Enhancing Federal Financial Participation for Consumers Served by the Department of Developmental Services—An Interim Update

Introduction

The Department of Developmental Services (DDS) currently serves a relatively small share of consumers who are eligible for, but not enrolled in, Medi-Cal, the state’s Medicaid program, and Medicaid home- and community-based services (HCBS) programs (which fund an array of services and supports that allow people to live in community-based settings, rather than in institutional settings). Consequently, the state cannot draw down federal Medicaid funds to help pay for DDS services provided to these consumers—the General Fund currently pays 100 percent of the cost. The Supplemental Report of the 2020‑21 Budget Act requires our office to evaluate Medi-Cal enrollment processes and identify the barriers to enrollment among these DDS consumers. It requires us to provide options to address these barriers with the ultimate goal of increasing federal financial participation (FFP) for regional center (RC)-coordinated services. Our evaluation may consider opportunities for streamlining the enrollment process and educating consumers and their families/representatives about Medi-Cal programs. Finally, the Supplemental Report requires us to include an estimate of potential General Fund savings resulting from increased FFP as well as an estimate of potential costs resulting from additional administrative activities and increased utilization of Medi-Cal benefits outside the DDS system.

While the Supplemental Report requested that we submit our report to the Legislature by March 1, 2021, we have advised the Legislature that our final report will be delivered in the summer. This is due to delays in receiving requested data and conducting interviews of DDS consumers’ families in order to complete our analysis. In the meantime, this interim update provides an overview of:

• Key information gathered to date and preliminary findings therefrom.

• Options for increasing Medi-Cal uptake among DDS consumers that we have explored in developing various possible recommendations.

• Our initial assessment on the potential fiscal impact of increasing Medi-Cal uptake among DDS consumers. Specifically, our initial findings suggest increasing enrollment could result in relatively low net savings to the state or even create costs.

As RC-coordinated services provided to infants and toddlers under age three in DDS’s Early Start program are not eligible for Medicaid reimbursement through DDS, the focus of our analysis will be on DDS consumers who typically are age three and older and eligible for RC-coordinated services under the Lanterman Developmental Disabilities Services Act (the Lanterman Act). These services potentially are eligible for federal Medicaid reimbursement through DDS.

Background

Medi-Cal Enrollment of DDS Consumers Allows DDS to Access Federal Funding for Services Coordinated by RCs in Two Main Ways. DDS can draw down federal Medicaid funding to support HCBS services coordinated by RCs and provided to certain consumers who are enrolled in federally matched Medi-Cal. For most Medi-Cal beneficiaries, including those with developmental disabilities, service costs are shared evenly between the state and federal governments (in the case of In-Home Supportive Services [IHSS], the nonfederal share is covered by state and local governments). (The state also operates a 100 percent state-funded Medi-Cal program for certain individuals who are not eligible for the federally funded program due to immigration status.) If a consumer is not eligible for federally matched Medi-Cal, the state funds the total cost of RC-coordinated services. There are two primary authorities for federal funding for HCBS services in the DDS system—(1) a Medicaid waiver (waiver), which has been in place for DDS since 1982 and (2) a Medicaid state plan amendment (1915(i) SPA), which has been in place since 2009. The difference between the two is based on the level of care required by the consumer, with the waiver helping fund HCBS services for those with more intensive needs.

• Waiver Eligibility: Consumers must be a legal resident, enrolled in Medi-Cal, live in a community-based setting, and receive at least one RC-coordinated service. (Some individuals—particularly children—receive only case management services from RCs, but either do not need additional services at the time or receive needed services outside of the RC system, such as through schools.) They also must need a level of care equivalent to that provided at an intermediate care facility (ICF), which is considered a more institutional setting. This ICF level of care is defined as having two moderate or severe support needs in one or more of the following areas: self-help, such as dressing or personal care; social-emotional to address such issues as aggression or running away; or health, such as tracheostomy care or apnea monitoring. The consumer, parent, guardian, or legal representative must complete a form indicating that they have chosen a community-based residence for the consumer, rather than an ICF.

• 1915(i) SPA Eligibility: Consumers must be a legal resident, enrolled in Medi-Cal, and live in a community-based residence. They do not need the same level of care as someone enrolled in the waiver. No forms or enrollment are required for the 1915(i) SPA; DDS can automatically seek reimbursement from Medicaid once the consumer accesses an RC-coordinated service.

Medi-Cal Eligibility Pathways. Before enrolling in the waiver or becoming eligible for 1915(i) SPA reimbursement, DDS consumers must first enroll in Medi-Cal. Individuals with developmental disabilities tend to qualify for Medi-Cal through one of the following eligibility pathways, also shown in Figure 1:

• Automatic Eligibility Based on Supplemental Security Income/State Supplementary Payment (SSI/SSP) Qualification. Individuals who receive SSI/SSP cash assistance are automatically eligible for Medi-Cal. Of the DDS consumers enrolled in Medi-Cal, about 61 percent became eligible because they receive SSI/SSP.

• Income-Eligibility. Medi-Cal is a means-tested program. In the DDS context, slightly more than 20 percent of consumers enrolled in Medi-Cal arrive through the income-eligibility pathway, including children whose families are income-eligible for Medi-Cal.

• Institutional Deeming. This eligibility pathway identifies children in the DDS system whose families are not income-eligible for Medi-Cal, but who could benefit from enrolling in the waiver because they live in a community setting and require an ICF level of care. Because of the needed level of care, this pathway disregards the parents’ income and considers only the child’s income to determine Medi-Cal eligibility. (A child’s income could include child support or trust fund income.) Institutional deeming also is an option for a married adult who requires an ICF level of care, but whose spouse’s income would disqualify them for Medi-Cal. In this case, the spouse’s income can be disregarded in determining Medi-Cal eligibility. Overall, slightly less than 10 percent of DDS consumers enrolled in Medi-Cal are eligible via institutional deeming and most are children.

• Automatic Eligibility for Current and Former Youth in the Foster Care System. Until the age of 26, current and former youth in the foster care system are automatically eligible for Medi-Cal. This pathway likely affects several thousand DDS consumers (or less than 2 percent of DDS consumers enrolled in Medi-Cal), although we are seeking more precise estimates from DDS.

Medi-Cal Supports a Variety of Services, but the DDS Budget Reflects Only Coordination and HCBS Services. In addition to HCBS services coordinated by the RCs, DDS consumers who are eligible for Medi-Cal also may receive other Medi-Cal services, such as medical and dental care, and potentially may be eligible to receive IHSS. Medi-Cal also funds non-HCBS services provided in more institutional settings, like ICFs or skilled nursing facilities (SNFs). While RC staff may help consumers access these other Medi-Cal services, the costs of these Medi-Cal services are not reflected in the DDS budget. Rather, these costs are reflected in other state departmental budgets, such as the Department of Health Care Services (DHCS) budget for health care services (including ICFs and SNFs) and the Department of Social Services budget for IHSS. In addition, schools also may work with DHCS to seek Medi-Cal reimbursement for therapies provided to children with developmental disabilities or delays.

Counties Manage Medi-Cal Enrollment. While the DDS system manages waiver enrollment and 1915(i) SPA reimbursements to access federal funding once a DDS consumer is enrolled in Medi-Cal, county governments manage Medi-Cal eligibility determinations, including for DDS consumers. California uses a federally approved application, which is the same for both Medi-Cal and Covered California and is electronically managed in the California Healthcare Eligibility, Enrollment, and Retention System. People may apply online, by mail, in person at the county office, or by phone. The eligibility process uses information about each family member in a household—such as income, resources, size of household, and disability—to determine the scope of benefits available to the family and the family’s share of cost, if any (most often, there is no share of cost). The process is guided by federal law and is designed to base eligibility on what is most beneficial (in terms of scope of benefits and share of cost) for the applicant and other familial household members (if they are eligible through more than one pathway).

Medi-Cal Can Be Used for Primary or Secondary Insurance Coverage. If an individual, such as a child deemed eligible through institutional deeming, already has private health insurance coverage, Medi-Cal can act as a secondary payer for primary insurance co-pays or uncovered costs.

About Eight in Ten DDS Consumers Are Enrolled in Medi-Cal. In 2019‑20, about 254,000 out of about 320,000 (or 79 percent) of DDS consumers were enrolled in Medi-Cal. Among children under age 18, 71 percent were enrolled, while among adults, 86 percent were enrolled. Of DDS consumers enrolled in Medi-Cal, a total of 71 percent were either enrolled in the waiver (about 132,000) or eligible for 1915(i) SPA reimbursement (about 48,000). Among DDS consumers who were enrolled in Medi-Cal, but not receiving waiver or 1915(i) SPA reimbursement, most did not receive a service that would make them eligible for the waiver or for 1915(i) SPA reimbursement. About 67,000 DDS consumers (or 21 percent) were not enrolled in Medi-Cal, but importantly, not all of these individuals would be eligible to enroll due to immigration status, income levels, or other reasons.

Key Considerations About Increasing Medi-Cal Enrollment Among DDS Consumers

One purpose of the forthcoming required report is to explore ways to increase Medi-Cal enrollment among DDS consumers who are Medi-Cal eligible but not currently enrolled, which would allow DDS to enhance federal support from Medicaid by enrolling more people in the waiver or seeking reimbursement through the 1915(i) SPA. While we will provide our recommendations in our forthcoming report, in the interim, we identify four main options for increasing Medi-Cal uptake among DDS consumers and discuss some of the trade-offs associated with each below. We then discuss why increased Medi-Cal uptake may not result in significant net savings to the state. We close by noting that increased federal reimbursement might be only one of multiple objectives served by increasing Medi-Cal uptake.

Options for Increasing Medi-Cal Uptake Among DDS Consumers

Some of the themes emerging from our initial research about reasons certain families do not want to enroll their consumer family member in Medi-Cal include: preference for their current commercial insurance, perceived stigma about accessing Medi-Cal, concerns about accessing a benefit they perceive as meant for more needy families, and hesitancy or unwillingness to provide sensitive personal and income information to Medi-Cal. Other families want to, or might want to, enroll their child in Medi-Cal, but lack an awareness or understanding about Medi-Cal and the range of benefits available or have had trouble completing the Medi-Cal application and providing the required documentation. In light of these concerns, below, we discuss four main approaches that we have identified in our preliminary analysis that could be taken separately or in combination to increase uptake in Medi-Cal. We also discuss some of the main pros and cons associated with each option.

Require Enrollment Among Those Who Are Eligible. In the Governor’s revised 2020‑21 budget proposal released in May 2020, the administration proposed requiring consumers to enroll in Medi-Cal (if eligible) to enable RCs to seek Medicaid reimbursements for RC-coordinated services. If the consumer (or parent/guardian/legal representative) chose not to enroll in Medi-Cal when eligible, they would have been required to pay the RC the equivalent of what Medicaid would have paid for RC-coordinated services. This proposal was not adopted as part of the final budget package; instead, our office was asked to complete this analysis.

Below, we discuss the pros and cons of this type of approach.

• Pros. Requiring Medi-Cal enrollment—or otherwise requiring the family to cover the federal portion of the cost of RC-coordinated services—would be the most direct method for trying to increase Medi-Cal enrollment among Medi-Cal-eligible DDS consumers. This approach could persuade families that perceive a stigma associated with Medi-Cal or that currently are hesitant or unwilling to apply for Medi-Cal to go ahead and do so by providing a financial disincentive for them to not enroll should they wish to receive RC-coordinated services.

• Cons. Making Medi-Cal enrollment a requirement could discourage families from seeking RC-coordinated services in the first place or from accessing all of the RC-coordinated services for which the consumer is authorized. This could occur because those uncomfortable with signing up for Medi-Cal may not have the ability to pay what would have been the federal portion of the cost of the RC-coordinated services. This approach would be more punitive in nature than the three alternative approaches discussed below, given that a family would have to pay for or forgo services if they did not want to enroll the consumer in Medi-Cal. While the requirement would not negate the statutory entitlement to RC-coordinated services provided by the Lanterman Act, it would create a new prerequisite to receiving services that did not exist before.

Incentivize Enrollment. Another approach to increase Medi-Cal uptake among DDS consumers is to provide an incentive to consumers and their families. One such incentive currently exists in the DDS system. The fees associated with at least two of the three family fee programs—the Family Cost Participation Program and the Annual Family Fee Program—are waived when the consumer is enrolled in Medi-Cal. We currently are working with DDS to learn more about the extent to which these programs (which were implemented in 2005 and 2011, respectively) led to increased enrollment in Medi-Cal (because families wished to avoid paying the fees).

Below, we discuss the pros and cons of developing additional incentives to enroll in Medi-Cal.

• Pros. Generally, an incentive would be structured as more of a reward-based approach than the requirement approach described above. Properly targeted incentives could make going through the Medi-Cal application process more attractive to families that are hesitant.

• Cons. An incentive approach provides no guarantee that a family will enroll the consumer in Medi-Cal. In addition, because there are no other fees in the RC system that could be waived, an incentive likely would have to take the form of a payment, extra service, or other benefit. Therefore, such an incentive program could add costs on a one-time basis, partially offsetting initial savings achieved by increasing federal reimbursements.

Make Enrollment Process Easier. For families that have trouble navigating the Medi-Cal application process, another approach is to make the process easier—either by changing something about the process itself or by providing enrollment assistance to the family. We have heard from RCs and families that the institutional deeming process in particular can feel burdensome. Despite seeking Medi-Cal exclusively for the child who is a DDS consumer, the family must still fill out the full Medi-Cal form, which requires them to provide personal and income information about each household member. This process likely cannot be changed easily however, given that the Medi-Cal application form (which is also the Covered California form) and process for determining eligibility follows federal guidelines and has federal approval.

Instead, we are exploring ways that RCs could assist families to help guide them through the process. In addition, we are exploring the extent to which federal rules could allow DDS to change some of the language in the application for waiver programs, which reportedly concerns some families because they do not fully understand what the terms and phrases mean. For example, “institutional deeming” and “Medicaid waiver consumer choice of services/living arrangement statement” have been highlighted to us as areas that could use plain language.

• Pros. This approach would not dissuade a family from seeking RC services (as the requirement approach might) and could relieve some of the administrative burden for families.

• Cons. Making the enrollment process easier does not guarantee a family will enroll the consumer in Medi-Cal. This approach could come with added costs for RC operations. For example, RC staff likely would have to spend more time helping families through the process and likely would need more training to ensure they fully understand the Medi-Cal application process. Changing waiver form language could take some time and the opportunity to make such changes may be constrained by federal rules.

Provide More Education About Medi-Cal to Families. Given that some families may be unaware of Medi-Cal benefits, or unaware of how Medi-Cal enrollment can fiscally benefit the DDS system, added education could assuage some concerns or hesitancy about applying for Medi-Cal. This approach would require DDS and RCs to improve and expand the information provided to families.

• Pros. Families could make more informed decisions based on consistent and more comprehensive information about Medi-Cal. Particularly in combination with the approach discussed above—making enrollment easier—this approach could dispel misinformation about Medi-Cal. For some families, understanding the other benefits of Medi-Cal outside the DDS system, such as IHSS, could be incentive enough for them to apply. DDS and RCs likely would be able to absorb the cost of developing up-to-date informational materials.

• Cons. Increased education does not guarantee a family will enroll the consumer in Medi-Cal. This approach could lead to some increased RC operations costs for staff training.

In the final report, we will evaluate these four options based on their projected performance using the following criteria:

• Is the Option a Cost-Effective Way to Increase Medi-Cal Enrollment? Would the option likely result in significantly increased Medi-Cal enrollment among DDS consumers, would it do so with administrative costs that are reasonable given the associated fiscal and policy benefits, and are there any unintended outcomes?

• Is the Option Feasible? Would the option be easy to operationalize and implement across the 21 RCs?

• Does the Option Improve Equity? How would the option affect different groups of consumers—would it maintain or improve equity or could it negatively affect a particular group?

Fiscal Implications of Increasing Medi-Cal Uptake Among DDS Consumers

State Savings in the DDS System Likely. According to 2019‑20 data provided to our office by DDS, about 21 percent of Lanterman Act-eligible DDS consumers (roughly 67,000 individuals) were not enrolled in Medi-Cal in 2019‑20. Of these, about 45 percent (roughly 30,000 individuals) had at least one RC-coordinated service, which could potentially make them eligible for federal reimbursement. Among that group, some are undocumented immigrants, a subset that is not eligible to receive waiver or 1915(i) SPA reimbursements. Among children, some do not require the ICF level of care that would make them eligible for Medi-Cal and the waiver through institutional deeming. We are continuing to refine our estimate of how many DDS consumers (of the 30,000) might be eligible for Medi-Cal as we collect additional information from DDS. Given that the population of DDS consumers that is both eligible and not enrolled in Medi-Cal is relatively narrow, the potential General Fund savings in the DDS budget are limited. We preliminarily estimate General Fund savings of up to the tens of millions of dollars. In the DDS system, these savings might be offset to a small degree by increased RC operations costs (if RC staff need additional training or have to spend additional time with consumers and their families to assist them with Medi-Cal applications) or by the cost of incentives provided to families.

Added State Costs Outside the DDS System. We are in the process of collecting information from DHCS about Medi-Cal costs—outside the DDS system—associated with DDS consumers. Some families may use Medi-Cal as the consumer’s primary insurance. Others may use Medi-Cal as a secondary payer to cover unreimbursed costs, such as co-pays. In addition, some consumers may access IHSS. If additional DDS consumers enroll in Medi-Cal, they likely would utilize these additional benefits to some degree. All of the General Fund costs associated with these Medi-Cal benefits would be an added cost to the state since these consumers would be new to the Medi-Cal program. In our final report, we will provide an estimate of the fiscal implications to the state budget of increasing the Medi-Cal uptake of DDS consumers that accounts for these added costs outside of the DDS system.

Other Implications of Increasing Medi-Cal Uptake Among DDS Consumers

While the original purpose of this project was to explore ways to enhance federal funding in the DDS system, we are finding that the benefit of increasing uptake of Medi-Cal may not be primarily a fiscal one (given that the net fiscal effect could be relatively low savings or even a cost). We note, however, that increasing Medi-Cal uptake among DDS consumers could serve to address other legislative goals. For example, while consumers’ RC-coordinated services would not change necessarily after enrolling in Medi-Cal, they would now be able to access other services outside the DDS system through the Medi-Cal program. This could advance the Legislature’s goal of improving access to needed services across the state’s various health and human services programs.