Over the last 3 decades, services for persons with mental retardation and developmental disabilities (MR/DD) in the United State have been largely transformed from institution-based to community-based service systems. This transformation has been facilitated by the appropriation of substantial new state and federal funding for community services and, in some states, by internally reallocating institutional funding to community settings. Today, forces are converging to further induce state governments to expand community services and family support programs. The Supreme Court's decision in Olmstead v. L.C. (1999) challenges all states under provisions of the Americans With Disabilities Act (ADA) to develop a comprehensive array of community services and supports. Complying with the ADA means developing and implementing plans for placing persons with disabilities in less restrictive settings within a reasonable period of time (Fox-Grage, Folkemer, & Horahan, 2001). A second force encouraging states to expand community programs is related to the continuing growth of unmet service needs. Currently, lawsuits in 15 states address waiting-list issues. These lawsuits are exemplified by the settlement agreement in Boulet et al. v. Cellucci et al. (2000), which commits the Commonwealth of Massachusetts to expend $355.8 million during 2002–-2006 to expand community services (Smith, 2001).
In this report, we highlight a potential source of revenue to address Olmstead and growing waiting lists in state MR/DD service systems—the use of existing state MR/DD resources not currently used for matching purposes to leverage additional federal MR/DD funding. As shown in Figure 1, a complicated mix of revenue sources underpins the MR/DD service system in the states. Although states largely control the allocation of resources and the type of services that are available within their borders, the finances that support MR/DD services come from a combination of federal and state sources. Federal revenue sources include Medicaid funds available through the Home and Community-Based Services (HCBS) Waiver, the Intermediate Care Facilities for the Mentally Retarded (ICF/MR) program, and Supplemental Security Income (SSI) payments. Federal Medicaid funds are available to states that opt to participate in the HCBS Waiver and the ICF/MR program; however, extensive matching funds from the states are required, ranging between 23% and 50% of total federal–state Medicaid funding.
Figure 1 also illustrates the rapid growth in federal–state HCBS Waiver spending from 1989–1998, which averaged 27% per year. In contrast, federal–state spending for public and private ICFs/MR of all sizes advanced only 2% per year during the same 10-year period. Over the past 2 decades, approximately four fifths of total ICF/MR spending was allocated to public and private 16+ person institutions. In 1998, HCBS Waiver spending comprised 28% of total MR/DD spending nationally, whereas ICF/MR spending constituted 39% of the total.
“Other Medicaid” in Figure 1 constituted 7% of total MR/DD spending in 1998 and consisted of federal–state spending for clinic and rehabilitative services, case management services, personal care, community Medicaid administrative services, and Model 50/200 Waiver services for children with severe disabilities. “Other federal funds,” which constituted 6% of spending, were derived from SSI payments and Adult Disabled Child (ADC) benefits for HCBS Waiver participants, miscellaneous federal project grant funds, and Social Services Block Grant (SSBG) resources.
The balance of total MR/DD spending in 1998—$5.1 billion—consisted of unmatched state funding, which was almost exclusively utilized for various community services and family support programs in the states. As shown in Figure 1, the volume of unmatched state funding has declined by about 2% per year in inflation-adjusted terms over the past decade. As a proportion of total MR/DD spending, unmatched state funds in the U.S. declined dramatically, from 61% in 1977 to 20% in 1998.
Table 1 presents the estimated amounts of “unmatched” state-by-state funding potentially available to draw down increased federal financial participation under the Medicaid HCBS Waiver or the ICF/MR program. Fifteen states had higher percentages of unmatched state funds than the 20% national average. The reasons for the levels of unmatched state funds are multiple and complex, including Medicaid-eligibility issues and the reluctance in many states to “Medicaid” family support services.
Currently, there are a number of initiatives in the states to leverage unmatched state funds. Ohio and Pennsylvania have plans to substantially expand their HCBS Waivers. Colorado and Montana are capturing additional Waiver funding for supported employment services, and Wyoming has extended its HCBS Waiver to include individuals previously funded only through state contracts (“Ohio requests expansion of Waiver resources,” 2000). States with relatively high volumes of unmatched state funds should engage stakeholders in the identification of barriers to the expansion of Medicaid reimbursement. Using unmatched state funds to match additional Medicaid HCBS resources is one way many states may be able to expand the capacity of their community services and family support programs, even as the economies of these states may be slowing down and restricting tax revenues. It is also a means by which states can be responsive to the Supreme Court's Olmstead decision and to growing waiting lists.