Medicaid Payment for Services Delivered in Residential Care Settings

Residential care settings (RCS) are a diverse set of community-based settings for individuals who are unable to live independently due to functional or cognitive limitations. RCS include homes where a few beneficiaries reside with a provider or paid caregiver and larger group settings where a beneficiary may live in his or her own apartment (Carder et al. 2015).  RCS vary in the types of services they provide and the degree of impairment of the populations they serve. Personal care services, such as assistance with activities of daily living and instrumental activities of daily living, are commonly offered in RCS (Carder et al. 2015). Some RCS include dementia care units, which provide specialized services to individuals with Alzheimer’s disease or other forms of dementia (Carder et al. 2015).

To better understand the role of RCS in delivering home- and community-based services (HCBS) to Medicaid beneficiaries and policies that states use to make these settings more affordable for Medicaid beneficiaries, MACPAC contracted with RTI International to examine state policies for payment and coverage of services in RCS. RTI conducted this research from September 2015 to May 2016.

The detailed state-level information RTI compiled is presented in the following tables:

Table 1 lists the terms used for residential care licensing in each state, as well as the state’s Medicaid service terms. RCS are regulated primarily by state laws. All states license at least one type of RCS, but nearly half of states (23) have more than one licensure category for these settings (Carder et al. 2015).

Table 2 identifies the state plan and waiver authorities that states use to cover services in RCS. States can use one or more Medicaid authorities to cover services in RCS, including Section 1915(c) HCBS waivers, Section 1115 research and demonstration waivers, and several state plan authorities.

Table 3 provides a high-level overview of the type of rate-setting methodology used in each state. These include:

  • flat rates, which provide the same payment regardless of the type of services provided;
  • tiered rates, which account for different levels of care needs;
  • case mix rates, which also account for differences in care needs but may use a sliding scale instead of distinct tiers;
  • cost-based rates, which are based on individual provider’s costs;
  • fee-for-service rates, where payments are made for individual service units (e.g. hours); and
  • negotiated rates, which are mainly used in states with managed long-term services and supports.

Table 4 provides additional detail on each state’s rate-setting methodology for each authority used to cover services in RCS.

Table 5 identifies strategies states use to make room and board more affordable. These include:

  • offering monthly supplements to Supplemental Security Income to help Medicaid beneficiaries pay for room and board;
  • limiting what RCS can charge Medicaid beneficiaries for room and board by setting a combined rate that includes costs for both services and room and board (the state only pays the service costs);
  • limiting the amount facilities can charge Medicaid beneficiaries for room and board; and
  • allowing family members to supplement room and board costs.