The Generation Project






The Implementation of SEA 493:
A Policy Education Series from The Generations Project


Moving Toward the Promise
July 2006


In the last days of June the director of the Indiana Division of Aging, Steve Smith, held a series of meetings and press events in South Bend, Evansville and Indianapolis announcing to the public the rollout of a new package of services for senior citizens and persons with disabilities called Options.  The Generations Project, advocacy organizations, area agencies on aging, academics, and providers were invited to participate in these events.  (See the related news stories on this website.) Options represents the first tangible steps to implement the primary features of Senate Enrolled Act 493, the nationally significant long term care reform law that was unanimously passed by the 2003 Indiana General Assembly.

More commonly called SEA 493, or simply 493, the act gives Indiana all the legal and programmatic tools it needs to establish a first rate system of home and community based services (HCBS).  Thousands of senior citizens and persons with disabilities have been on waiting lists for years for HCBS services through Indiana’s outstanding CHOICE program or through an existing Medicaid waiver.  For these people the implementation of SEA will be a godsend.

Why?  SEA 493 allows the state to treat its entire Medicaid long term care budget as a single global budget.  The law empowers the state to move people from nursing homes to HCBS through the Medicaid program (meaning, the funding will follow individuals within the Medicaid system), and it allows the Medicaid dollars that are saved by reducing the use of institutional care to be used for additional HCBS.  The law requires the state to provide access to a full array of HCBS.  Of great importance is the equalization of income eligibility for individuals between nursing home care and HCBS.  Because of that provision in SEA 493 people will no longer be forced to be far poorer than persons in nursing homes in order to receive Medicaid funded HCBS .

Indiana’s CHOICE program, established in 1987, has been and continues to be a great program.  But CHOICE is only allocated a fixed number of state dollars each year.  That has resulted in long waiting lists for CHOICE funded services.  Likewise, the Medicaid waivers that have been used by the state prior to SEA 493 to provide additional HCBS have been more restricted in scope than the CHOICE program and have only been provided to a finite number of individuals each year.  Consequently, extensive waiting lists for CHOICE and Medicaid waiver services have been a part of the Indiana long term care landscape for many years.  So much so that the primary means for getting off the waiting lists have been death and nursing home placements.

By expanding the funding pie to the entire Medicaid long term care budget, SEA 493 represents the potential to dramatically expand the availability of HCBS through Medicaid waivers.  Over time this will allow a huge drop in the utilization of Medicaid funded nursing home care, the elimination of waiting lists for home and community based services, improvements in direct care for consumers, and a drop in the per capita cost of all long term care services.

Mr. Smith has made it clear that as of July 1, 2006 the new consumer income eligibility standard for all Medicaid waiver HCBS is 300 percent of the federal Supplemental Security Income (SSI) level.  300 percent of SSI is the eligibility level set in SEA 493.  Presently, that means an income for an individual of just over $1,800 per month.  SEA 493 became the law in July of 2003 but previous administrations had openly balked at implementing its major provisions. 

Mr. Smith has also made it clear the Division of Aging is seeking ways to grow the capacity of home and community based services as quickly as possible.  There are important reasons for doing this.  One, SEA 493 cannot work and its savings cannot be achieved because a full array of HCBS is not available to consumers.  Two, Indiana has a moratorium on the growth of new nursing home beds.  When that moratorium is lifted HCBS capacity must be in place in order to prevent a possible run up in nursing home bed utilization.  That would also defeat the re-balancing objectives in SEA 493 and drive up costs for the state.   A third reason would be to demonstrate tangible SEA 493 successes prior to the 2007 legislative session. During that session the state’s next biennial budget will be enacted.

In the first quarter of the year Mr. Smith worked closely with AARP, The Generations Project, the Alzheimer’s Associations, and area agency on aging interests to design a capacity building plan through the establishment of a capacity work group.  He has since brought all provider interests into this process.   Recently providers have played a greatly enhanced role in the state’s capacity design and implementation plans including the development of a Medicaid bed buy out strategy.  Advocacy groups are worried this may signal a lessening of the role of consumers in shaping the SEA 493 process and could have a negative impact on the quality and cost of HCBS.

In state fiscal year 2007 the Division of Aging plans to “buy out” a minimum of 1,500 Medicaid beds from nursing homes as a means for reducing capacity.  According to Mr. Smith the money for the bed buy outs comes from a portion of the bed tax on nursing homes.  That portion has been used to establish a bed buy out and closure fund. 

While the bed tax on nursing homes sounds like a burden on those entities it is actually a source of revenue.  First enacted by the 2003 General Assembly at the urging of the nursing home industry, the bed tax is technically called a quality assessment fee charged for each Medicaid certified resident bed a nursing home contains.  However, the bed tax dollars are then used to draw down nearly 63 cents on the dollar from the federal government in matching funds.  Of the total funds generated by the bed tax the nursing home industry gets 80 percent and the remainder stays with the state.  That is the portion that is now being used to do one time “buy outs” of Medicaid certified beds. 

Without a doubt bed buy outs will reduce the number of Medicaid certified beds, but that strategy will only save the state money if the beds are not refilled and if the buy outs are not too generous.  Consumer groups believe the buy outs are much too expensive:  $10,000 for an empty bed and up to $25,000 for an occupied bed.  The buy outs can be seen as a form of double dipping by nursing homes.  Legally, it is not necessary to buy out beds:  they can be decertified by the state.  SEA 493 also allows nursing homes to convert to other businesses through the use of bonding.   However, the buy outs may be a necessary evil in order to minimize nursing home angst about the impact of implementing SEA 493.  Clearly, that industry will lose substantial market share over time with the expansion of HCBS if it fails to change as the system changes.

From the consumer perspective the bottom line must always be driven by the impact of public policies on the users of long term care.  In that context the question is whether or not the buy outs unintentionally slow down or even impede the ability to finance HCBS as quickly as they are needed in order to made SEA 493 work and to protect highly vulnerable LTC consumers.  A final word of caution regarding the closure of nursing home beds is the impact on consumers.  United Senior Action, a member of the Project, is presently studying this issue and has raised its concerns with the state on behalf of the Indiana Home Care Task Force.

The home and community based services that are getting special attention in the efforts of the Division of Aging to build capacity quickly are assisted living, adult foster care (also called adult family care), and adult day care.  Steve Smith and his program managers have talked at length with consumer groups and providers on how to develop these services as soon as possible through Medicaid waivers.  The analytical work of The Generations Project definitely supports the growth of these services in order to establish HCBS capacity.  These services clearly address a number of housing needs when trying to move people out of nursing homes.  Nonetheless, traditional home care and self-directed care must not be lost in the SEA 493 implementation process.  They are the most cost-effective and can ultimately serve the most people in HCBS settings.  Home care is already utilized on a significant scale through the CHOICE program and the aged and disabled Medicaid waiver.  As 493 is implemented it will be the aged and disabled waiver that receives the vast bulk of the enrollees in the new system during the coming biennium.  In the years that follow all of the HCBS options, including self-directed care, must see considerable growth if savings are to be realized and all persons who need LTC are properly served.

A service that has never received public funding in Indiana is adult foster care (AFC).  The Generations Project is very familiar with this service.  It received substantial review in the Project’s Moving Forward study and has been examined in detail by the member organizations of the Project.  The Project and AARP Indiana have had extensive dialogue with the officials in Oregon who pioneered publicly funded AFC.  Oregon has advised Indiana to carefully recruit families who want to provide AFC for humanitarian reasons in order keep inappropriate providers out of the LTC system.  At this point in time it is not clear if the Division of Aging will fully follow the lessons learned in Oregon.

The actions described in this article are clearly intended to implement the major features of SEA 493.  They are moving toward the promise of home and community based services for Indiana’s senior citizens and persons with disabilities. The coming weeks, months and years will test how well that promise is met as it is implemented under the Options nameplate.