Home Care Might Be Cheaper, But States Still Fear It Disagreement persists over whether moving people out of institutions and nursing homes and into home-based care will save or cost money.

Home Care Might Be Cheaper, But States Still Fear It

For states, it's the big unanswered question about expanding opportunities for elderly and disabled people to get their long-term care at home: How much is all this going to cost?

In 1999, the U.S. Supreme Court ruling in Olmstead v. L.C. said that the unnecessary institutionalization of people with disabilities is a form of discrimination. State Medicaid programs are required to provide alternatives so that the elderly and disabled can choose to get their care at home, instead of in state institutions or nursing homes. But the Supreme Court said there were limits. A doctor, representing the state, has to determine that the person is capable of living at home. The person has to want to get that care at home. And a state when considering its responsibility to move people out of institutions can consider its own budgetary constraints.

That makes the cost issue important. But there's disagreement over whether moving people out of institutions and nursing homes and into home-based care will save or cost money.

Advocates for what's called "home- and community-based care" -- HCBS -- say it almost always costs less to care for someone in his own home instead of in an institution. A June 2009 report by the AARP Public Policy Institute estimates that "on average, the Medicaid program can provide HCBS to three people for the cost of serving one person in a nursing home." This is because the cost of care is more tailored to the needs of an individual. And in most cases, people who live at home need less than the 24-hour care that's paid for in institutions.

But Janice Zalen, of the American Health Care Association, the largest association of long-term care providers, argues that this is an "apples to oranges" comparison. The cost of a nursing home includes the cost of food and rent. But calculations of home-based care often include just the cost of services, such as an aide to come in several hours of day to provide care.

And Zalen argues that when someone moves from a nursing home into a home-based program, there is still likely to be someone else who moves into that nursing home, who still gets government-funded care. An April 2007 study for AHCA, by Avalere Health, a health care research and consulting firm, found that while nursing home "cost growth has slowed in some states," those savings for states were offset "in many instances" by growth in community-based care.

Home Or Nursing Home: America's Empty Promise To Give Elderly, Disabled A Choice

About this series:

There's been a quiet revolution in the way the elderly and young people with disabilities get long-term health care. A new legal right has emerged for people in the Medicaid program to get that care at home, not in a nursing home.

States, slowly, have started spending more on this "home- and community-based care." But there are barriers to change: Federal policies are contradictory, and states face record budget deficits. As a result, for many in nursing homes — or trying to avoid entering one — this means the promise to live at home remains an empty promise.

But three researchers from the University of California, San Francisco found, in a January/February 2009 study in the journal Health Affairs, that expansion of home-based care can save states money over the long run. The paper, by H. Stephen Kaye, Mitchell LaPlante and Charlene Harrington, looked at Medicaid data from 1995 to 2005. States incurred extra cost when they spent to create new social service programs to care for people at home, but that expense, over time, paid for itself because it was cheaper to care for people at home.

Policymakers often cite the "woodwork effect" as a reason to worry about expanding home-based care. This is the argument that if states provided people what they want -- home-based care -- then more people will demand the services and costs will go up. Currently, nursing home care is the one thing states are required to provide. But many people fear going into a nursing home. So their family members provide the care at home.

State policymakers know that they benefit from this "free" care (although it comes at a cost to the caregiver in lost wages and retirement savings, in stress and poor health care). And policymakers worry that if a more attractive alternative is available, then people will come out of the "woodwork" to demand this new service, and that, as a result, the state's costs would rise. (Even the term, "the woodwork effect," is now controversial. Joann Lamphere of the AARP notes: "AARP doesn't think people are cockroaches.")

But Kaye, LaPlante and Harrington found that states "largely" were able to avoid the "feared" growth in costs. For one thing, federal rules allow states to put limits on the costs of home-based-care programs. States can create waiting lists. Another study by Harrington found that, across the country, there are 400,000 people on state waiting lists for home- and community-based care. That number doubled over 10 years.

States can't, however, keep waiting lists for people who are eligible for nursing home care. This reflects what's called Medicaid's "institutional bias." Nursing home care is an entitlement, but home-based care is not. In 1999, the year of the Olmstead decision, states spent about 25 percent of their Medicaid long-term-care budgets on home-based care. There's been a steady increase since. Now states spend 66 percent of their long-term-care for the disabled and elderly on nursing homes and 34 percent on home-based care. But that's still not enough to keep waiting lists from growing.

There have been failed attempts in Congress to end this "institutional bias" in Medicaid. The Community Choice Act would make it mandatory for state Medicaid programs to pay for eligible people to live at home instead of in a nursing home. The Congressional Budget Office estimates this would cost about $5 billion a year. Congress rejected a push to make the bill part of this year's health care overhaul. But the final bill did dangle enhanced funding for states that expand home-based care.