Analysis of the 2007-08 Budget Bill: Health and Social Services

In-Home Supportive Services

The In-Home Supportive Services (IHSS) program provides various services to eligible aged, blind, and disabled persons who are unable to remain safely in their own homes without such assistance. An individual is eligible for IHSS if he or she lives in his or her own home—or is capable of safely doing so if IHSS is provided—and meets specific criteria related to eligibility for the Supplemental Security Income/State Supplementary Program. In August 2004, the U.S. Department of Health and Human Services approved a Medicaid Section 1115 demonstration waiver that made about 93 percent of IHSS recipients eligible for federal financial participation. Prior to the waiver, about 25 percent of the caseload were not eligible for federal funding and were served in the state-only “residual” program.

The budget proposes nearly $1.5 billion from the General Fund for support of the IHSS program in 2007-08, an increase of $27 million (1.9 percent) compared to estimated expenditures in the current year. This increase is attributable to caseload growth partially offset by increased savings from full implementation of the quality assurance reforms enacted in 2004-05.

IHSS Caseloads Overbudgeted

We recommend that proposed General Fund spending for In-Home Supportive Services be reduced by $26.9 million in 2006-07 and $33.9 million for 2007-08 because the caseload is overstated. (Reduce Item 5180-111-001 by $33.9 million.)

Governor’s Budget. For 2006-07, the revised budget for IHSS assumes that the caseload will grow by 6.4 percent over the previous year. As a result, the budget estimates the average number of IHSS cases to be 375,000 in 2006-07, as shown in Figure 1. The Governor’s budget estimates that the IHSS caseload will reach 395,000 cases in the budget year, an increase of 5.4 percent over the current year.

LAO Estimate. Based on our review, we conclude that the Governor’s caseload projections for the current and budget year are overstated. Our conclusion is based on an examination of the actual caseload for the first six months of 2006-07, which indicates that the average monthly caseload is significantly below the Governor’s current estimate for that six month period. We have adjusted the budget’s caseload downward to account for the most recent actual monthly caseload (December 2006). Figure 1 reflects this adjustment, and shows that the total caseload is overstated by 2 percent for 2006-07 and by 2.5 percent for 2007-08. Because the caseload is overstated, we estimate that the IHSS program is overbudgeted by $77.6 million ($26.9 million General Fund) in 2006-07, and $97.7 million ($33.9 million General Fund) in 2007-08. Accordingly, we recommend that the Legislature recognize a General Fund savings of $26.9 million in 2006-07 and reduce the IHSS budget by $33.9 million General Fund in 2007-08.

A separate analysis of unaudited monthly cash expenditures for the program indicates that IHSS savings may be even greater than indicated above. Six months into the year, monthly cash expenditures are running below where one would expect them to be, given the amount of funding appropriated for the program. The lower-than-expected expenditures suggest that the IHSS cost per case is declining. However, we are reluctant to recognize additional savings at this time because (1) the expenditures are unaudited and (2) the budget already reflects a reduction in the cost per case due to full implementation of the quality assurance initiative. We will continue to monitor expenditures and report to the Legislature on the IHSS caseload and expenditures at the May Revision.

Freezing State Participation in Provider Wages

The budget proposes to limit state participation in provider wages and benefits. This proposal results in General Fund savings of at least $14 million in 2007-08, plus substantial cost avoidance in future years. We review current law regarding state participation in wages, describe the General Fund exposure associated with current law, and provide alternatives to the Governor’s proposal.

Program Funding. The federal, state, and local governments share in the cost of the IHSS program. The federal government pays for 50 percent of program costs that are eligible for reimbursement through the Medicaid Program. Under the recently approved Medicaid demonstration waiver, about 93 percent of cases receive federal funding. The state pays 65 percent and the counties pay 35 percent of the nonfederal share of provider wages.

State Participation in Wage Increases. Chapter 108, Statutes of 2000 (AB 2876, Aroner), authorized the state to pay 65 percent of the nonfederal cost of a series of wage increases for IHSS providers working in counties that have established “public authorities.” The public authorities, on behalf of counties, negotiate wage increases with the representatives of IHSS providers. The wage increases began with $1.75 per hour in 2000-01, potentially to be followed by additional increases of $1 per year, up to a maximum wage of $11.50 per hour. Chapter 108 also authorizes state participation in health benefits worth up to 60 cents per hour worked.

State participation in wage increases after 2000-01 is contingent upon meeting a revenue “trigger” whereby state General Fund revenues and transfers grow by at least 5 percent since the last time wages were increased. Pursuant to this revenue trigger, the state currently participates in wages of $10.50 per hour plus 60 cents for health benefits, for a total of $11.10 per hour. Based on current revenue estimates, the final trigger increasing state participation in wages to $12.10 per hour would be pulled for 2007-08.

Future General Fund Exposure. Although the state participates in wages up to $11.10 per hour, current county wages range from $7.50 to $13.30 per hour. Figure 2 shows that several large counties, such as Los Angeles, San Diego, and Riverside have wages below $11.10. Given that these large counties are below $11.10, the state General Fund faces significant exposure to increased costs if counties increase wages. Specifically, if all counties were to increase their wages to $11.10 per hour, the increased annual cost to the General Fund would be about $225 million. Once the final wage trigger is pulled, allowing state participation in wages up to $12.10 per hour, the General Fund exposure increases by $125 million to a total of about $350 million annually. It is difficult to estimate how fast wages will increase, as wage increases are largely dependent on county fiscal health and collective bargaining outcomes. Nevertheless, we believe it will take several years to reach the $350 million in additional annual costs. As a point of reference, from July to November 2006, the General Fund costs from increased wages and benefits was about $20 million.

Governor’s Proposal. The budget proposes to freeze state participation in wages and benefits. Such a freeze results in a savings of $14 million in 2007-08. This is because some counties already pay providers over $11.10, and absent this proposal, the state would have to increase its participation in those wages. Depending on the degree to which the remaining counties would have increased wages absent this proposal, the Governor’s approach would result in additional, unknown cost avoidance in 2007-08. Finally, the Governor’s proposal eliminates the $350 million future exposure discussed above.

We note that the Governor’s proposal does not limit the wages paid to IHSS providers; rather, it caps state participation to the level in effect on the date the freeze is enacted. Counties that elect to pay wages above what they were paying as of the wage freeze would share such wage cost increases with the federal government (50 percent county and 50 percent federal). The state would continue to pay its 65 percent share of the nonfederal costs of wages up to the county wage in place on the date of the wage freeze. This means that the counties that have higher wages in place at the time of the freeze would lock in a greater degree of state participation prospectively than the counties with lower wages as of that date.

Current-Year Wage Increases. The administration believes it has the authority to freeze state participation in wages to January 10, 2007 levels during 2006-07. However, the administration now indicates that it will continue to participate in post-January 10, 2007 wage increases until its urgency legislation proposal prospectively limiting state participation is enacted by the Legislature.

Impacts on Recipients and Providers. In the short term, we believe that freezing wages at their current levels will have minimal influence on the supply of available IHSS providers. However, in the long run, if counties decide that they cannot afford to increase wages without state participation, there may be a reduction in the supply of providers. This could impact the quality of care for IHSS recipients, as it may be more difficult to find skilled providers. Additionally, about 43 percent of IHSS providers are immediate family members, and assuming the provider lives with the recipient, a long-term wage freeze may limit the household income of the provider and the recipient.

Alternatives to the Governor’s Proposal

By freezing state participation in wages, the Governor’s proposal eliminates the state’s current exposure of about $350 million from future wage increases. Below we present some alternatives to this proposal which offer less budgetary savings.

Alternative 1: Reject the Governor’s Proposal. The Legislature could reject the proposal, and allow the final wage trigger to increase state participation in wages and benefits up to $12.10 per hour. This alternative would result in (1) costs of $14 million in 2007-08, (2) unknown additional costs in 2007-08 depending on county wage increases, and (3) a future exposure of about $350 million.

Alternative 2: Eliminate Final Wage Trigger. The Legislature could eliminate the final wage trigger, but allow state participation in wages up to the currently established combined level of $11.10 per hour. This would result in a savings of $14 million in 2007-08, and would limit future state exposure to about $225 million as counties increase their wages towards $11.10. One advantage of this alternative is that it would give all counties that are currently below $11.10 per hour an opportunity to increase wages and obtain state participation. The disadvantage is that it allows unknown additional costs in 2007-08 and leaves an exposure of $225 million, which is significantly more than the Governor’s approach.

Alternative 3: Delay Final Wage Trigger. Another option is delaying the final wage increase indefinitely. This would allow all counties to receive state participation in wages up to the currently established $11.10 per hour in 2007-08, and would leave the decision of raising state participation to $12.10 to future years, when the state’s fiscal health may have improved. In the short run, this would limit the General Fund exposure to $225 million. However, it adds unknown costs to 2007-08, compared to the Governor’s proposal, depending on the number of counties that increase their hourly IHSS provider wage up to $11.10.

Conclusion. The Governor’s proposal to freeze wages results in budgetary savings of $14 million in 2007-08. Additionally, it eliminates potential future annual costs of about $350 million for provider wages. In deciding whether to adopt this proposal, the Legislature should weigh the budgetary savings against the potential for a long term county wage freeze which may make it somewhat more difficult for recipients to find skilled providers.

Enhancing Program Integrity

Chapter 229, Statutes of 2004 (SB 1104, Committee on Budget and Fiscal Review), created an In-Home Supportive Services quality assurance (QA) initiative designed to improve the accuracy of needs assessments and program integrity. Although the QA initiative has improved the accuracy and standardization of service hour authorizations by social workers, there are limited controls assuring that recipients receive their service hours in accordance with their case plan. Furthermore, current law and regulations are unclear as to whether recipients are permitted to reallocate their total approved hours in a way that deviates from the allocation determined by the social worker. We review the department’s implementation of the quality assurance initiative, and provide recommendations to enhance program integrity and increase the likelihood that recipients receive services in accordance with their case plans.

Background

The IHSS program provides various services to eligible aged, blind, and disabled persons who are unable to remain safely in their own homes without such assistance. Figure 3 shows specific tasks for which IHSS recipients may receive assistance. The IHSS program relies on county social workers to determine the number of hours for each type of IHSS task that a recipient needs in order to remain safely in his/her own home. Typically, social workers conduct reassessments once every year to determine whether the needs of a recipient have changed. After the social worker has determined the appropriate tasks, and time needed for each, a notice of action (NOA) is sent informing the recipient of the number of assigned hours for each task.

Quality Assurance Initiative

Chapter 229 outlined a number of quality assurance (QA) activities to be performed by the Department of Social Services (DSS), the counties, and the Department of Health Services to improve the accuracy of IHSS needs assessments, enhance program integrity, and detect and prevent program fraud and abuse. A key feature of the QA initiative is improving the accuracy of assessments for service hours. This is important because the correct assignment of service hours by task is critical if recipients are to remain in their own homes. For similar reasons, as we discuss later, it is important for recipients to use their authorized hours as allocated.

Below we discuss the most significant QA changes concerning the development of hourly task guidelines and county QA units.

Hourly Task Guidelines

Prior to the QA initiative, social workers relied significantly on their own judgment when determining the number of service hours to provide to IHSS recipients. As a result, IHSS recipients with similar disabilities, but residing in different counties may not have been granted similar hour allocations. Another way to identify social worker variance in assigning hours is to compare the average hour allocations per case among the ten largest counties. As shown in Figure 4, among California’s ten largest counties in 2006-07, average hours per case ranged from 69 to 101 hours. We assume that these large counties are serving similar populations. Thus, differences in the average hours assigned are likely to be the result of social worker discretion and practice.

To meet the requirements of Chapter 229, DSS lead a workgroup composed of state representatives, county staff, legislative staff, and advocacy groups. The workgroup collected information from each county on the average number of hours granted per IHSS case. They then considered various levels of IHSS recipient ability, and developed corresponding ranges of times that would be appropriate to grant for each task. From this workgroup, hourly task guidelines (HTG) were created to provide social workers with a standard tool to ensure that service hours are authorized consistently and accurately throughout the state.

Since September 2006, HTG have been used statewide by social workers during their assessments. The guidelines help social workers to determine a recipient’s level of ability to perform each IHSS task. After determining a recipient’s level of ability, the social worker decides if the number of hours of assistance needed per week is within the HTG range for a particular task. The HTG do not take away the individualized assessment process, but instead require a social worker to provide a written justification if a recipient is assessed as needing hours that are outside (either above or below) the range established by HTG. These task guidelines increase the probability of consistent assessments throughout the state.

In a further effort to achieve uniformity, the IHSS Social Worker Training Academy was developed as a standardized method to educate social workers in QA and the proper usage of HTG. Interviews with county workers suggest that HTG and uniform training will likely increase the uniformity of assessments among counties so that IHSS recipients moving from one county to another will not likely experience large increases or decreases in their hour allocations.

County Quality Assurance Units and Reviews

Prior to the QA initiative, county efforts to review IHSS cases and hours varied. Some counties dedicated resources to reviewing cases and promoting uniformity, while others did not. Pursuant to QA requirements, each county has now established a QA unit to review and investigate cases. The 2006-07 Budget Act funded a total of 110 QA positions, which were allocated to the 58 counties. The QA units conduct desk reviews, home visits, and targeted reviews. Although QA reviews began in 2005-06, legislative reporting requirements were not in place until 2006-07. As a result, DSS indicates that it is now compiling quarterly reports on these reviews, and these results will be available during budget hearings in 2007.

Mandatory Desk Reviews. Chapter 229 requires counties to complete 250 randomly selected desk reviews each year for each QA worker in a given county. Thus, a total of about 27,500 desk reviews will be conducted during the current year. During a desk review, a QA worker reviews a case to verify the presence and accuracy of all required forms, necessary hour calculations, and documentation. This type of review is used to ensure that caseworkers accurately apply the IHSS rules and procedures for assessing a recipient’s need for services. A desk review may be supplemented with a phone call or home visit, but interaction with the program recipient is not required.

Home Visits. Counties are required to complete 50 home visits per allocated QA worker per year. A home visit requires QA workers to schedule an in-person meeting with an IHSS recipient to validate the information in the case file and verify that the services authorized are consistent with the needs of the recipient.

Targeted Reviews. Chapter 229 requires counties to develop a schedule under which QA staff will periodically perform targeted case reviews. The purpose of such reviews is to look more closely at individuals and situations that raise concerns about the delivery of IHSS services. Counties may use broad discretion in determining the types of cases to target. Counties have used information gathered during home visits and desk reviews to determine which cases to target.

One example of cases some counties have chosen to target involves providers who are paid for delivering over 300 hours of services each month. Working over 300 hours per month is the equivalent of working 10 hour days, seven days per week. Although the program does not prevent providers from working over 300 hours, there is some concern that it would be difficult to provide this much service to a recipient if the provider does not live in the same household. As such, some counties have opted to target cases involving a provider that is paid for over 300 hours of services per month, but is not living with the recipient. These cases were chosen to verify that quality care was actually being provided in the reported amounts. Counties believed that targeting this population might yield results that could lead to IHSS improvements.

Expanding Quality Assurance to Service Delivery

Through a standardized assessment process, the QA initiative increases the likelihood that recipients with similar impairments will be provided similar service hours to meet their needs. However, there has been no parallel effort to ensure that the hours granted are being provided in accordance with how they were allocated. Current law and current practice are unclear as to whether it is appropriate for recipients to reallocate their hours among tasks, or across weeks, as long as they do not go over their total approved monthly hours. At the assessment, recipients are given documents suggesting that the intent of the program is to use hours according to the hour allocations assigned by the social worker, but there are no penalties for reallocating hours without social worker approval. Below we review current law and current practice regarding the use of authorized hours.

Current Law

State law provides that the purpose of the IHSS program is to provide supportive services to eligible aged, blind, and disabled individuals who cannot safely remain in their homes without these services. Current law further states that a recipient of IHSS services shall receive a description of “each specific task authorized and the number of hours allotted.” Current law also requires that county welfare departments reassess each recipient’s need for service at least once every 12 months with limited exceptions. Finally, counties must reassess “a recipient’s need for supportive services anytime that the recipient notifies the county of a need to adjust” service hours.

Given current law requirements that each client (1) receive notification of the tasks and hours authorized, and (2) be reassessed anytime an adjustment in service hours is needed, it appears that legislative intent is for clients to use their hours of service as authorized. Although a recipient’s reallocating hours from one task to another (for example, from bathing to domestic services) seems contrary to current statutory provisions, there is no explicit statutory prohibition against such reallocation.

Current Practice

The IHSS program is designed to provide individuals with the services necessary to allow them to remain safely in their own homes. Several documents provided to IHSS recipients and providers reinforce the intent that tasks authorized and the hours allocated should be used in the way in which they were assigned. Ultimately, however, this expectation may be unclear to recipients and providers.

Notice of Action. After a social worker completes an assessment, the recipient is notified of the number of hours for each IHSS task they were granted. Currently, this information is provided through a NOA that is sent only to the recipient. It then becomes the responsibility of the recipient to direct his or her care by informing the provider of the number of hours authorized for each task. As a result of this practice, IHSS providers may only know what their clients tell them. For example, if a recipient who is assessed as needing three hours of bathing and four hours of meal preparation per week instructs his/her provider to perform seven hours of meal preparation and no bathing, the provider would likely not know that bathing was a task approved by the IHSS social worker. We note that some counties have changed this practice, and now send providers a document that provides varying details of the hours assigned to each task. However, there is no established statewide method for counties to inform providers of the care that was authorized by the social worker. The NOA states that recipients must notify their social worker of any changes in their condition that may affect their hour allocations. However, this does not indicate that there is any prohibition on reallocating approved hours.

IHSS Recipient/Employer Responsibility Checklist. The recipient/employer responsibility checklist explains IHSS rules and responsibilities, and is intended to be discussed between the IHSS social worker, recipient (who is also considered the employer), and provider. The form provides places for these three parties to sign to indicate that they have discussed the information provided. However, the form is often only signed by the recipient and the social worker at the time of the assessment. Although DSS considers this form to be required, there are currently no consequences if a provider does not sign the form.

The form states that the “recipient has informed their provider of the services authorized and the time given to perform those services.” This statement suggests that reallocating assessed hours is not allowed in IHSS, but it does not include a statement that prohibits reallocating hours across tasks or across weeks.

Time Cards. In order to receive payment, recipients and providers sign and return timecards to their counties every two weeks. These timecards require the recipient and provider to report the total number of hours that were provided each day of the pay period, but do not ask them to indicate the number of hours they spent on each specific task.

Since DSS regulations require that social workers assess hours per task on a weekly basis, it may be implied that hours are intended to be used weekly. In other words, a person needing 100 hours per month of a particular service would be assessed as needing that service 25 hours per week, and should presumably use their hours accordingly. However, there is currently no prohibition against reallocating hours across weeks.

We are aware of one county which is concerned about clients reallocating hours across weeks, and follows up with recipients when they see that more than 59 percent of the approved hours per month were used in any two-week period. This county acknowledges that IHSS recipients may have weeks where they need to use more or less of their approved hours, and as a result they are not overly concerned when hours vary by 9 percent or less. It is the belief of this county that when a recipient and provider claim over 59 percent of their hours in a two-week pay period, it may be possible that the condition of the recipient has changed so drastically that a reassessment is necessary.

Bottom Line: Unclear Expectations for Recipients and Providers

Program design and documents imply that hours should be used as they were allocated. However, because there is no explicit prohibition on reallocating hours across tasks or weeks, recipients and providers may not be aware that the intent of the program is to have them use their hours as assigned by the social worker. In other words, recipients may believe that the hours they receive are flexible and reallocate them amongst tasks, thereby treating them as a block grant of hours. Local officials indicate that some IHSS recipients reallocate their total approved hours between tasks without social worker approval. This practice could result in either inadequate or unneeded care. In the former case, a recipient receiving inadequate care could be in jeopardy of being placed in a nursing home if his/her condition deteriorated. In the latter case, the state would be paying for services that were unneeded.

Analyst’s Recommendations

Below we recommend changes to current law and practices that are likely to result in clearer expectations for IHSS recipients, providers, social workers, and administrators. Figure 5 provides a brief summary of the proposed recommendations. If adopted, these recommendations would enhance program integrity and the delivery of services by ensuring that recipients receive the level and type of services authorized by the social worker.

Clarify Expectations in Statute

As discussed above, although current law and practice suggest that recipients should not reallocate their hours among tasks, and across weeks, such action is not prohibited. Moreover, documented reallocation is not grounds for nonpayment. Therefore, we recommend enactment of legislation that sets clear expectations for the use of authorized hours. This legislation would (1) prohibit reallocation across tasks without social worker approval, (2) limit reallocation across weeks, and (3) provide that documented misuse of hours is grounds for nonpayment. With respect to reallocation across weeks, we believe the “59 percent” approach discussed above provides sufficient flexibility for recipients to use services as needed while maintaining program integrity.

Make Certain Certifications Mandatory to Establish Payment

In order to assure that providers know the number of hours assigned to each IHSS task, we recommend (1) that providers indicate in writing that they have reviewed a document stating the hours per task and (2) that clients sign the recipient/employer checklist as a condition for processing the first payment. We discuss these certifications and our recommendations below.

Notify the Provider of Authorized Tasks. We recommend enactment of legislation requiring the provider be given a copy of the NOA, or a similar document, which identifies the tasks and the number of hours per task that were approved by the social worker. The provider would have to indicate in writing that he/she has seen the authorized hours by task, and understands that service hours are to be delivered as authorized. Currently, the provider must sign an enrollment form that provides the county with general information, such as name, address, and social security number. Because the provider must already supply the county with an enrollment form prior to receiving payment, requiring this new or modified form, would not represent an additional burden. This signed form will increase the probability that recipients will receive the services that they need to avoid institutionalization.

A further benefit of this requirement is that it would allow counties to hold providers accountable in instances of IHSS recipient neglect. Currently, because providers rely completely on the recipients to inform them of the approved tasks and hours, it is difficult to hold providers accountable when neglect occurs due to inadequate service. This is because providers can claim that they were not aware of the services authorized by the social worker, and were following the instructions given to them by the recipients. By requiring the providers to review the authorized services, counties will be able to hold providers responsible for providing those services. Additionally, providers will know when the recipients are asking for unauthorized activities, and providers will not be able to claim that they were unaware of the services they were authorized and paid to provide.

Inform Recipients of Program Requirements. As discussed earlier, there are a couple of flaws with the IHSS recipient/employer checklist. First, although recipients receive this form each time they are assessed, there is currently no consequence when either a recipient or a provider does not sign and return an IHSS recipient/employer checklist. Second, this form implies that hours should be used in accordance with the way in which they were allocated, but does not indicate that there are any consequences for reallocating such hours.

In order to address these shortcomings, we make several recommendations. First, we recommend that recipients be required to have these signed forms on file in order to process payment. Second, we recommend that this form be modified to only be signed by the recipient and social worker since the provider must already acknowledge their understanding of program expectations when they sign the recommended form mentioned above. Third, we recommend that this form be modified to indicate a recipient’s responsibility to use hours as allocated and seek social worker approval before reallocating such hours. Finally, the form should indicate that reallocating hours across tasks and weeks without social worker approval could be grounds for nonpayment. We note that requiring recipients to sign this modified form should not create an additional burden, as it is current practice for the recipient to sign the current recipient/employer checklist form at the time of assessment and reassessment.

Setting clearer expectations for recipients and providers increases the probability that hours will be used as authorized. Ultimately, using hours as authorized by the social worker increases the likelihood that recipients will receive the services necessary for remaining in their own homes.

Fiscal Impacts. The recommendations above will most likely result in savings in payments for services, which will be partially offset by increases in workload as recipients request more reassessments and modifications. We estimate the net General Fund savings could range between $2 million and $5 million. Currently, recipients and providers claim about 96 percent of the hours they are authorized each month. We believe that most recipients want to comply with the rules of the program, and that with clearer rules against reallocating hours there will be a slight decrease in the utilization of authorized service hours. This is because when recipients do not need all of the hours assigned to a specific task in a given pay period, they will know that they are not permitted to ask their provider to spend the extra time on another task and will instead claim fewer hours in the pay period.

---

Return to Health and Social Services Table of Contents, 2007-08 Budget Analysis