Assuring High Quality Home and Community-Based Care
Through Medicaid Reimbursement Provisions
© 2000 by National Health Law Program

Prepared by:
Jane Perkins
National Health Law Program
September 29, 2000

        In previous Issue Briefs, the National Health Law Program has provided an overview to Medicaid home and community-based waiver programs1 and discussed ways to address waiting lists for Medicaid home and community-based waivers.2 This Issue Brief looks at how the Medicaid Act payment provisions can be cited to improve quality of care in the delivery of home-based services, particularly Medicaid home and community-based waiver programs.

The following example, taken from the Benjamin H v. Ohl case in West Virginia,3 illustrates the problem:

Chad is a 32-year-old man with traumatic brain injury. With home health and personal care assistance, Chad can live in his own apartment. However, his condition demands consistency and a focus on social behavior. Unfortunately, individuals who are providing services to Chad through the Medicaid home and community-based waiver program are untrained and have consistently quit the job to take higher-paying work after making only a couple of visits to Chad's home. Chad is left without care or with inadequate care.

        Some providers have exhibited inappropriate behavior. On one occasion, Chad's mother was summoned to the apartment, only to find a 19-year-old care provider passed out on the sofa, naked from the waist down with beer cans strewn around him.

        Quality of care problems, such as those experienced by Chad, are occurring because there is a lack of oversight and enforcement of quality standards in home and community-based care settings. As noted in the previous Issue Briefs, state Medicaid agencies have enjoyed almost unchecked flexibility in how they administer their home and community-based services - so long as the federal government does not find the states' actions to be illegal or too expensive.

Recently, however, advocates for people with disabilities have been demanding that state Medicaid agencies address problems with the lack of access to high quality home health services. A number of Medicaid Act provisions are being cited in these advocacy efforts, including the Act's reasonable promptness requirements.4  In addition, child health advocates are seeking improvements based on Medicaid Early and Periodic Screening, Diagnosis and Treatment laws that require timely treatment services from a broad base of providers.5 The reader is referred to the National Health Law Program's May 2000 Issue Brief for discussion of these provisions.6

        This Issue Brief looks at Medicaid Act provisions that are designed to assure that payment rates are consistent with quality of care and sufficient to ensure adequate access.7 First, a brief overview to the Medicaid program is provided.

A.  Medicaid Background

Title XIX of the Social Security Act, 42 U.S.C. § 1396 et seq., sets forth the provisions governing Medicaid. Medicaid is a joint federal and state program to provide medical care for needy individuals. States are not required to participate in Medicaid. However, once a state elects to participate, it must do so in accordance with the mandatory requirements of the federal Medicaid statute and regulations.8

Under federal law, covered services are to be rendered by qualified providers to Medicaid-eligible persons, and -- absent express waiver -- beneficiaries are to have a free choice of qualified providers.9 The state makes payments directly to these providers. Except for nominal copayments,10 the provider cannot bill the beneficiary for services; rather, Medicaid payment must be accepted as payment in full.11

B.  The requirement for adequate payment rates

The state Medicaid agency must also comply with 42 U.S.C. § 1396a(a)(30)(A), which requires the state to:

provide methods and procedures relating to utilization of, and the payment for, care and services available under the plan ... to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.12

"The purpose of this subsection is to ensure adequate access and quality of care in the context of noninstitutional Medicaid providers."13 As such, adequate enforcement and oversight of this provision is critical to the ensuring high quality home care services.14

At the outset of their efforts to obtain compliance with section a(a)(30)(A), advocates should be aware of a number of factors. First, because the provision ties quality and access to payment rates, the nature of investigation and relief must, per force, also be tied to payment issues. Second, there are two parts to the law and, as discussed below, advocates will need to take different steps depending on whether one or both of the sections are used. Third, there is a split among the circuits regarding how the law is to be enforced, a factor that is also discussed below.

3.   The two parts of a(a)(30)(A)

Section 1396a(a)(30)(A) has been a part of the Medicaid Act since 1968. Originally, the provision was limited to the requirement that rates be consistent with efficiency, economy and quality of care. However, in 1989, the Act was amended to add the requirement that payments be "sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area."15 Previously, this "equal access" requirement had been implemented only through a regulation, 42 C.F .R. § 447.204. In legislative history, Congress explained that it was adding this section to the statute because states were improperly limiting provider fees as "one method of controlling program costs."16Medicaid eligibility would be meaningless if providers are not willing to treat Medicaid recipients, and "without adequate payment levels, it is simply unrealistic to expect physicians to participate in the program 17

The two parts of this provision are significant to advocacy efforts. Notably, it is the second part of section a(a)(30)(A), the equal access requirement, that has received most attention from the courts.18 Thus, theory and reasoning regarding private enforcement of the equal access provision, standards for proving a violation, and potential remedies for a violation are more developed.

In Clark v. Kizer, for instance, federal courts in California looked at the equal access requirement (while still in regulatory form) and held that payment rates do not ensure sufficient access if they are "far below any reasonable estimate of what it actually costs providers to render the services."19 The Clark court, which looked at access to dental care, was also persuaded by the fact that "the present rates are not even adequate to meet overhead, let alone allowing for some marginal profit."20

The access factor also compares "access of beneficiaries to the access of other individuals in the same geographic area with private or public coverage."21 In most states, there will be only limited private insurance markets against which Medicaid home care payments and access can be compared. Public coverage may be as or more relevant, including Medicare, school-based programs, and other Medicaid waiver programs in the state. Courts have also found that rates paid by neighboring states for the same or similar services are relevant to determining whether a state meets the access requirement.22

4.   Standards of review

Nothing in the Medicaid Act sets a minimum rate of reimbursement that states must provide. However, every court that has reviewed section a(a)(30)(A) has held that it does require states to take the necessary steps to ensure that rates are consistent with the four factors set forth in the statute -- efficiency, economy, quality of care, and access. Courts have developed differing standards for reviewing states' actions against the statutory factors: a process-oriented standard and a result-oriented standard.

The Eighth and Ninth Circuit Courts of Appeal and the Ohio Supreme Court have applied a process-oriented standard to meeting the statutory demands. Specifically, the state Medicaid agency must undertake a process of investigation or study to justify its rates and, thus, ensure future results. In Arkansas Medical Soc'y v. Reynolds,23the court examined Medicaid rates for home health benefits, personal care services, and other outpatient services, and required the state to employ objective study when setting these rates.

[T]he state must consider, on the basis of some reasonably principled analysis, the substantive requirements of 42 U.S.C. § 1396a(a)(30)(A) in setting its payment rates. The state's payment rates are not proper if the methods and procedures it utilizes in formulating its rates, rather than being bona fide and objective, are merely an exercise to make the best case to support the state's rates, and the state considers only factors favorable to its position while failing to consider the relevant factors.24

The Ninth Circuit has further concluded that a state "cannot know if it is setting rates that are consistent with efficiency, economy, quality of care and access without considering the costs of providing such services."25 Thus, the Medicaid agency was required to "rely on responsible cost studies, its own or others, that provide reliable data as a basis for its rate setting."26

By contrast, the Courts of Appeal for the Third and Seventh Circuits use a result-oriented approach when applying the statute. These Circuits hold that section 1396a(a)(30)(A) requires "each state to provide a result, not to employ any particular methodology for getting there."27

The result-oriented standard is not without benchmarks, however. First, the state must "assure" that the four statutory outcomes will occur. The Third Circuit defines "assure" to mean "'to make certain and put beyond doubt ... to ... ensure positively.'"28Second, the process used by the state must be "reasonable and sound."29 It must "protect the public from possible ill effects of an agency testing out new formulae or prices at random, then correcting the results once a violation has occurred."30 Finally, a state cannot act arbitrarily or capriciously. For example, a state cannot simply "act like any other buyer of health care by offering a certain price, and seeing what response or result that price brings forth."31 Also, states may not rely on factors other than those intended by Congress.32

5.   Advocacy to enforce the Provision

This discussion of the legal standards suggests a number of advocacy strategies for enforcing section a(a)(30)(A). These are listed below:

a.   Most courts have not ruled on whether a process or result standard is to be applied. Therefore, advocates should prepare to show that under either standard the current payment rates fall short of ensuring efficiency, economy, quality, and access.

b.   Quality of care and access problems must be illustrated by the stories of Medicaid beneficiaries and family members. After describing medical condition and treatment needs, individuals should illustrate how sporadic care; gaps in care, and care from inadequately trained providers have affected them. For example, a plaintiff in the Ball v. Biedess case in Arizona described how she was left alone on numerous occasions when her home care worker failed to show up for work, leaving her stranded in bed, sometimes more than 12 hours, unable to turn, eat any meals, or use the bedpan.33 If applicable, stories should include instances where families have supplemented the Medicaid payment rate with out of pocket payments to providers.

c.   Quality of care and equal access problems should also be described by the providers themselves, for example, behavioral health centers and home health agencies contracting with the state to provide services to waiver beneficiaries. These providers should describe the relation between their costs and Medicaid payments, the extent to which the rate structure allows them to provide training and fringe benefits to direct care workers, and turnover rates in their work force. They should be prepared to show the relationship between a lack of adequately trained providers and gaps in services to payment rates.34

d.   Quality of care problems should be verified by experts who can talk about the relationship among wages, reimbursement rates, and turnover rates and present evidence that the problem is recurring among home care beneficiaries.35

e.   Quality of care and access problems can also be illustrated through the stories of home health workers who have moved on to other jobs. Testimony in the Benjamin H case disclosed that many of these workers received no fringe benefits, were not reimbursed for travel (sometimes extensive) to get to beneficiaries' homes, and that they could earn more working for a fast food chain. Home care agencies or experts may also be used to conduct exit surveys of these workers.

f.   Equal access problems should be illustrated by comparing access to the services by individuals who are privately insured (where relevant) or publicly insured through, for example, Medicare, school-based programs, other Medicaid waiver programs funding by the state, or the state's payment rates for similar services in institutional settings.36

Conclusion

   Medicaid home health and personal care attendant benefits are of little use to beneficiaries if qualified providers are not available in a timely manner. Similarly, home and community-based waivers offer an enriched package of benefits to beneficiaries, but these benefits do not exist beyond the treatment plan if there are not adequate numbers of qualified service providers. Previous Issue Briefs have discussed the importance of Medicaid laws requiring reasonable promptness in the delivery of services, free choice of services, and Early and Periodic Screening, Diagnosis and Treatment for children. This Issue Brief has described activities that are underway to enforce the Medicaid Act requirement that payment rates be consistent with efficiency, economy, quality of care, and equal access.

1 See Manju Kulkarni, Fact Sheet: Accessing Medicaid Home and Community-based Services (Mar. 2000).

2 See Jane Perkins & Manju Kulkarni, Addressing Home and Community-based Waiver Waiting Lists Through the Medicaid Program (May 2000).

3 Civ. Action No. 3:99-0338 (S.D. W.Va.) (pleadings on file with authors, preliminary injunction and settlement available at http://www.healthlaw.orgipubs/199907benjamin.html).

4 42 U.S.C. § 1396a(a)(8). See also 42 C.F.R. 435.930(a) (delay should not be caused by the agency's administrative processes); 42 C.F.R. 435.930(b) (agency must "[c]ontinue to furnish Medicaid regularly to all eligible individuals until they are found to be ineligible.").

5 42 U.S.C. § 1396a(a)(10)(A), 1396a(a)(43), 1396d(a)(4)(B), 1396d(r); 42 C.F.R. §§ 441.56(e),441.61(b).

6 See Jane Perkins & Manju Kulkarni, Addressing Home And Community-Based Waiver Waiting Lists Through The Medicaid Program (May 2000). See also Jane Perkins & Randolph T. Boyle, Addressing Long Waits for Home and Community-based Care Through Medicaid and the ADA, __ St. Louis L. Rev. __ (forthcoming 2000).

7 This Issue Brief does not discuss the Americans with Disabilities Act, 42 U.S.C. § 12131 et seq., or Section 504 of the Rehabilitation Act, 29 U.S.C. § 794. These laws are an integral part of the advocacy effort. But see generally Black v. Dept' of Mental Health, 2000

Cal. App. LEXIS 711 (Sept. 11, 2000) (provision of inappropriate care does not violate the ADA integration mandate). The Issue Brief format also prohibits in-depth discussion of another relevant Medicaid provision, 42 U.S.C. §§ 1396n(c)(2)(A), 1396n(d)(2)(A). This law authorizes home and community-based waivers and requires states to provide assurances to the Secretary of Health and Human Services that "necessary safeguards (including adequate standards for provider participation) have been taken to protect the health and welfare of individuals provided services under the waiver " Id. Courts have allowed Medicaid beneficiaries to enforce this provision. See Wood v. Tompkins, 33 F.3d 600 (6th Cir. 1994), aff'g in part and rev'g in part, Wood v. Wallace, 825 F. Supp. 177 (S.D. Ohio 1993) (discussing enforcement of §§ 1396n(c)(2)(A), (B), (C), and (E); 42 C.F.R. §§ 441.302(a), (c), (d), and (t)(2)). See also Rolland v. Cellucci, 52 F. Supp. 2d 231 (D. Mass. 1999); Cramerv. Chiles, 33 F. Supp.2d 1342 (S.D. Fla. 1999) (discussing § 1396n(c)(2)(C)); Cherryv. Thompkins, No. C-I-94-460 (S.D. Ohio, Mar. 31, 1995), reprinted in Medicare & Medicaid Guide (CCH) ΒΆ 43,485 (discussing enforcement of §1396n(c)(2)).

8 See, e.g., Wilder v. Virginia Hosp. Ass'n, 496 U.S. 498, 500 (1990).

9 See 42 U.S.C. § 1396a(a)(23); 42 C.F.R. § 431.51.

10 See 42 U.S.C. § 1396o; 42 C.F.R. § 447.53.

11 See 42C.F.R.§ 447.15.

12 42 U .S.C. § 1396a(a)(30)(A); 42 C.F .R. § 447.204. Notice must be published in advance of significant changes in the statewide method or level of reimbursement for Medicaid services. See 42 C.F.R. § 447.205. See, e.g., Independent Acceptance Co. d/b/a San Bruno Convalescent Hosp. v. Belshe, 204 F.3d 1247 (9th Cir. 2000) (upholding approval of rate amendments); State of New York v. Shalala, 119 F.3d 175 (2d Cir. 1997); Visiting Nurse Ass'n ofN. Shore v. Bullen, 93 F.3d 997, 1010 (1 st Cir. 1996); Oklahoma v. Shalala, 42 F. 3d 595 (10th Cir. 1994) (upholding HCFA disapproval of state reimbursement plan for lack of notice).

13 Arkansas Medical Society v. Reynolds, 6 F.3d 519,530 (8th Cir. 1993). See also, e.g., DeGregorio v. O'Bannon, 500 F. Supp. 541, 549-50 (E.D. Pa. 1980) (law requires states to design reimbursement formula to engage sufficient providers "to make the state's Medicaid program meaningful in all respects"); Ohio Hosp. Ass'n v. Ohio Dep't of Human Serv., 62 Ohio St. 3d 97, 100-01,579 N.E.2d 695,698 (S. Ct. 1991) ("Medicaid statutes impose a duty on state programs to adequately reimburse their Medicaid providers.").

14 The Medicaid Act lists provisions that can be waived when a state implements a Medicaid home and community-based waiver program; § 1396a(a)(30)(A) is not among them. See 42 U.S.C. § 1396n(c)(3). See generally Letter from George J Schieber, Ph.D., Director, HCFA Office of Research and Demonstrations, to H. Russell White, Commissioner, Tennessee Dept. of Health (Mar. 25, 1994) (stating that a(a)(30)(A) continues to apply in managed care waiver programs) (available from National Health Law Program, Los Angeles, CA).

15 Omnibus Budget Reconciliation Act of 1989, Pub. L. No.101-239, §6402(a).

16 Report of the House Budget Committee on H.R. 3299 (Sept. 20, 1989) reprinted in Medicare & Medicaid Guide (CCH), Extra Edition No. 596 (Oct. 5, 1990) at 390.

17 Id.

18 For a docket of provider participation cases, see National Health Law Program, Provider Participation Docket (ongoing updates) (available from National Health Law Program, Los Angeles, CA).

19 758 F. Supp. 572, 577 (B.D. Cal. 1990), aff'd in part and vacated in part on other grounds sub nom., Clark v. Coye, 967 F.2d 585 (9th Cir. 1992) (additional case history omitted).

20 Id. at 577.

21 H.R. Rep. No. 1010-247, 101st Cong., 1st Sess 390 (1989), reprinted in 1989 U.S.C.C.A.N. 2060, 2116.

22 See Rite Aid of Pennsylvania v. Houstoun, 171 F.3d 842,848-49,855 (3d Cir. 1999) (citing with favor the Department's reliance on reimbursement rates in neighboring state). Compare Arkansas Med. Society, 6 F .3d at 530 (refusing to rely on Medicaid agency's contention that it considered rates paid in other states, in a case where the other states were unnamed).

23 819 F. Supp. 816 (E.D. Ark.), aff'd, 6 F.3d 519 (8th Cir. 1993).

24 6 F .3d at 530 (affirming the district court, holding that the agency "must offer evidence to show that the relevant factors have been considered").

25 Orthopaedic Hosp. v. Belshe, 103 F.3d 1491, 1496 (9th Cir. 1997), cert. denied, 522 U.S. 1044 (1998).

26 Id. See also Ohio Hosp. Ass'n v. Ohio Dep't of Human Serv., 62 Ohio St. 3d 97, 102, 579 N.E.2d 695,698-99 (Ohio S.Ct. 1991) (invalidating outpatient hospital rate regulation as "adopted solely for budgetary reasons without due consideration of its effect on the quality of care").

27 Methodist Hosp. v. Sullivan, 91 F .3d 1026, 1030 (7th Cir. 1996) (emphasis in original). See also Rite Aid, 171 F.3d at 851 ("We conclude that section 30(A) mandates only substantive compliance with its specified factors of efficiency, economy, quality of care, and access").

28 Rite Aid, 171 F .3d at 851 (quoting Black's Law Dictionary 123 (6th ed. 1990)).

29 Id. at 853.

30 Id. at 852.

31 Id. at 851-52. But see Methodist Hosp., 91 F .3d at 1029.

32 Rite Aid. 171 F.3d at 853.

33 See Ball v. Biedess, No. CIV-00-67 TUC ACM (D. Ariz. May 2000) (Interveners' Amended Complaint).

34 See Wolf Prado-Steiman v. Bush, Civ. No. 98-6496-CN-FERGUSON (D. Fla. 2000) (Settlement Agreement) (available from NAPAS, Washington, DC). The parties have entered into an agreement, pending court approval. The agreement requires provision of home and community-based services in a timely manner. The state also agrees to develop and implement a direct care staff training program to ensure competency in direct care delivery, use a client based quality assurance system, launch citizen monitoring of community services, and undertake a comprehensive study to determine whether payment rates for community services are adequate. Id.

35 See Benjamin H v. Ohl, Civ. No. 3:99-0338 (S.D.W.Va. Aug. 9, 2000) (Memorandum Opinion and Order as to Count VIII) (available from NHeLP, Los Angeles, CA). While the court found beneficiaries provided a "compelling description of the inadequacies of the Waiver program ... and the Defendant offered no evidence to rebut it," it insisted on having evidence that the complaints were recurring among Waiver recipients. Id.

36 See Sanchez v. Johnson, Civ. No. C-00-1593 (N.D. Cal, May 4,2000) (Complaint) (available from NAPAS, Washington, DC). This complaint challenges the adequacy of community-based services, in part, by comparing the wages and benefits to direct workers in community-based settings versus in institutions and alleges that the state has placed a far lower value on the community-based services.

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