed that requiring it to ignore preexisting funding limitations in its Medicaid program was a fundamental alteration. Second, the state claimed that requiring it to ignore the preset population limits in its waiver program would be a fundamental alteration. Third, the state argued that forcing it to exceed the federal funding limits and thereby supply 100 percent of the funds for the additional community-based placements also would be a C.F.R (d) (2000). 55 Id (b)(7). 56 Olmstead, 572 U.S. at 587. For more discussion of the Olmstead decision, see Jennifer Mathis, Community Integration of Individuals with Disabilities: An Update on Olmstead Implementation, 35 CLEARINGHOUSE REVIEW 395 (Nov. Dec. 2001). 57 Olmstead, 572 U.S. at People with disabilities have the right to file, with the U.S. Department of Health and Human Services Office for Civil Rights, administrative complaints asserting that they are not receiving services in the most integrated setting. A recent study assessing these complaints revealed that individuals residing in the community but at risk of unjustified institutionalization filed nearly 30 percent of them; 41 percent of all child and adolescent complainants were residing in the community. SARA ROSENBAUM ET AL., CTR. FOR HEALTH CARE STRATEGIES, AN ANALYSIS OF OLMSTEAD COMPLAINTS: IMPLICATIONS FOR POLICY AND LONG- TERM PLANNING (2001). 59 Makin, 114 F. Supp. 2d at CLEARINGHOUSE REVIEW MARCH APRIL 2002

12 fundamental alteration. 60 The court rejected these assertions and denied the state s motion. The court clarified that it would not require the state to violate the terms of its agreement with the federal government and pay for the entire package of services. Instead, the court said, it would analyze whether the federal government could change the program limits. The court held that the mere fact that a state would have a problem funding the program and might have to ask the federal government to change population limits was not a fundamental alteration. The state also claimed that requiring it to admit all eligible individuals to the waiver would decrease funding for the state s intermediate care facility for the mentally retarded program, and this would be inequitable to that program. 61 The court acknowledged that the state would not be required to alter its program in such a way that other programs would suffer unjustly but held that the state had not demonstrated that this would occur. 62 A recent Maryland case, Williams v. Wasserman, illustrates the protection that the fundamental-alteration defense can afford states facing Olmstead challenges. 63 In Williams plaintiffs, who had developmental disabilities and had been institutionalized at some point, sought to have Maryland develop and implement community-based treatment plans for each of them. Defendants claimed that immediately providing community placements for plaintiffs would constitute a fundamental alteration of their existing program because it would be unmanageably expensive. 64 To assess the validity of this defense, the court followed the reasoning articulated in the Olmstead plurality; thus, in determining whether the costs to defendants of accommodating the plaintiffs would constitute a fundamental alteration, the court considered the totality of the expenses and programs the state undertook over recent years. 65 Accordingly the court refused to compare the per-capita cost of institutionalization with the per-capita costs of communitybased treatment; all parties acknowledged that a comparison would show that community placements were less expensive. 66 Rather, the court took into account the necessarily gradual process of closing institutions and the state s inability to realize immediate savings from the closure. 67 The court accepted the defendants expert testimony that the state would need to maintain the fixed cost of an institutional bed for three to five years. 68 The court held that the immediate shift of resources sought by plaintiffs would constitute a fundamental alteration of Maryland s provision of care in intermediate care facilities for the mentally retarded. 69 This decision illustrates the potential that cost considerations may override any mandate to provide community-based services. Advocates should be mindful of Olmstead s limitations in requiring community placements. IV. Practical tips Advocates who encounter these problems should consider the following points: Educate parents, providers, and policy makers about EPSDT s mandate to provide a broad array of services to children. Advocates must realize that many parents, case managers, health care personnel, and elected officials are simply unaware of the services that are available through EPSDT. Advocates can help by 60 Id. at Id. 62 Id. 63 Williams v. Wasserman, 164 F. Supp. 2d 591 (D. Md. 2001). 64 Id. at Id. at Id. at Id. at Id. at Id. at 638. MARCH APRIL 2002 JOURNAL OF POVERTY LAW AND POLICY 729

13 making parents aware of the services to which their children are entitled. Caseworkers, who may work primarily with waiver programs and thus be unfamiliar with regular Medicaid rules, may find it helpful to discover the additional benefits that their clients could receive. Doctors, nurses, and therapists who are familiar with EPSDT can be excellent allies in the search for an appropriate program. Policy makers need to hear about the importance of EPSDT and the benefits that it can bring to poor children. Look carefully at the components of the various cost assessments. Advocates should closely examine the services that are being included in any individual home and community-based services waiver budget. Sometimes an individual caseworker assembling a budget may include services that should not be considered a part of the total waiver costs. This may be based upon an erroneous policy or result from individual error. For example, physical therapy should not be included in the cost summary because this service also would be provided to an individual in an institution. Advocates should consider ways to work within the child s budget to fit more services under the cap. For children who are eligible for Medicaid regardless of the waiver, argue that institutionalization is not an appropriate treatment. While CMS does authorize states to serve children in institutional settings if that is the most economic treatment, advocates should focus on the limitations to that proposition. Advocates should argue that such treatment is not appropriate and not as efficacious as home care. The recommendation of the child s physician is the key to this argument. If a physician explicitly recommends home health and other EPSDT services, and indicates that institutionalization is neither medically necessary nor appropriate, advocates have a strong argument that the cost effectiveness question should not even be raised. Advocates have a helpful tool in the Olmstead guidance letters issued in the wake of that decision. 70 Do not push for unlimited EPSDT services if a child is eligible for Medicaid only through the waiver. CMS instructs states that they may refuse to offer a waiver slot to a person when waiver services can reasonably be expected to be more expensive than institutionalization. Demanding EPSDT services for a child when this would result in a plan of care that exceeds the cost of institutionalizing that child may endanger the child s waiver slot and eligibility. Consider alternatives carefully. Advocates should familiarize themselves with other possible claims (not taken up here), including Medicaid Act violations such as lack of reasonable promptness, failure to provide freedom of choice, and violations of the Americans with Disabilities Act. 71 They may also consider filing a claim with the Office for Civil Rights in the Department of Health and Human Services. With all litigation, particularly when raising Olmstead claims, advocates should proceed with caution. 70 These letters, as well as other guidance on implementing the Olmstead decision, may be found at 71 JANE PERKINS ET AL., NAT L HEALTH LAW PROGRAM, REPRESENTING CLIENTS WHO NEED MEDICAID EARLY PERIODIC SCREENING DIAGNOSIS AND TREATMENT (2001) (available from National Association of Protection and Advocacy Systems and National Health Law Program). 730 CLEARINGHOUSE REVIEW MARCH APRIL 2002