Iowa First to Add Home- and Community-based Services Option to Medicaid State Plan

A National Council Fact Sheet

Effective January 1, Iowa became the first state to receive federal approval to add home- and community-based services (HCBS) option as a permanent feature of its Medicaid plan. The HCBS option was created by section 6086 of the Deficit Reduction Act of 2005 (DRA) as an alternative to time-limited waivers. CMS has not yet released regulations or other guidance on the option, so the Iowa state plan amendment (SPA) may provide insight regarding the federal government's interpretation of the option. Although the option became effective January 1, the U.S. Department of Health and Human Services (HHS) announced the approval on March 5 and services began on March 1. A draft provider manual was not available until April 11, 2007, leading many providers to hold off on providing services until mid-April.

Background on the HCBS Option
The HCBS option has some advantages not available under a waiver. Unlike the option, waivers are generally limited to three or five years, requiring states to ask for renewals. In addition, the waiver process can be quite time consuming. States still must seek federal approval to add such things as home- and community-based services — even as an optional benefit — to their Medicaid state plans. Once a state plan has been approved, any changes to it must be reviewed and approved by CMS. However, once a state has received approval from CMS, no further permission to offer the benefit is required.

The most important advantage of the HCBS option is that it does not limit beneficiaries who need home-based services to those who would need institutional care without them. Under the option, States can now provide home- and community-based care to those who may not yet be at risk for immediate institutionalization. Selecting the option does not prevent States from continuing to provide services through their existing waiver programs.

The HCBS option does have some limitations that a waiver does not. The option is limited to individuals whose incomes do not exceed 150 percent of the Federal poverty level (FPL), whereas waivers can include individuals whose incomes are as high as 300 percent of SSI income. Under the newly created option, States may not waive comparability—i.e., States must provide comparable services to all eligible individuals and may not limit services based on diagnosis, type of illness or condition. Waivers allow States to tailor home- and community-based services to the needs of a particular population, such as people with serious and persistent mental illness.

Iowa's Medicaid History
From 2003 to 2005, the Office of the Inspector General at HHS (OIG) audited Iowa's Medicaid program. Ultimately the state was required to return approximately $6 million in disallowed payments under the adult rehabilitation option. In 2005, an OIG audit produced a similar result on children's rehabilitation services. The OIG ruled that services that had once been generally considered rehabilitative did not meet the standard for a Medicaid covered service. These audits signaled a sea change in the federal interpretation of the rehabilitation option in the absence of any new legislation or regulation.

As a result of the audits, Iowa redesigned its Medicaid program, creating a "Remedial Services Program" for children and adults. For many adults, the Remedial Services Program will serve as a bridge to the new HCBS option. The Remedial Services Program is more restrictive than the HCBS option and geared toward acute service needs. www.nccbh.org

Iowa's HBCS State Plan Amendment
Iowa's new benefit will provide statewide HCBS case management services and "habilitation services" at home or in day treatment programs that can include such things as support in the workplace. Services approved under this option are intended to help individuals delay or avoid institutional stays or other high-cost out-of-home placements.

Eligibility
Although Iowa could not explicitly limit HCBS services to adults with severe and persistent mental illness due to the comparability requirement, the state was able to define the target population in such a way as to effectively target their desired population using functional criteria. To qualify for HCBS services under the Iowa SPA, an adult would have to meet one of the following criteria:

• has undergone or is currently undergoing psychiatric treatment more intensive than outpatient care, more than once in a lifetime (e.g., emergency services, alternative home care, partial hospitalization or inpatient hospitalization); or
• has a history of psychiatric illness resulting in at least one episode of continuous, professional supportive care other than hospitalization.

In addition, the person must demonstrate a need for assistance by meeting at least two of the following criteria on a continuing or intermittent basis for at least two years:

• Is unemployed, or employed in a sheltered setting, or has markedly limited skills and a poor work history;
• Requires financial assistance for out-of-hospital maintenance and may be unable to procure this assistance without help;
• Shows severe inability to establish or maintain a personal social support system;
• Requires help in basic living skills such as self-care, money management, housekeeping, cooking, or medication management; or
• Exhibits inappropriate social behavior that results in demand for intervention.

The above criteria appear fairly generous, but the population that can meet these requirements are limited in two ways—by financial eligibility standards and a cap on the number of people who can be served under the option. The DRA explicitly limits participants' income to below 150% of FPL. Iowa has also decided to limit eligibility to 3,700 individuals in 2007. The cap will gradually increase over the next five years, to a maximum of 4497 in 2011. The state does not expect to exceed the cap, either this year or in the future. Approximately 3,000 adults in Iowa are currently eligible for adult rehabilitation services. As the rehabilitation option is being phased out—services authorized prior to January 1 must end on June 30—slots under the HCBS option are being held for those who qualified under the rehabilitation option and who also meet HCBS option criteria.

Services
Iowa's HCBS option covers two categories of services: HCBS case management and habilitation. HCBS case management is defined as "[s]ervices that assist participants in gaining access to needed waiver and other State plan services, as well as medical, social, educational and other services, regardless of the funding source for the services to which access is gained." The HCBS case management service is for Medicaid recipients who do not qualify for targeted case management (TCM) services. Iowa's SPA explicitly states that individuals who receive TCM services may not also receive HCBS case management.

Habilitation services are divided into four categories: home-based, day, prevocational, and supported employment.

• Home-based habilitation: "[I]ndividually tailored supports that assist with the acquisition, retention, or improvement in skills related to living in the community." Such skills include, but are not limited to, "adaptive skill development, assistance with activities of daily living, community inclusion, transportation, adult educational supports, social and leisure skill development, that assist the participant to reside in the most integrated setting appropriate to his/her needs. Home-based habilitation also includes personal care and protective oversight and supervision." Services will not be covered if delivered in facilities with more than 16 residents, and room and board are not covered.
• Day habilitation: "[A]ssistance with acquisition, retention, or improvement in self-help, socialization and adaptive skills that takes place in a non-residential setting, separate from the participant's private residence. Activities and environments are designed to foster the acquisition of skills, appropriate behavior, greater independence, and personal choice. Services are furnished 4 or more hours per day on a regularly scheduled basis for 1 or more days per week or as specified in the participant's service plan? Day habilitation services focus on enabling the participant to attain or maintain his or her maximum functional level and shall be coordinated with any physical, occupational, or speech therapies in the service plan. In addition, day habilitation services may serve to reinforce skills or lessons taught in other settings."
• Prevocational habilitation: "[S]ervices that prepare a participant for paid or unpaid employment. Services include teaching such concepts as compliance, attendance, task completion, problem solving and safety. Services are not job-task oriented, but instead, aimed at a generalized result. Services are reflected in the participant's service plan and are directed to habilitative rather than explicit employment objectives." The recipient's file must document that the services delivered are not available under programs funded by Vocational Rehabilitation or the Individuals with Disabilities Education Act (IDEA).
• Supported Employment Habilitation: "[S]ervices that consist of intensive, ongoing supports that enable participants, for whom competitive employment at or above the minimum wage is unlikely absent the provision of supports, and who, because of their disabilities, need supports, to perform in a regular work setting. Supported employment may include assisting the participant to locate a job or develop a job on behalf of the participant. Supported employment is conducted in a variety of settings, particularly work sites where persons without disabilities are employed. Supported employment includes activities needed to sustain paid work by participants, including supervision and training. When supported employment services are provided at a work site where persons without disabilities are employed, payment is made only for the adaptations which do not include those for which providers are already responsible to make in order to meet requirements of the Americans with Disabilities Act, supervision and training required by participants receiving waiver services as a result of their disabilities but does not include payment for the supervisory activities rendered as a normal part of the business setting." The recipient's file must document that the services delivered are not available under programs funded by Vocational Rehabilitation or the Individuals with Disabilities Education Act (IDEA). Claims cannot include "incentive payments, subsidies, or unrelated vocational training expenses."

All providers are required to be accredited or certified according to the list of acceptable programs in the SPA. For example, providers of home habilitation services must be accredited by one of the following:

• Commission on Accreditation of Rehabilitation Facilities (CARF)
• Joint Commission on Accreditation of Healthcare Organizations (JCAHO)
• Council on Accreditation (COA)
• Council on Quality and Leadership (CQL)

In lieu of accreditation, home habilitation providers need to be certified under one of two state programs. Each habilitation service has its own list of required credentials.

Implementation
Although the HCBS option became effective on January 1, implementation did not begin until March 1. Although a few providers began providing services under the option in March, most providers were reluctant to begin serving clients without a provider manual. A draft version of the provider manual was not posted until mid-April, and the state expects that the final version will be available by the end of the month. At the Iowa Association of Community Providers' annual conference in April, a representative from the state Medicaid office gave an overview of the new option. In addition to raising concerns about the provider manual, providers identified other barriers to implementation, such as database glitches, that were preventing them from getting service plans approved. The state representative acknowledged technological problems, but claimed that the process was working for most providers and beneficiaries.

Implications for Other States
"We expect many states to follow Iowa's lead in taking advantage of the DRA's provision which grants new freedom to state Medicaid programs and the people who depend upon them," said Leslie Norwalk, acting administrator of CMS. It's not clear, yet, how many states will follow Iowa's lead and amend their state Medicaid plans to add the HCBS option. Depending on the state's approach, the new option could result in more Medicaid covered community-based services for more adults with mental illness.

The best news from Iowa's SPA is that adults with mental illness can be targeted very broadly for HCBS services. Although a state cannot explicitly restrict eligibility to individuals with severe and persistent mental illness, they can reach the same result by tailoring eligibility criteria. In Iowa's case, CMS approved very broad eligibility criteria—i.e., receiving care "more intensive than outpatient care, more than once in a lifetime" or a "history of psychiatric illness resulting in at least one episode of continuous, professional supportive care other than hospitalization." (emphasis added). The criteria include people with a serious mental health problem but do not require a prior psychiatric hospitalization or even that adults need a hospital level of care in order to qualify.

The only barriers to serving more people under the HCBS option are the cap and the lower income limit. The lower income limit is a matter of law for the different options and the HCBS waiver, so all states face the same limit (150% of FPL for the HCBS option versus 300% of SSI for an HCBS waiver). Iowa providers requested that the state allow individuals over 150% FPL to buy-in to the program, but the state said the income limit was "beyond [its] control," citing the DRA which created the HCBS option.

Although the rehabilitation option does not allow a cap, the HCBS waiver does allow caps. In Iowa, the cap and lower income limit will probably result in few people losing eligibility as the state moves from using the rehabilitation option to the HCBS option, but the same may not be true in other states. Providers and advocates should work to ensure that their states set the caps high enough to serve all adults who need the services to attain and maintain a decent quality of life in the community. If the initial cap is low enough to create a waiting list for services, subsequent caps should be set high enough for the state to make steady and substantial annual progress in meeting the needs of all who are otherwise eligible.

The Iowa Association of Community Providers was very involved in the development of the HCBS option. In response to provider advocacy, the state expanded the list of acceptable accreditation credentials to include the Council on Quality and Leadership for all habilitation services and the International Center for Clubhouse Development to provide day, prevocational and supported employment habilitation services. The provider organizations also raised concerns about a lower rate schedule for the habilitation services than were available under the adult rehabilitation option. Because of provider advocacy, the state acknowledged that its methodology resulted in lower rates because of the different service definitions under the rehabilitation option and the HBCS option. The state agreed to change the rate-setting methodology so that all habilitation services will require a cost report rather than using a fee schedule. After costs are reported for the first year, the state will use the data to re-evaluating the caps for all of the services. In addition, the state raised the rate cap for home-based habilitation from $34.63 to $46.24 for hourly services $78.10 to $104.92 for daily services. Rate caps for all other services will remain at the proposed level, but they will be re-evaluated after the first year of cost data is available.

To view documents related to Iowa's HCBS option, including the SPA and provider manual, see http://www.ime.state.ia.us/HCBS/HabilitationServices/documents.html.

For more information, please contact Chuck Ingoglia at ChuckI@thenationalcouncil.org.