COST SAVINGS FROM HOME AND COMMUNITY-BASED SERVICES - ARIZONA CAPITATED MEDICAID LONG-TERM-CARE PROGRAM

The Arizona Long-Term Care System is the first capitated, long-term ca re Medicaid program in the nation to operate statewide. It promotes an extensive home and community-based services program intended to lower long-term care costs by substituting home care for institutional care . Because the program is statewide, finding a suitable control group t o evaluate it was a serious problem. A substitute strategy was chosen that compares actual costs incurred to an estimate of what costs would have been in the absence of home and community-based (HCB) services. To estimate the likelihood of institutionalizing clients in the absenc e of HCB services, coefficients for institutionalization risk factors were estimated in a logistic regression model developed using national data. These were applied to characteristics of Arizona clients. The m odel assigned approximately 75 percent of the program's clients to a c ategory with traits that were determined to resemble nursing home resi dents' traits. A similar methodology was used to estimate lengths of n ursing home stays. Lengths of stay by the program's nursing home patie nts were regressed on their characteristics using an event history ana lysis model. Coefficients for these characteristics from the regressio n analysis were then applied to HCB services clients to estimate how l ong their nursing home stays would have lasted, had they Seen institut ionalized. These estimated nursing home stays were generally shorter t han these same patients' observed home and community stays. Risk of in stitutionalization was then multiplied by estimated length of stay and by monthly nursing home costs to estimate what costs would have been without the HCB services option. The expected costs were compared to a ctual costs to judge cost savings. Home and community-based services a ppeared to save substantial amounts on costs of nursing home care. Est imates of savings were very robust and did not appear to be declining as the program matured. Savings probably came from several sources: th e assessment teams that judged client eligibility were employed by a s tate agency and thus were independent from the program contractors; cl ients were required to be in need of at least a three-month nursing ho me stay; a cap was placed on the number of HCB services clients contra ctors were allowed to serve each month. the capitated payment methodol ogy forced managed care contractors to hold down average HCB services costs or lose money; and the HCB services and nursing home costs were blended in the capitated rate, so that plans that failed to place clie nts in HCB services would lose money by using more nursing home days t han their monthly capitated rate allowed.