September 19, 2006, marked the 20th anniversary of hearings held by the U.S. Senate Subcommittee on Health, Committee on Finance, in the midst of a series of proposed amendments to the Social Security Act to end what was described as the “institutional bias” of Medicaid in financing long-term supports for persons with intellectual and developmental disabilities (ID/DD). The contention that Medicaid was biased toward institutional as opposed to community services for persons with ID/DD had become a major issue in the 1980s (e.g., Taylor, 1981) and was easily supported with various statistics. For example, in June 1982, 84.5% of the people with ID/DD who were receiving either Medicaid Intermediate Care Facility/Mental Retardation (ICF/MR) or Home and Community-Based Services (HCBS), the latter first authorized in 1981, were living in public and private institutions of 76 or more residents, and 74.4% were living in institutions of 151 or more people (Lakin, Hill, & Bruininks, 1985).
In response, Senator John Chafee introduced The Community and Family Living amendments of 1983 (S. 2053), which proposed radical reform of Medicaid, most notably by phasing out all Medicaid funding for institutional services for persons with ID/DD over a 10- to 15-year period. These amendments would have made Medicaid's federal financial participation available for HCBS while phasing down 85% of the federal financial participation for institutions of 16 or more residents. A revised Community and Family Living Amendments of 1985 (S. 873) was re-introduced by Senator Chafee in the 99th Congress (1985–1986). Its introduction in the Senate was followed by a companion bill in the House (H.R. 2523) and by another somewhat modified House version (H.R. 2902, introduced by Representative James Florio). These bills would have promoted the development of community services by greatly reducing federal financial participation for institutions. Specifically, after 1989, federal payments for institutional services would have been steadily reduced with funding after Fiscal Year (FY) 2000, being limited to 15% of 1985 expenditures. Community settings would be limited to no more than three times the size of the average U.S. household, or 8 people (2.7 × 3). Existing settings of 9 to 15 residents would be able to retain full Medicaid funding, but any new settings of such sizes after 1985 would be treated in the same way as larger institutions. In addition to these proposals, in 1985, Senator Bill Bradley and Representative Ron Wyden introduced identical bills (S. 1277 and H.R. 2863) under the title, Medicaid Home and Community-Based Services Improvement Act. This legislation would have authorized states to deliver HCBS to persons who would have otherwise needed skilled nursing or ICF/MR services under their Medicaid State Plan without requiring a Waiver application or linking the number of HCBS recipients to reductions in otherwise needed ICF/MR capacity. Finally, in 1985 Senator Lowell Weicker introduced the Quality Services for Disabled Individuals Act of 1985 (S. 1948). It was intended to improve the quality of existing services for persons with ID/DD and mental illness and to authorize, indeed require, that states include HCBS in their regular Medicaid State Plan services (repealing the “Waiver” aspect of HCBS that has endured since).
In September 1986, at the end of the 99th Congress, all of these bills were still formally under consideration. In this context, the Subcommittee on Health, Senate Committee on Finance, scheduled a hearing to examine the role of Medicaid in supporting individuals with ID/DD, the issue of a Medicaid bias toward institutional care, and alternatives for program reform (Durenberger, 1987). Senator David Durenberger opened the hearing with questions: “Does the Medicaid program have a bias toward institutional care that is out of line with the needs of clients? Does that bias limit expansion or availability of what might be more desirable and effective for some developmental disabled individuals” (p. 2)?
Senator Weicker responded in his testimony, stating that “The Medicaid ICF/MR … program by everyone's assessment, is institutionally biased; at best it funds sheltered and limited opportunities and custodial care; and at worst, it promotes segregation, dependence and isolation” (p. 75). Ruth Luckasson, testifying on behalf of the American Association on Mental Retardation, summed up the bulk of the hearing's testimony, stating that:
Unnecessary and debilitating institutionalization must end. Congress has recognized this. Researchers, scholars, families and the disabled individuals themselves have recognized the potential of disabled individuals to live and work in the community, near family and friends. However, the funding mechanisms necessary to implement proper living arrangements have not only lagged behind, but have actually sustained an outmoded model of service delivery, at great cost both financially and in terms of harm to disabled citizens. (p. 277)
Ironically, despite the number of similarly directed proposed reforms and the overall support for significant reform, none of the bills introduced in the 99th Congress (1985–1986), nor the third of Senator Chafee's proposed amendments, the Medicaid Home and Community Quality Services Act of 1987, introduced with 17 co-sponsors in the 100th Congress in 1987 (S. 1693), ever reached a vote in either the Senate or House of Representatives. Still, these various proposals and the hearings around them, including the hearing on “Medicaid Financing of Services for Developmentally Disabled Persons” of September 19, 1986, signaled recognition that the federal Medicaid program needed to be reoriented from primarily supporting institutional services to being a much more significant factor in home and community services. Indeed, the September 1986 hearings were followed by 2 decades of truly remarkable change in Medicaid financing of home and community supports for people with ID/DD, but it all occurred without a single major piece of legislation requiring it.
Figure 1 shows the relative distribution of participants in Medicaid institutional and community service programs in June 1986. It can be seen from the figure that service recipients are put into service setting-size categories parallel to those specified in S. 873, with the exception that because statistics on settings of 8 or fewer are not available, settings of 6 or fewer have been used for the analysis. Specifically, the categories shown are home and community settings of 6 or fewer that would have been favored with full federal financial participation in S. 873; existing settings with 7–15 residents that would have been allowed to retain full Medicaid federal financial participation, but with new settings of more than 3 times the average household size treated as institutions; and ICFs/MR of 16 or more residents that gradually would have lost 85% of their federal Medicaid funding. The chart for 1986 emphasizes those services provided in 1986 that would have had continued full Medicaid support. As shown, only 23.7% of Medicaid recipients in June 1986 were receiving services that would have retained full federal financial participation under S. 873. The chart for 2005 shows the proportion of service recipients in June 2005 who remained in programs that under the provisions of S.873 would have incurred reduced federal financial participation. By 2005, only 12.8% of Medicaid ICF/MR and HCBS recipients were in programs for which reduced federal financial participation was proposed in S. 873, even though neither it, nor any of other of the proposed Medicaid reforms, was ever enacted. Clearly, even without its passage, much of what was intended by the Medicaid Community and Family Living Amendments was achieved, but the exceptions are notable too. There remained, 20 years after S. 873 was introduced, 61,171 persons in ICFs/ MR of 16 or more residents; and in 18 states the number of people in ICFs/MR of 7–15 residents increased after 1986 by a total of about 8,798 people. (In 21 other states the number of people in ICFs/ MR of 7–15 residents decreased by a total of 2,954 people.)
Table 1 presents these statistics in state-by-state breakdowns. It shows that the vast majority of states achieved, without passage of any of the Medicaid reform bills, the great bulk of what they were intended to promote. More than half of all states (26) supported 90% or more of their ICF/MR and HCBS recipients with ID/DD in settings that would have qualified for full federal financial participation under the provisions of S. 873. At the same time, S. 873 would have likely impelled, through greatly reduced federal financial participation, substantial reductions in institutional populations in a number of states, including 6 in which more than 25% of current Medicaid ICF/MR and HCBS recipients remain in settings that would have lost most of their federal financial participation had S. 873 been enacted. Twenty years following the Senate hearings of September 1986 on the question of whether there is an “institutional bias” in Medicaid services for persons with ID/DD, it would appear that the answer is no. To the question of whether the “community bias” proposed in S. 873 would have benefited people with ID/DD, however, the answer would appear to depend on which state an individual happens to live.