DDS—Implement Regulations to Govern RC Expenditures

Background

Purchase of Services Fall Into Ten Major Categories. The purchase of services for consumers by RCs fall into ten major service categories: (1) community care facilities, (2) medical facilities, (3) day programs, (4) habilitation services, (5) transportation, (6) support services, (7) in–home respite, (8) out–of–home respite, (9) health care, and (10) miscellaneous services. Within the ten major service categories, about 190 different and more specific service expenditure codes are authorized by DDS and used by the RCs to classify purchase of service expenditures for entry into the central purchase of services database. The budget plan’s proposed spending levels for the ten major service categories is shown below in Figure 9.

Some service categories consist of more service expenditure codes than others. For example, the transportation category is comprised of ten different service expenditure codes. The largest category by far in terms of number of service expenditure codes is miscellaneous services, which is comprised of about 100 different codes. This category includes client and parent behavior intervention training, socialization training program services, and specialized therapy services for children less than three.

The DDS periodically adds new service expenditure codes and deletes obsolete codes as necessary to ensure that RC purchases are properly reported. However, it sometimes creates the codes without establishing regulations to guide RCs in the use of the codes. These newly created service expenditure codes are broadly defined by the department. However, these definitions are generally not as restrictive in regards to what may be purchased as the codes that are under regulations. About 100 of the approximately 190 service expenditure codes are established in regulation. Most of the expenditure codes which lack regulations fall into the miscellaneous services category.

Extraordinary Growth in Miscellaneous Expenditures

The DDS estimate for community services projects that expenditures for the miscellaneous services category will grow from $338 million in the current year to $452 million in the budget year, or by about 34 percent. (We note that the Governor’s 2009–10 budget plan proposes to reduce overall General Fund spending for the RCs by $344 million relative to the DDS estimate. However, the budget plan does not allocate this reduction among the various service categories, leaving it unclear how miscellaneous services would be affected by the reduction.) Between 2004–05 and 2007–08, for example, the service expenditure code for special therapy services for children less than three years old almost doubled from $18.8 million to $37.2 million, according to DDS data. On a per–person basis during this same time period, spending increased from $1,699 to $2,399 or by $700 per person for these services. A number of other service expenditure codes, such as client and parent behavior intervention training and socialization training program services, have experienced similar growth.

This rate of growth is out of line with other categories of RC services. As shown above in Figure 9, the adjusted total growth rate is 11.8 percent. In comparison, miscellaneous services have been growing at an average annual rate of almost 34 percent. If expenditures for miscellaneous services had grown at the same rate as the adjusted total growth rate of 11.8 percent the proposed 2009–10 level of expenditures would be $74 million lower.

Regulation of Miscellaneous Services Would Slow RC Spending. State agencies frequently adopt regulations to clarify state law and to help ensure that it is applied consistently. In a number of cases, the adoption of regulations has helped to ensure that expenditures of state funds are properly controlled. Given the rapid rate of growth in the miscellaneous services category, we believe the promulgation of regulations governing the use of these expenditure codes is warranted. Notably, the nine other categories of services that are not growing as quickly as miscellaneous services are generally subject to DDS regulations. We believe it is likely that the adoption of regulations to more carefully limit expenditures for these services would slow the dramatic growth of RC spending for these services.

Analyst’s Recommendation

For the reasons discussed above, we recommend that the Legislature direct DDS to adopt emergency regulations governing miscellaneous services. The promulgation of regulations defining miscellaneous services would clarify what services may be purchased under individual service expenditure codes, thereby limiting expenditures in this service category. We recommend that the department begin with adopting regulations for the miscellaneous services expenditure codes that have seen the largest growth in overall cost, caseloads, and per–person spending.