Medicaid: CMS Should Take Additional Steps to Improve Assessments of Individuals' Needs for Home- and Community-Based Services

With approval from CMS, the federal agency responsible for overseeing state Medicaid programs, states can provide long-term care services and supports for disabled and aged individuals under one or more types of HCBS programs. State and federal Medicaid HCBS spending was about $87 billion in 2015. Effective needs assessments help states ensure appropriate access to, and manage utilization of, services and therefore costs. States' processes vary, and challenges include the potential for assessors to have conflicts of interest leading to over- or under-estimating of beneficiaries' needs for HCBS.

GAO was asked to examine states' needs assessment processes for provision of long-term services and supports. This report addresses (1) how selected states assess needs for HCBS, and (2) steps CMS has taken to improve coordination and effectiveness of needs assessments, among other objectives. GAO studied six states that varied in terms of assessment tools in use, participation in federal initiatives, HCBS delivery systems, and geographic location; reviewed federal requirements and documents; and interviewed CMS officials and stakeholders.

The six selected states that GAO reviewed used multiple approaches to assess individuals' needs for Medicaid home- and community-based services (HCBS). Each state may have multiple HCBS programs authorized under different sections of the Social Security Act. These programs serve beneficiaries who generally need assistance with daily activities, such as bathing or dressing. States establish needs assessment processes to collect data on functional needs, health status, and other areas that they use to determine individuals' eligibility for HCBS and to plan services, such as the amount of services needed. The selected states varied in the extent to which they used different assessments across HCBS programs and used multiple types of entities—such as state or government agencies, contractors, or providers—to conduct them.

The Centers for Medicare & Medicaid Services (CMS) has taken steps to improve needs assessments but concerns about conflict of interest remain in regard to HCBS providers and managed care plans. HCBS providers may have a financial interest in the outcome of needs assessments, which could lead to overstating needs and overprovision of services. CMS has addressed risks associated with HCBS provider conflicts, such as by requiring states to establish standards for conducting certain needs assessments, but these requirements do not cover all types of HCBS programs. For example, specific conflict of interest requirements are generally not in place for needs assessments that are used to inform HCBS eligibility determinations. In addition, requirements for states to establish standards to address HCBS providers' potential for conflict of interest in conducting needs assessments that are used for service planning do not apply across all programs.

Similarly, managed care plans may have a financial interest in the outcome of HCBS assessments used for both determining eligibility and service amounts. Managed care plans could have an incentive to enroll beneficiaries with few needs, as plans typically receive a fixed payment per enrollee. For example, a plan in one state admitted in a settlement with the federal government to enrolling 1,740 individuals, from 2011 through 2013, whose needs did not qualify them. In 2013, CMS issued guidance that managed care plans may not be involved in assessments used to determine eligibility for HCBS, but CMS has not consistently required states to prevent this involvement. Among three states GAO reviewed with managed care HCBS programs, CMS required one to stop allowing plans to conduct such assessments but allowed plan involvement in two states. The absence of conflict-of-interest requirements across all types of HCBS programs and states is not consistent with federal internal control standards, which require agencies to respond to risks to program objectives.

GAO recommends that CMS ensure that all Medicaid HCBS programs have requirements for states to address both service providers' and managed care plans' potential for conflicts of interest in conducting assessments. HHS concurred with GAO's recommendation.

Medicaid, a federal-state health financing program for low-income and  medically needy individuals, is the nation’s primary payer of long-term  services and supports for children and adults with disabilities and aged  individuals. In recent years, the majority of Medicaid spending on long- term services and supports has been for home- and community-based  services (HCBS)—that is, services that are provided to beneficiaries in  their homes or in other settings that are integrated into their communities  rather than in institutional settings such as nursing homes. In fiscal year  2015, federal and state Medicaid spending for HCBS was estimated at  $87 billion, or 55 percent of total Medicaid spending on long-term services  and supports. HCBS can enable beneficiaries who are limited in their  ability to care for themselves to remain in their homes, maintain their  independence, and participate in community life to the fullest extent  possible. In administering their Medicaid programs, states have  considerable flexibility to establish multiple HCBS programs authorized  under different provisions of federal law, which offer states different  options for serving beneficiaries. For example, some types of Medicaid  HCBS program authorities limit services only to beneficiaries who need a  level of care typically provided in an institutional setting.

To receive Medicaid HCBS, beneficiaries generally must meet functional  eligibility criteria—which are typically based on factors such as physical  and cognitive abilities indicative of a specified level of need for services— as well as financial eligibility criteria. States establish HCBS needs  assessment processes that they use to determine whether individuals are  functionally eligible for Medicaid HCBS and to develop service plans that  specify the scope and amount of services beneficiaries may receive  based on their needs. These processes must be consistent with  applicable federal requirements, which may vary across HCBS programs.  HCBS needs assessments directly affect the efficiency of and access to  the Medicaid program, given their key role in informing both states’  determination of functional eligibility for HCBS and the development of  service plans that reflect the amount of services to be provided. These  assessments are conducted using questionnaires or interview guides  referred to as assessment tools, and individual states may use different  assessment tools. A state may also use different assessment tools for  different HCBS programs within the state or for different purposes such  as establishing functional eligibility or developing service plans. The  Medicaid and CHIP Payment and Access Commission (MACPAC) found  at least 124 distinct HCBS needs assessment tools in use nationwide in  2015.

Given the variation in needs assessment tools across and within states,  stakeholders have noted potential benefits of moving toward more  uniform HCBS needs assessments—either by assessing all individuals  with the same assessment tool, or by assessing individuals in specific  populations or HCBS programs with distinct tools that gather similar  information on a core set of topics for all individuals. For example, the U.S. Senate Commission on Long Term Care recommended the  development and implementation of a single needs assessment tool that  could be used across states, programs, and care settings. In addition,  MACPAC noted potential benefits of moving to a uniform needs  assessment tool, but also challenges such as differing and changing  program needs across states and recent state investments in a variety of  different tools. The Centers for Medicare & Medicaid Services (CMS), an  agency within the Department of Health and Human Services (HHS), is  responsible for federal oversight of Medicaid. Recent CMS initiatives  related to HCBS needs assessments were intended to help states collect  uniform information across HCBS assessment tools and improve the  effectiveness of needs assessments by addressing potential conflicts of  interest, which may occur when entities with financial incentives that are  tied to the outcomes of needs assessments conduct such assessments.

Given the critical role that needs assessments play in determining  Medicaid beneficiaries’ access to long term services and supports and  states’ broad flexibility to structure needs assessments, you asked that  we provide information related to the use of needs assessments across  states.

In this report, we:  1.  describe the needs assessment processes that selected state  Medicaid programs used to determine functional eligibility for HCBS  and to plan the provision of services, such as the amount of services  to provide;  2.  describe steps selected states have taken to improve needs  assessment processes for HCBS; and  3.  evaluate steps CMS has taken to improve the coordination and  effectiveness of needs assessment processes for HCBS.

To describe states’ HCBS needs assessment processes and the steps  states have taken to improve these processes, we conducted case  studies of six states. We selected states that varied in the number of  assessment tools in use, types of HCBS delivery systems, participation in  key CMS programs related to needs assessments, and geographic  location. The six selected states were: Connecticut, Kentucky, Minnesota,  New York, North Carolina, and Washington. For each state, we  interviewed state officials involved in Medicaid HCBS programs and  interviewed or collected information from state advocacy organizations,  such as organizations representing beneficiaries that receive HCBS. We  reviewed documents related to states’ HCBS programs such as CMS  program approvals and policy manuals, as well as documents related to  the tools states use to assess beneficiaries’ needs, such as  questionnaires. To supplement the state case studies, we also reviewed  relevant publications, such as MACPAC’s inventory of the assessment  tools that states used, and conducted interviews with representatives  from national organizations involved in Medicaid HCBS issues. The scope  of this review was to describe states’ needs assessment processes for  determining HCBS functional eligibility and developing service plans with  respect to the amount of services to provide. While we reviewed HCBS  needs assessment tools, it was not within the scope of our review to  evaluate the benefits or limitations of specific assessment tools or  questions, or to assess state compliance with federal requirements  governing HCBS programs.

To evaluate steps CMS has taken to improve the coordination and  effectiveness of Medicaid HCBS needs assessment processes, we  reviewed and analyzed relevant federal statutes and regulations,  guidance, and program materials issued by CMS and its contractors. We  compared CMS’s regulations and guidance across Medicaid HCBS  program authorities. We also reviewed evaluations and documentation of  key CMS programs related to HCBS needs assessments, and  interviewed CMS officials responsible for overseeing state Medicaid  HCBS programs and key CMS programs related to HCBS needs  assessments. We also reviewed CMS’s HCBS program approvals in our  selected states and information gathered from our case studies in the  states. In addition, we reviewed the relevant standards for internal control  in the federal government.

We conducted this performance audit from May 2016 to December 2017  in accordance with generally accepted government auditing standards.

Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Medicaid is jointly financed by the federal government and the states.  States administer their Medicaid programs within broad federal rules and  according to a state plan approved for each state by CMS. CMS issues  program requirements in the form of regulations and guidance, approves  changes to states’ Medicaid programs, provides technical assistance to  states, and conducts other oversight activities. States are responsible for  establishing state policies and procedures in accordance with federal  requirements. Each state must designate a single state agency to  administer its Medicaid program. That agency can delegate programs or  functions—such as enrollment in HCBS programs—to other state and  local agencies, but is responsible for their supervision. States may  provide certain types of HCBS under their state plans. In addition, states  may seek permission from CMS to provide HCBS under waivers of  traditional Medicaid requirements; for example, in order to provide  services to a targeted population or to a limited number of beneficiaries.  Both state plans and waivers are developed and proposed by states and  must be approved by CMS in order for states to receive federal matching  funds for medical expenditures.

Types of Medicaid HCBS Programs and Delivery Systems

Medicaid HCBS cover a wide range of services and supports to help  individuals remain in their homes or live in a community setting, such as  personal assistance with daily activities, assistive devices, and case  management services to coordinate services and supports that may be  provided from multiple sources. With approval from CMS, states can  provide Medicaid HCBS under one or more types of programs authorized  under different sections of the Social Security Act, including several state  plan and waiver authorities. (See table 1.) States can have multiple HCBS  programs operating under different authorities, and these authorities have  distinct features such as different functional eligibility criteria. For  example, some types of Medicaid HCBS programs only serve  beneficiaries who are functionally eligible for an institutional level of care;  that is, beneficiaries must have needs that rise to the level of care usually  provided in a nursing facility, hospital, or other institution.

Under some types of HCBS programs, states can tailor their programs to  the needs of specific beneficiary populations they choose to target.  Common populations that states target with their HCBS programs  include: older adults and people with physical disabilities, people with intellectual or developmental disabilities, people with addictions or mental illness, and other populations with specific conditions such as traumatic brain  injury or Alzheimer’s disease.

States use different delivery systems to provide Medicaid HCBS, and  these may vary across distinct HCBS programs within a state.  Historically, states have predominantly provided HCBS using fee-for- service delivery systems in which states pay providers for HCBS  rendered to beneficiaries and billed to the state. Alternatively, under  managed care long-term services and supports delivery systems, states  contract with managed care plans to provide HCBS to beneficiaries and  typically reimburse the plans through capitation payments, which are  periodic payments for each beneficiary enrolled under the contract.  Managed care plans may contract with HCBS providers to provide  services to beneficiaries or may provide services directly. A state may use  a combination of fee-for-service and managed care delivery systems  within or among its HCBS programs. Estimated expenditures on HCBS  provided under managed care have grown from $8 billion in fiscal year  2012 to $19 billion in fiscal year 2015.

Assessments of Individuals’ Needs for Medicaid HCBS

Individuals require HCBS because they are limited in their ability to care  for themselves due to physical, developmental, or intellectual disabilities,  or to chronic conditions. These services can assist beneficiaries with  activities of daily living—basic, personal, everyday activities such as  bathing, dressing, and eating—or with instrumental activities of daily  living, which are other activities that allow individuals to live independently  in the community, such as meal preparation or managing finances. States  generally assess a beneficiary’s needs for HCBS based on designated  assessment tools—or sets of questions—that assessors use to collect  information from sources such as beneficiaries, caregivers, and health  records. Examples of this information include the following:

Functional support needs: The need for assistance with activities of  daily living or instrumental activities of daily living.

Clinical care needs or medical health concerns: Information on an  individual’s health history, active diagnoses, medications, and clinical  services (e.g., wound care or dialysis).

Cognitive and behavioral support needs: The loss of memory function,  behaviors that pose risks, or adaptive and maladaptive behaviors.

Beneficiaries’ strengths, preferences, and goals.

The needs assessment processes may vary across states and distinct  HCBS programs within a state, but typically involves the following key  steps:

States direct potentially eligible individuals to entities that conduct  Medicaid HCBS needs assessments.

An assessor conducts a needs assessment, generally in a face-to- face setting, using a designated assessment tool to collect information  based on methods such as interviews with beneficiaries and  caregivers, observation, and review of other sources of information  needed to determine functional eligibility for services. Additional  information relevant for service planning purposes may be included in  this needs assessment, or collected in additional assessments that  may occur after an individual is determined eligible for HCBS.

Needs assessment results are used to inform determinations of  whether an individual meets particular HCBS programs’ functional  eligibility requirements.

Needs assessment results for eligible individuals inform the  development of a service plan. The service plan includes the type and  amount of services to be provided to the beneficiary within state- specified limits. States may use distinct needs assessments for  service planning to collect more detailed information or may use the  same assessment that was used to determine functional eligibility.  (See fig. 1.)

CMS’s goals for HCBS and other Medicaid long-term services and  supports include achieving a sustainable and efficient system that  provides appropriate services to beneficiaries. Effective needs  assessments can help beneficiaries to receive appropriate services to  help them live independently and help states manage utilization of  services, and therefore costs. An effective assessment process would  facilitate efficient use of services and beneficiaries’ access to available  services appropriate to their needs by accurately and consistently  estimating beneficiaries’ needs. Assessment processes that overestimate  needs, underestimate needs, or both, may result in HCBS programs that  offer more services than needed or deny eligible beneficiaries access to  needed services. (See fig. 2.)

There are varied reasons why HCBS needs assessments may not  accurately and consistently estimate beneficiaries’ needs. HCBS needs  assessments cover complex subject matter and may require assessors to  make observations and judgments about beneficiaries’ needs. For  example, needs assessments typically address numerous and varied  tasks necessary for a beneficiary to live independently, which can be  difficult to measure and subject to interpretation—such as a beneficiary’s  ability to manage finances. Furthermore, CMS has stated that assessors’  conflicts of interest can influence decisions even without individual  assessors realizing this. Conflicts of interest can arise when an assessor  has an incentive for a beneficiary to either over- or under-utilize HCBS, or  an incentive to put the needs of assessors ahead of program goals, such  as promoting certain HCBS when others may be more beneficial or cost  effective. As examples to further illustrate these points, incentives that  could result in over- or under-utilization of HCBS include the following,  respectively. On one hand, an assessor may be a provider of the services  for which the beneficiary may be eligible or a managed care plan that  covers these services, and thus have an incentive to find that individuals  need the services or coverage they offer. Conversely, a managed care  plan may have incentives to reduce enrollees’ service utilization in order  to reduce costs below the capitation payments that the plan receives to  provide care to its enrollees and thus to maximize its profits, which could  influence needs assessments used for service planning.

Selected States Used Multiple Tools and Entities to Conduct Needs Assessments across Distinct HCBS Programs

Selected States Varied in the Extent to Which Needs Assessment Tools Were Tailored to Distinct HCBS Programs and Assessment Purposes

Each of the six selected states we reviewed used varied needs  assessment tools across their distinct Medicaid HCBS programs, for  which both functional eligibility criteria and amount of services available to  beneficiaries can differ widely. The selected states varied in the extent  to which their needs assessment tools were either tailored to a single  Medicaid HCBS program or used across multiple, though not necessarily  all, HCBS programs in the state. The selected states also varied in the  extent to which the same or different needs assessment tools were used  for different purposes, such as determining functional eligibility and  developing a service plan:

Connecticut. State officials reported that the state was in the process  of piloting a uniform needs assessment tool that it planned to use for  all but one of the Medicaid HCBS programs in the state. This needs  assessment tool was used both to determine functional eligibility and  to develop beneficiary service plans.

Kentucky. State officials reported that the state had implemented a  new needs assessment tool for one Medicaid HCBS Waiver program  while continuing to use previous tools for other Medicaid HCBS  Waiver programs. The same assessment was used for determining  functional eligibility and for developing the service plan. In selecting  and adapting the new tool, officials said that they considered the  assessment needs of the other Medicaid HCBS waiver programs,  because they would ultimately like to use only one assessment tool  across all HCBS Waiver programs.

Minnesota. State officials reported that the state had designed a  uniform needs assessment tool for use across all HCBS programs in  the state and had implemented it for most programs. The uniform  assessment tool was used to determine functional eligibility for all  HCBS programs in the state for which it was implemented and was  also used to inform the development of service plans.

New York. State officials reported that the state had implemented a  set of needs assessment tools, referred to as a uniform assessment  system, for use across multiple HCBS programs. The same uniform  assessment system was used to both determine functional eligibility  and to inform development of beneficiary service plans.

North Carolina. At the time of our review, officials described  generally using different assessment tools for the separate HCBS  programs in the state. State officials reported that the state had  developed a new needs assessment tool for one Medicaid HCBS  Waiver program, and that they planned to expand use of this tool to  another program in the future. The state used different needs  assessments to determine functional eligibility and for service  planning in its HCBS Waiver programs.

Washington. State officials reported that a uniform assessment  system was used across HCBS programs in the state. The system  was composed of multiple needs assessment components. One  version of the assessment was used for HCBS programs serving  individuals with intellectual and developmental disabilities, and a  different version was used for all other programs. For all HCBS  programs, the same needs assessment system was used to  determine functional eligibility and to develop the service plan.

Selected States Used Different Types of Entities to Conduct Needs Assessments, Including State Agencies, Local Public Agencies, Contractors, HCBS Providers, and Managed Care Plans

All six states we studied reported using more than one type of entity to  conduct needs assessments for HCBS programs. For example, New York  used five different types of entities, North Carolina used four different  types of entities, and the remaining four states used two or three types of  entities to conduct needs assessments. State agencies, local public  agencies, and independent contractors were used by four states to  conduct needs assessments for at least one HCBS program. All states  but one, Washington, used HCBS providers or managed care plans to  conduct needs assessments (see table 2).

The types of entities that conduct needs assessments in the selected  states varied across distinct HCBS programs, or for distinct needs  assessment purposes within a single HCBS program. States may use  multiple types of entities to conduct needs assessments because of  differences in how particular HCBS programs were delivered. For  example, the entities used in Minnesota varied by delivery system—the  state reported that it used local public agencies to conduct needs  assessments for all Medicaid HCBS programs other than its managed  care HCBS program, for which managed care plans conducted needs  assessments. In other states, different entities conducted needs  assessments within the same HCBS programs depending on the purpose  of the assessment. For example, because managed care plans may have  a financial interest in eligibility determinations, New York began by July  2015 to use an independent contractor exclusively to conduct needs  assessments to determine functional eligibility for HCBS for new enrollees  in its managed care HCBS program. Once individuals were determined  eligible for managed care HCBS, the managed care plans conducted the  same assessment a second time in order to develop beneficiary service  plans.

Selected States Varied in Whether Formulas Were Used to Inform Functional Eligibility Determinations and Service Planning Decisions

The six selected states also varied in whether they used formulas based  on information collected using Medicaid HCBS needs assessment tools to  inform key functional eligibility and service planning decisions. States  may use such formulas as a means of meeting goals of consistent  treatment of individuals based on needs. In making functional eligibility  determinations, five of the six selected states—Connecticut, Minnesota,  New York, North Carolina, and Washington—reported using a formula to  compare the results of completed needs assessments to eligibility criteria  for at least one of the HCBS programs in the state. For example, for  specific HCBS programs, the assessment tool may compile results of  certain assessment questions into a score that indicates whether or not  the beneficiary is considered to have a need for an institutional level of  care, which is required in order to be functionally eligible for some types  of HCBS programs. For service planning purposes, four states— Connecticut, Minnesota, North Carolina, and Washington—reported that  in at least one of these states’ distinct HCBS programs, the assessment  tools included formulas. These formulas specified a particular amount of  services or guided a potential range of service amounts for beneficiaries  based on the results of particular assessment questions. (See table 3.)

Professional judgment may also be used in conjunction with formulas. For  example, when formulas are used to specify particular service levels  based on the needs assessment results, they may specify a number of  service hours or service budget. In either case, other factors may also be  considered in some circumstances. State officials in one state described  the use of formulas to allocate services as an initial step prior to the  detailed person-centered service planning process. For example, in  Minnesota a state formula specifies a certain number of hours of personal  care services partly based on the level of need for assistance with  activities of daily living such as eating, bathing, and toileting. However,  the beneficiary and the entity responsible for the service planning process  determine the specific services to prioritize within the overall number of  hours available, and they may decide to use the authorized hours toward  covered services that were not necessarily part of the formula, such as  instrumental activities of daily living. In contrast, in states or HCBS  programs that did not utilize formulas to specify or guide a particular  amount of services based on assessment results, the amount of services  may be determined—within the scope of service limits applicable to the  particular HCBS program—by the entity responsible for working with the  beneficiary on the service planning process.

Selected States Took Steps to Unify Needs Assessment Processes and Increase Consistency

Selected States Made Efforts to Make Needs Assessment Processes More Uniform across Distinct HCBS Programs and Noted Benefits and Challenges

The six selected states reported taking steps to unify needs assessment  processes across Medicaid HCBS programs as a means of meeting goals  such as improving the efficiency and effectiveness of assessments.  Specifically, states reported taking steps to implement assessment tools  for use across multiple Medicaid HCBS programs in the state. Four  states—Connecticut, New York, Minnesota, and Washington—had  adopted or were piloting needs assessment tools that were used across  multiple state Medicaid HCBS programs (though not necessarily all such  programs in the state) rather than completing separate needs  assessments for each separate program. In addition, Kentucky and North  Carolina had recently implemented new tools for specific Medicaid HCBS  programs that would be considered for use in additional HCBS programs  in the future.

Important benefits to beneficiaries and HCBS programs have resulted  from efforts to coordinate needs assessment processes by using a  uniform assessment across distinct HCBS programs, according to state  officials and advocates. For example:

State officials and advocates described that using a uniform  assessment tool to determine functional eligibility for multiple state  HCBS programs resulted in benefits and efficiencies for beneficiaries.  Officials and advocates in Minnesota said that the uniform  assessment process allowed beneficiaries to connect with the  program best suited to their needs, even if they may not have  otherwise been aware of it when initially seeking assistance. For  example, officials said that families of children with autism may apply  for personal care services, but may benefit more from being  connected to another HCBS program that is available and designed to  support the children’s specific needs. Similarly, officials in Connecticut  said that uniform assessment across HCBS programs allows  beneficiaries to access the services that are most appropriate without  multiple assessments. For example, if an individual applies for a  particular HCBS program but a separate program would be more  appropriate, a second assessment is not necessary.

Connecticut, Washington, and New York officials described how  uniform assessment tools allowed consistent information to be shared  with care providers or when beneficiaries transitioned between care  settings. This, in turn, could allow care providers to better manage  beneficiary care.

State officials reported uniform assessment tools can result in better  informed program management and policy decisions because they  allow for the ability to collect consistent information across HCBS  programs. For example, officials from Connecticut and Washington  described how comparable assessment information could inform  equitable policies for allocating services. Washington officials  described using information about the extent of beneficiary needs to  inform decisions about how many program staff were needed.  Kentucky officials described how a more uniform assessment process  helped them become aware of when beneficiaries were receiving  services from multiple different non-Medicaid HCBS programs that  were state-funded.

States and advocates also reported challenges, including inefficiencies, to  using uniform assessments under certain circumstances, such as when  states have different criteria for functional eligibility across their different  HCBS programs, or when different beneficiary populations have different  assessment needs. For example:

Minnesota officials reported that beneficiaries may need to address  multiple versions of similar eligibility-related questions in its uniform  assessment tool. This was due to the decision to incorporate each  HCBS program’s previously separate functional eligibility questions  into its tool to avoid changes in the information they used to determine  eligibility.

Beneficiary advocates in three states expressed concerns with the  use of assessments designed for a particular population on a different  population, such as using assessments designed for adults to assess  the needs of children. Officials from Kentucky also noted concerns  about using assessments across distinct populations as part of the  reason the state was not using a single assessment tool.

State officials and advocates also reported that uniform assessments  resulted in lengthier assessment question sets that take longer to  complete for both the assessor and the beneficiary.

Selected States Reported Efforts to Increase Consistency in How Needs Assessments Were Conducted and Used, but Balancing Consistency with Flexibility Was a Concern

Selected states reported making efforts to improve their assessment  processes to increase consistency in how assessors conduct HCBS  needs assessments. These efforts included using structured questions  and emphasizing training to ensure individual assessors approached the  assessment questions consistently and according to policy, and  addressing potential conflicts of interest by using independent assessors  rather than HCBS providers and managed care plans to conduct certain  needs assessments. States’ improvement efforts included the following:

Structured questions. Officials from five states described that  structured approaches to assessment questions could improve the  consistency of the assessment results, which are used to make  functional eligibility and service planning decisions. Examples of  structured questions that state officials described included questions  that limited responses to a specific time period—such as the past 7  days—when assessing needs, and questions that used a standard  scale for responses.

Assessor training. Officials from four states reported focusing on  assessor training to improve consistency. For example, North  Carolina officials reported that determinations of need for personal  care services were improved after training. In the training, assessors  were taught to comply with a state policy to ask that beneficiaries  demonstrate need for assistance with activities of daily living, such as  mobility, rather than solely asking them questions about their needs.

Independent needs assessments. Officials from three of the  selected states—New York, North Carolina, and Kentucky—reported  that needs assessments were improved by removing entities that had  a financial interest in assessment results from conducting certain  assessments. For example, Kentucky officials reported that using  independent assessors rather than HCBS providers enhanced  consistency because HCBS providers may skew beneficiaries’  assessment results to generate demand for their services. They noted  that providers had resisted their removal from the process.

Three of the six selected states reported that using a formula to  summarize assessment results increased the consistency with which  functional eligibility determinations or decisions about the amount of  services to provide were made based on each individual’s assessment  results. For example, officials from Washington reported that after  implementing a formula to generate an overall classification of need, the  amount of service hours authorized for beneficiaries was distributed more  equitably and evenly across a continuum from minimum to maximum,  rather than beneficiaries mainly always receiving the maximum number of  hours allowed under program limits. This could allow for limited resources  to be allocated more consistently across beneficiaries with similar levels  of need. Officials from Connecticut similarly reported that during testing of  a formula that was planned for use to specify the amount of service to  provide, they had identified beneficiaries receiving more services than  would be indicated by the formula based on their assessed needs.

While officials reported that these efforts enhanced consistency of  eligibility determinations and service authorization decisions, state  officials and advocates also acknowledged challenges related to  balancing consistency with flexibility in arriving at decisions—particularly  with respect to the use of formulas for service allocation. The different  approaches of relying on a formula or relying on the judgement of  individual entities each presented its own challenges:  In two states where there was a formula to specify or guide the  amount of services to provide, advocates raised concerns that the  indicated amount did not adequately address needs for some  individuals. For example, advocates noted that the results of a lengthy  and nuanced assessment tool were ultimately reduced to a single  score in order to inform a particular budget for services. While this  score might reflect the average needs of beneficiaries with similar  assessment results, it did not adequately convey individualized needs  of some beneficiaries, according to the advocates.

On the other hand, there were concerns that relying on entities’  judgment resulted in inconsistency across beneficiaries. Advocates in  three states raised concerns about inconsistent decisions across  managed care plans or geographic areas, or over time, when  determinations of functional eligibility or amount of services to provide  were not based on state-determined formulas.

In one state, state officials and advocates noted that these concerns  were addressed by using formulas to allocate services but allowing  beneficiaries to use an alternative assessment process in certain  circumstances or receive “exceptions” to the amount of service  authorized by the state’s formula based on individual circumstances.

Beneficiary advocates also emphasized that the amount of services that  are authorized for beneficiaries may reflect the scope of available  services rather than the needs of an individual beneficiary. To the extent  that a given HCBS program has limited resources for providing services,  assessment results may be used to allocate resources within those  limitations rather than to estimate the amount of services that would fully  meet needs. For example, an assessment formula in Washington is  designed to specify service amounts based on beneficiaries’ identified  levels of need and the amounts that are available for particular levels of  need may increase or decrease based on the state budget. State officials  in Connecticut also said that because funding can vary for different HCBS  programs within a single state, moving to a consistent formula for  analyzing assessment results may shed light on the extent that  beneficiaries with similar levels of need receive different levels of services  depending on available program resources.

CMS Has Taken Steps to Make HCBS Needs Assessment Processes More Effective, Uniform, and Free from Conflict of Interest, but Some Concerns Remain Unaddressed

Two CMS Programs Have Sought to Make Assessment Processes More Effective and Uniform within and across States

CMS has implemented two key programs that facilitate state efforts to  make their HCBS needs assessment processes more uniform, among  other goals. One of these is called Testing Experience and Functional  Tools (TEFT) and is designed, in part, to test the effectiveness of a set of  specific questions that states can use to conduct needs assessments.  CMS designed the TEFT assessment questions for use across multiple  HCBS beneficiary populations, including beneficiaries (1) of advanced  age, or with (2) intellectual or developmental disabilities, (3) physical  disabilities, (4) serious mental illnesses, or (5) traumatic brain injuries.  The assessment questions being tested are limited to needs that may be  relevant among these populations and do not assess needs that may  apply to only certain populations; for example, questions to assess  cognitive status that may apply to those with intellectual or developmental  disabilities or other conditions but that do not apply to those with physical  disabilities only. CMS announced TEFT in 2012 and six states received  grants to test needs assessment questions for their effectiveness, which  includes their validity (defined as accuracy in measuring individuals’  functional abilities) and reliability (defined as the consistency of results  across assessors). Three of these six states were among those we  selected for this review: Connecticut, Kentucky, and Minnesota. Officials  in these states told us that they had not completed field testing the TEFT  questions, and officials in two of these states (Connecticut and  Minnesota) said they would consider the option of using TEFT questions  in their assessments in the future. CMS officials told us that CMS plans to  make the assessment questions they determine to be valid and reliable  available to all states in the spring of 2018.

Another key program that CMS has implemented is the Balancing  Incentive Program, which was authorized by the Patient Protection and  Affordable Care Act in 2010, to provide incentives for eligible states to  rebalance their long-term services and supports systems towards more  home- and community-based care. Among other things, this program  required participating states to collect information on specific topics  related to beneficiaries’ needs, but allowed states to choose the needs  assessment questions. Under this program, states could use different  assessment tools to gather information for HCBS programs serving  different populations as long as the states used tools that collected  information on 26 key topics that spanned five broad areas, or domains.  The five domains were (1) activities of daily living, (2) instrumental  activities of daily living, (3) medical conditions/diagnoses, (4) cognitive  functioning, memory, and learning, and (5) behavior concerns (e.g.,  injurious, uncooperative, or destructive behavior). The requirement to  collect information from these five domains for each beneficiary  population was designed to promote consistency in determining  beneficiaries’ needs across HCBS programs, while allowing states to  tailor their assessment processes to specific beneficiary populations,  according to CMS officials. For example, New York reported collecting  information on the required topics using a suite of six assessment tools  that varied to reflect differences in beneficiaries’ age, population, and  other factors.

The Balancing Incentive Program ended in 2015, although some states  were provided extensions to carry out planned activities. Of 20  participating states evaluated, 18 successfully carried out the requirement  to incorporate the 26 key topics in their needs assessments, according to  a program evaluation prepared for the HHS Assistant Secretary for  Planning and Evaluation. In addition, CMS has provided information and  lessons learned from the Balancing Incentive Program to all states via its  website and, according to CMS officials, has done several related  presentations. While CMS does not have plans to conduct additional  evaluations of assessment tools used by participating states, CMS  officials told us that there would be some value to doing so and they may  consider it in the future.

CMS Has Taken Steps to Improve Effectiveness by Addressing the Potential for Conflicts of Interest, but These Steps Do Not Address All Types of Programs or Conflicts

CMS has sought to improve HCBS needs assessments by addressing  concerns about the potential for conflicts of interest that HCBS providers  and managed care plans may have in conducting assessments. As  previously noted, HCBS providers may have a financial interest in  providing services that could potentially lead to over-utilization of  services, while managed care plans may have a financial interest in  increasing enrollments and reducing enrollees’ service utilization.

Addressing HCBS Providers’ Potential for Conflicts of Interest

CMS has taken steps to address conflicts of interest that may occur when  HCBS providers conduct needs assessments, but gaps remain. The  Balancing Incentive Program, which ended in 2015, required the 21  participating states to either separate HCBS provision from needs  assessment processes or to take steps to mitigate the potential for  conflicts of interest that occur when HCBS providers conduct  assessments. In addition, CMS implemented regulations requiring all  states to establish standards for conducting needs assessments that  address certain potential conflicts for particular types of HCBS programs.  The specific requirements may differ by program and whether the  assessment is used to determine functional eligibility or develop service  plans:

For example, for State Plan HCBS—a relatively small program that  accounted for less than 1 percent of estimated Medicaid HCBS  expenditures in fiscal year 2015—states are required to establish  conflict-of-interest standards that address both (1) evaluation of  eligibility, and (2) needs assessments used to develop service plans.  These standards must prohibit HCBS providers from conducting  eligibility evaluations and needs assessments for this program, with  certain exceptions in which the potential for conflict of interest must be  mitigated.

Under the HCBS Waiver, Community First Choice, and Self-Directed  Personal Assistant Services programs—which collectively accounted  for 60 percent of estimated expenditures for Medicaid HCBS in fiscal  year 2015—states are required to establish standards that generally  prohibit HCBS providers from conducting assessments of need used  to develop service plans, but this requirement does not apply to  assessments that states may use to determine functional eligibility.

In addition, for State Plan Personal Care Services programs and other  HCBS authorized under Section 1905(a) of the Social Security Act— which collectively accounted for 29 percent of estimated Medicaid  HCBS expenditures in fiscal year 2015—regulations do not  specifically limit HCBS providers from conducting assessments that  states may use to determine eligibility or develop service plans.

As a result of these differences in requirements across HCBS authorities,  there are gaps in federal conflict-of-interest requirements applicable to  entities that may conduct needs assessments. For example, several  types of HCBS programs have specific requirements for states to  establish standards to address potential conflicts of interest when HCBS  providers conduct needs assessments that are used for service planning,  but there are no equivalent requirements for State Plan Personal Care  Services programs. (See table 4). In addition, HCBS providers may  conduct certain needs assessments that inform HCBS functional eligibility  determinations, but specific conflict of interest requirements are generally  not in place for such assessments. With respect to gaps in requirements  specific to needs assessments that are used to inform functional eligibility  determinations, CMS officials suggested that state agencies’  responsibility for making final eligibility determinations addresses conflict- of-interest concerns. Specifically, officials noted that CMS regulations  require state agencies to determine eligibility, and that, in doing so, states  may consider needs assessments conducted by assessor entities as well  as information from other sources. However, states may vary in the  extent to which they consider information from other sources. In addition,  it is unclear how the requirement that the state maintain responsibility for  eligibility determinations addresses potential conflicts of interest when an  HCBS provider conducts a needs assessment upon which a  determination of eligibility for HCBS may be based.

Gaps in requirements to address the potential for conflicts of interest  when HCBS needs assessments are conducted by HCBS providers are  not consistent with federal internal control standards, which require  federal agencies to identify, analyze, and respond to risks related to  achieving defined objectives. While CMS has a goal of achieving an  effective long-term services and supports system that provides  appropriate services to beneficiaries, because the agency does not  require states to address the potential for HCBS providers’ conflicts of  interest in conducting needs assessments under all HCBS authorities,  there is a risk that some states may rely on HCBS providers to conduct  assessments without addressing HCBS providers’ financial incentives,  which can lead to over-utilization of HCBS. Examples among our case  study states include:

North Carolina: A program integrity review conducted by CMS in  North Carolina found that the state’s transition to the use of an  independent entity to conduct needs assessments for the State Plan  Personal Care Services Program—rather than relying on HCBS  providers to assess beneficiary needs—was followed by a reduction in  both the number of beneficiaries using the program and a 30 percent  reduction in average monthly expenditures. This suggests the  program may have been over-utilized before the independent entity  was used to conduct needs assessments. CMS highlighted this use of  an independent entity as a practice that merits consideration from  other states.

Kentucky: State officials told us that when they transitioned to the  use of independent assessors they also identified apparent instances  of over-utilization that were occurring before they implemented  independent assessments and other program changes. For example,  officials said that when testing a new assessment tool using  independent assessors, they identified individuals who had a low level  of needs, and who did not appear to require an institutional level of  care, as required for program eligibility, but who had been assessed  at that level in the past.

Addressing Managed Care Plans’ Potential for Conflicts of Interest

Conflict-of-interest concerns also exist for states with managed care  HCBS programs where managed care plans conduct assessments.  CMS has taken separate steps to address these concerns, including  issuing guidance and new regulatory requirements.

CMS issued guidance in May 2013 that addressed best practices and  CMS’s expectations of new and existing managed long-term services and  supports programs, which include managed care HCBS.  The guidance  stated that managed care plans may not be involved in any HCBS  functional eligibility determinations or needs assessment processes prior  to a beneficiary’s enrollment in the plan. CMS officials told us that  allowing managed care plans to assess individuals before enrollment  without proper oversight by the state may provide an opportunity for plans  to selectively enroll individuals who require less HCBS. Despite this risk,  we found that CMS does not always take steps to ensure that states have  procedures in place to guard against this practice prior to approving their  programs. CMS officials told us that they evaluate state programs  individually and may not apply all of the detailed concepts in its guidance  when developing state-specific requirements for managed care HCBS  programs. CMS’s application of the guidance in the three states selected  for this review varied across types of HCBS programs. Examples from  1115 Demonstration and HCBS Waiver programs for our case study  states include the following:

1115 Demonstration programs: Of the six states we selected for this  review, one—New York—operated a managed care HCBS program  authorized by an 1115 demonstration. Prior to July 2015, New York  used managed care plans to assess and determine individuals’  functional eligibility for certain HCBS programs. One managed care  plan admitted to enrolling 1,740 individuals in managed care HCBS  whose needs did not qualify them for the program from January 2011  to September 2013, and it resolved allegations that it had submitted  false claims for Medicaid HCBS in a $35 million settlement with the  U.S. Department of Justice. In 2013, CMS amended the terms and  conditions of New York’s demonstration to require the state to use an  independent assessor entity to both conduct needs assessments and  determine eligibility for managed care HCBS, and New York has  contracted with an independent assessor to carry out these functions.  While this requirement applied specifically to New York, it does not  necessarily apply to other states, as CMS’s terms and conditions for  1115 demonstrations can vary across states. According to CMS, an  additional 11 states had managed care HCBS programs approved  under 1115 demonstrations as of July 2017. However, CMS officials  told us that they did not have information on whether or not these 11  states were using managed care plans to conduct needs  assessments for the purpose of determining individuals’ functional  eligibility.

HCBS Waiver programs: Two of our six selected states—Minnesota  and North Carolina—used managed care plans to deliver services for  HCBS Waiver programs. In these states, CMS approved HCBS  Waiver applications that proposed to use managed care plans to  conduct or evaluate needs assessments used to determine functional  eligibility for the programs, contrary to CMS’s May 2013 guidance.  CMS officials said that when states allow managed care plans to be  involved in these assessments, CMS would expect states to provide  oversight as part of their quality improvement strategies required  under HCBS Waivers. However, CMS does not require states to  provide assurances or evidence of oversight directly related to  managed care plans’ potential for conflicts of interest when plans are  involved in needs assessments that states use to determine functional  eligibility.

CMS officials told us that states that do allow managed care plans to  conduct assessments used to determine eligibility for HCBS should be  aware of the potential for conflicts of interest in order to provide adequate  oversight. CMS officials also told us that they engage in a conversation  with states related to oversight of the assessment process when CMS  learns of such states. However, CMS does not collect complete  information on which states use managed care plans for needs  assessments prior to enrollment, and states may not implement  precautions absent a specific CMS requirement to address the potential  for these conflicts of interest. The absence of requirements for states to address acknowledged risks is not consistent with federal internal control  standards that require federal agencies to identify, analyze, and respond  to risks related to achieving defined objectives.

Developing Service Plans and Determining the Amount of HCBS to  Provide  Separate concerns pertain to managed care plans’ involvement in HCBS  needs assessments for service planning purposes that are conducted by  plans after enrollment. Advocates in two of the three selected states with  managed care HCBS programs, New York and North Carolina, expressed  concerns about managed care plans’ incentives to reduce their costs by  reducing enrollees’ HCBS service levels, leading to reduced access to  needed HCBS. For example, advocates in New York highlighted the  growth in fair hearings that enrollees initiated to dispute reductions in  HCBS they receive, which can result from inaccurate needs  assessments. In May 2016, in the preamble to a final rule that amended  managed care regulations, CMS responded to concerns from  commenters about managed care plans’ involvement in the needs  assessments used to develop service plans by stating that managed care  plans’ HCBS needs assessments of enrollees are a critical component of  the plans’ efforts to manage enrollees’ care. CMS also noted that existing  appeals processes, which are similar to fair hearings, provide adequate  safeguards to address instances when enrollees believe their needs  assessments do not reflect their true needs. However, according to  CMS, beneficiaries enrolled in managed long-term services and supports  are among the most vulnerable and often require enhanced protections to  assure their health and welfare.

To implement additional beneficiary protections, the May 2016 managed  care regulations require states with managed care HCBS programs to  implement a beneficiary support system. A beneficiary support system  generally provides individuals with education and assistance related to  appeals, grievances, and fair hearings, and assists states with the  identification and resolution of systemic issues through review and  oversight of program data. These regulations also require states to report  annually on the activities and performance of these systems in order to  drive continual improvements. CMS stated that reporting requirements of  this nature would help the agency address fragmented program  information about state managed care programs and help improve  oversight efforts. However, as of September 2017, CMS had not issued  guidance to states on the content and form of this reporting, and under  the regulations, states are not required to submit reports until CMS issues  such guidance. CMS officials told us they were unsure whether they  would issue this guidance, and thus it is unclear whether and when the  reporting requirement will take effect.

We previously made a recommendation to CMS that pertains to this  issue. Specifically, in a report published in August 2017, we identified  similar concerns with the lack of requirements for state managed long- term services and supports programs to report information that CMS  needs to adequately oversee states’ programs for ensuring beneficiary  access to services. We found that existing state reporting did not always  include key elements necessary for CMS to monitor certain key aspects  of beneficiaries’ access and quality of care, including data related to  appeals and grievances. We recommended that CMS improve its  oversight of managed long-term services and supports by taking steps to  identify and obtain key information needed to oversee states’ efforts to  monitor beneficiary access to quality services. HHS concurred with this  recommendation and stated that the agency will take this  recommendation into account as part of an ongoing review of the 2016  managed care regulations. This action could help to address the  concerns discussed above regarding managed care plans’ potential for  conflicts of interest in conducting needs assessments for service planning  purposes.

HCBS needs assessments can directly affect whether individuals are  eligible to receive HCBS and the amount of services they receive. Given  the growth in spending for Medicaid HCBS and the potential vulnerability  of individuals seeking HCBS, it is critical that needs assessments are  effective in ensuring that beneficiaries receive the help they need to live  independently while at the same time reducing the risk of over-utilization  of HCBS. CMS plays an important role in ensuring that states  appropriately assess the needs of those seeking HCBS, including  addressing the potential for entities that conduct needs assessments to  have conflicts of interest. Conflicts of interest can result in inaccurate  assessments, potentially leading to provision of unnecessary services or  restricting other beneficiaries’ access to needed services. CMS has  required states to take actions to avoid or mitigate the potential for  conflicts of interest for some HCBS programs, and states that have taken  steps to protect against conflicts of interest in HCBS programs have  reported improvements; however, we found gaps in federal requirements  for such safeguards. These gaps in requirements are inconsistent with  federal control standards that require federal agencies to identify,  analyze, and respond to risks related to achieving defined objectives.  CMS could improve the efficiency and effectiveness of Medicaid HCBS  programs by taking additional steps to consistently require all types of  states’ programs to avoid or mitigate the potential for conflicts of interest  in conducting needs assessments, as appropriate.

The Administrator of CMS should ensure that all types of Medicaid HCBS  programs have requirements for states to avoid or mitigate potential  conflicts of interest on the part of entities that conduct needs  assessments that are used to determine eligibility for HCBS and to  develop HCBS plans of service. These requirements should address both  service providers and managed care plans conducting such  assessments. (Recommendation 1)

We provided a draft of this report to HHS for review and comment, and  HHS provided written comments, which are reprinted in appendix I. HHS  also provided technical comments, which we incorporated as appropriate.  HHS concurred with our recommendation to ensure that all types of  Medicaid HCBS programs have requirements for states to avoid or  mitigate potential conflicts of interest on the part of entities that conduct  needs assessments. HHS stated that it has a regulatory structure in place  to protect against potential conflicts of interest on the part of entities  responsible for determining eligibility for HCBS and developing service  plans. As described in our report, however, there are gaps in required  conflict of interest standards applicable to entities that conduct needs  assessments that inform HCBS eligibility determinations. Further, the  conflict of interest requirements related to service plans do not apply to all  programs, such as State Plan Personal Care Services programs.  Developing additional requirements in response to such gaps would  further improve efficiency and effectiveness.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies to the Secretary of Health  and Human Services and other interested parties. In addition, the report  will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact  me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix II.

Appendix I: Comments from the Department of Health and Human Services

In addition to the contact named above, Tim Bushfield (Assistant  Director), Emily Beller Holland, Anne Hopewell, Laurie Pachter, Chris  Piccione, Vikki Porter, Russell Voth, and Jennifer Whitworth made key  contributions to this report.

Medicaid spent $87 billion in FY2015 for long term care services provided in homes and community settings. To receive these services, individuals’ needs must first be assessed—by a government agency, independent contractor, care provider, or others.

However, a conflict of interest can exist if the assessor has a financial interest in the outcome. For example, one state took steps to address conflicts after a managed care plan admitted enrolling 1,740 individuals whose needs did not qualify them.

We recommended that the federal Centers for Medicare & Medicaid Services expand requirements for states to address potential conflicts of interest.