Projecting Cost Savings from the ADRC Network

1. Projecting Cost Savings from the ADRC Network

2. Summary of Findings • General fund savings to Medi-Cal for nursing facility stays could cover the cost of the ADRC Network infrastructure and options counseling if options counseling diverts 4% of its participants from NFs • The Lewin calculator yields much higher savings, equivalent to $6.90 for every $1 invested • There is already some evidence of lower long-term care costs in ADRC counties. • However, all estimates are based on a series of strong assumptions.

3. Focus on Costs to General Fund • Reducing costs is not an explicit purpose of ADRCs as envisioned in the Older Americans Act • However, the possibility of Medi-Cal savings offers a compelling incentive for the State of California to invest in the ADRC Network • Therefore, this cost analysis focuses on: • Cost of the ADRC Network (not ongoing ILC and AAA services) • Potential Savings for Medi-Cal

4. What does it take to fund the ADRC Network annually?

5. Focus on Options Counseling Role in Preventing Institutional Care Nursing facility (Medicaid) Nursing facility (private-pay) → Acute illness or hospital stay → Loss of primary caregiver → Depleted funds → Spenddown Living at home (formal or informal home care) Increasing level of care need Depleting private resource

6. Extending the Ability of People to Live at Home Saves Medi-Cal Dollars Nursing facility Medicaid Nursing facility (private-pay) → Spenddown Living at home (formal or informal home care) Increasing level of care need Depleting private resource

7. Typical Annual General Fund Cost for NF Care: $22,719 • $5,679.85 per person per month in 2012-13 • DHCS May 2013 Budget Estimate • Assume average 8 month stay • Eight month average is used by Lewin in the calculator • Consistent with people starting at different times a year or a mix of long-term and short-term stays • Total $45,439, 50% paid by federal match

8. Savings are substantial even if Medi-Cal pays for HCBS Care • For example: Multipurpose Senior Services Program (MSSP): $3,781 annual costs for waiver participants -$45,439 + $3,781 = -$41,658 Per person who receives MSSP instead of NF -$20,829 annually for federal costs -$20,829 annually for general fund

9. However, estimated savings are very sensitive to assumptions • How much will community-based services cost? • If costs are similar to waiver costs, which waiver? • IHSS averages $12,530 per person per year, which would lower general fund savings to $16,454 • Who will use community-based services that would never use Medi-Cal NF care? • “Woodwork” effect

10. Assume $16,454 annual savings per person not entering NF • Assumes each person not entering a NF due to ADRC options counseling has costs equal to IHSS costs • The $12,530 per person ($6,265 GF) is probably too high but can help account for woodwork effect • Same net cost would occur if each person received $4,176 in HCBS services, but two more people used community services for every person that avoided a nursing facility

11. The ADRC network pays for itself if just 4 percent of those who receive options counseling take avoid nursing facility care

12. Where does 4% come from? • $16,454 savings per person not entering a NF • $1,755,964 divided by $16,454 = ~107 • Savings for diverting 107 people is $1,760,578 • If 3,000 people receive options counseling and 107 avoid NF care, this means 3.6% avoid NF (107/3000) • So, if 4% (120) avoid NF, Medi-Cal GF saves $1,974,480 or $218,516 more than the network costs

14. Is it plausible that options counseling will divert 120 people? Two ways of checking: • Lewin ADRC Cost Offsets Calculator • Medi-Cal NF use in existing ADRC counties

15. Calculating Diversion Population in the Lewin ADRC Cost Offsets Calculator

16. Lewin ADRC Cost Offsets Calculator Applied to California

17. 844 diverted would yield $6.90 for each $1 invested in ADRCs • $16,454 times 844 = $13,887,176 saved • Minus $1,755,964 costs = $12,131,212 saved net • $12,131,212 divided by $1,755,764 in cost = 6.9

18. Long-term care days are falling in California; falling faster in ADRC counties *Adjusting for change in population aged 65+ Cost to Medi-Cal for LTC in ADRC counties is $4,461,474 less than it would have been if LTC days had matched the rest of the state

19. Summary of Findings • General fund savings to Medi-Cal for nursing facility stays could cover the cost of the ADRC Network infrastructure and options counseling if options counseling diverts 4% of its participants from NFs • The Lewin calculator yields much higher savings, equivalent to $6.90 for every $1 invested • There is already some evidence of lower long-term care costs in ADRC counties. • However, all estimates are based on a series of strong assumptions.

20. Discussion Questions • Is there a better basis to estimate the costs (to the State) of services for those receiving options counseling? • Is it plausible that 4% of people who receive options counseling avoid Medi-Cal NF care? Is options counseling well targeted to this group? • How comparable are options counseling and other ADRC activities to functional assessment for Medi-Cal level of need? • What network costs are left out (that aren’t otherwise ILC or AAA costs)?