DEPARTMENT OF HEALTH & HUMAN SERVICES 
Centers for Medicare & Medicaid Services 
7500 Security Boulevard, Mail Stop S2-14-26 
Baltimore, Maryland 21244-1850 
 
Center for Medicaid and State Operations 
 
August 13, 2002              SMDL# 02-012 
Letter Summary 
 
In the Progress on the Promise Report to the President under the New Freedom Initiative, the 
Department of Health and Human Services promised to work with states and people with 
disabilities to assure Medicaid-eligible persons with disabilities of all ages are served in the 
most appropriate setting according to their needs and preferences.  This letter focuses on 
strategies available to states under current authority to assist individuals to avoid or leave 
unnecessary nursing facility placement.  This letter highlights promising state practices, such as 
programs in which money follows the person, and outlines some early lessons learned from 
states that previously awarded nursing facility transition grants.  
 
 
Dear State Medicaid Director: 
 
In 2000, slightly over 1 million Medicaid beneficiaries were residents in federally certified or 
state licensed nursing facilities.1  Of those individuals, approximately 10.9 percent2 were under 
the age of 65, representing about 109,146 Medicaid beneficiaries.  The cost of long-term care 
represents a significant portion of all spending on Medicaid services.  In particular, the cost of 
nursing home services (which have accounted for over 20 percent3 of total Medicaid 
expenditures through most of the 1990s) are perceived as a serious cost driver for many states.  
During this same time period, nursing homes expenditures as a percent of all long-term care 
expenditures have hovered around 60 percent.4 
 
Based upon this data, the Center for Medicaid and State Operations believes there is tremendous 
potential to serve people who meet nursing facility level of care in private homes or in 
community residential settings that would be more acceptable to the beneficiary, without 
increasing costs to the states. 
 
Many states have engaged in activities and developed programs that serve persons in the most 
appropriate community setting rather than in an institution.  These programs and activities, 
developed under existing authority, have included diversion programs to maintain people in the 
community, transition programs to actively move individuals from institutional settings to 
alternative community placements, and program models in which the money follow the person 
to assure stability of community living.  
                                                 
1 CMS, Online Survey and Certification and Reporting System (OSCAR), December 8, 2000. 
2 National Nursing Home Survey, National Center for Health Statistics, Advanced Data Number 280, January 1997. 
3 CMS, CMS Form 64, Office of State Agency Financial Management. 
4 CMS, CMS Form 64, Office of State Agency Financial Management.  Page 2  State Medicaid Director 
 
Below are examples of states engaged in activities we consider promising practices.  More 
detailed descriptions of two of the practices outlined below (Florida and Utah) currently appear 
on our website at www.cms.hhs.gov/promisingpractices.  Detailed descriptions of the other 
practices will be available on the same website within the next three months.  These examples 
are not intended to be exhaustive of states efforts, but rather illustrative of the types of programs 
that exist.  States are encouraged to submit their own programs that have been successful in 
addressing the unnecessary placement of persons in nursing facilities to Alissa DeBoy at 
Adeboy@cms.hhs.gov.  These ideas will then be considered for our Promising Practices Series 
and published on our website so that all states might benefit. 
 
State Innovation Under Existing Authority 
 
Colorado 
 
In 1998, Colorado implemented the Fast Track program to increase the number of persons 
discharged from hospitals to community-based settings instead of nursing homes.  The purpose 
of the Fast Track program is to address some of the structural problems in the Medicaid system 
that act as barriers to community placement for persons who have been hospitalized.  The focus 
of the project has been to provide on-site assessment for waiver services and Medicaid eligibility 
determination within a hospital setting to divert hospital discharges from nursing facility 
placements when appropriate.  The program has adopted a series of accelerated procedures for 
conducting assessments of hospital patients, for determining financial eligibility for Medicaid, 
and for approving and arranging for community-based services.  Between July 2000, and June 
2001, out of 122 potential fast-track candidates referred by the hospital to the program, 87  
(71 percent) were successfully fast-tracked to community settings. 
 
Texas 
 
In 2001, the Texas Department of Human Services implemented a law that provides for 
Medicaid funding to follow an individual when transitioning from a nursing facility to the 
community.  The law specified that as individuals relocate from nursing facilities to community 
care, funds will be transferred from Nursing Facilities to Community Care Services to cover the 
cost of the shift in services.  The Texas law represents a good example of an initiative that can 
be undertaken relatively quickly, without requiring major restructuring of the long-term care 
system. 
 
The Texas Department of Human Services has assisted more than 700 individuals to transition to 
community living since the effective date of the law in September 2001.  The Department 
developed procedures for informing nursing facility residents, responding to requests for 
assessments and care planning, and then assisting with the transitions.     Page 3  State Medicaid Director 
 
Florida 
 
Florida is pilot testing a managed care model to increase incentives for maintaining individuals 
in community settings.  Under the Long-Term Care Community Diversion Project, managed care 
organizations are paid a capitated rate to provide all Medicaid services to persons eligible for 
Medicaid (HCBS) Waivers for older persons.  Participating managed care organizations are 
expected to coordinate acute and long-term care services for program enrollees, including all 
Medicare-covered services.  Managed care organizations also are liable for unlimited nursing 
home payments for as long as the person remains enrolled.  As a result, there are strong 
incentives to reduce nursing home placements and managed care organizations generally provide 
additional HCBS services not covered under the traditional waiver program.  The pilot is 
operational in four counties, and participation among HCBS waiver participants is voluntary.   
According to a formal evaluation of the program, the pilot serves a more impaired population 
than the states largest traditional HCBS waiver for older people.   
 
New Jersey 
 
Under New Jerseys Community Choice Initiative, the State employs 40 counselors who are 
exclusively dedicated to informing nursing home residents  and hospital patients awaiting 
nursing home admission  about HCBS and housing alternatives.  The counselors, who are 
registered nurses and social workers, also provide assistance to residents who express a desire to 
move out of a nursing home.  Counselors are notified as soon as a Medicaid participant enters a 
nursing home, and start working with the participant on community-based alternatives.  
Counselors also provide assistance to persons who have been in nursing homes for many years.  
Between 1998 and 2001, over 3,400 people were discharged from nursing homes with the help 
of Community Choice.  In the first three years of the Community Choice Initiative, New Jerseys 
Medicaid nursing home population decreased by 1,500 (5 percent).   
 
Utah 
 
The State of Utah responded to the Olmstead decision by addressing the need to fully inform 
nursing home residents of their options regarding long-term care services.  Utahs Department of 
Health developed a plan whereby representatives from Area Agencies on Aging (AAA) and 
Independent Living Centers visited almost all of the States nursing homes in six months to 
conduct on-site resident education programs.  The educators made group presentations, passed 
out literature covering all of Utahs home and community-based long-term care programs, and 
conducted one-on-one follow-up interview sessions for interested residents.  Upon a residents 
request, AAAs conducted needs assessments to determine if the persons needs could be met 
using available community resources.  About one-fifth of Utahs nursing home residents 
voluntarily attended the education sessions, and fifteen percent of these residents received 
assessments.  Thirty of the 63 people determined appropriate for a less restrictive setting have 
transitioned to the community. 
  Page 4  State Medicaid Director 
 
Vermont 
 
In 1996, Vermont changed the waiting list policy for its Medicaid HCBS waiver for older people 
and people with physical disabilities.  Instead of serving applicants on a first come, first serve 
basis, Vermont gave higher priority to nursing home residents, hospital patients awaiting nursing 
home placement, and people residing at home who are at great risk of institutionalization.  The 
State also established a statewide system of local Long-Term Care Community Coalitions to 
improve the infrastructure for HCBS.  In addition, Vermont created a new flexible fund solely 
for the coalitions to pay for supports not available through other funding sources.  Between 1996 
and 2000, Vermont decreased its reliance on nursing homes.  During that time, the share of 
Vermonts long-term care expenditures for older people and people with physical disabilities 
spent on nursing homes decreased from 88 percent to 78 percent.   
 
Washington 
 
The State of Washington employs numerous innovative mechanisms to reduce the number of 
nursing home residents on Medicaid.  All current residents have the option to receive case 
management from nursing home case managers to assist them in leaving the nursing home.  
Washington also helps Medicaid-eligible residents keep their home or obtain and furnish a home 
after transition.  Under post-eligibility treatment of income rules, Medicaid residents can use 
their own income for up to six months--up to 100 percent of the poverty level--to make rent, 
mortgage, utility, and other payments to maintain their home in the community.  Transitioned 
nursing home residents also can receive a one-time payment of up to $800 of state-only funds to 
help with rent, security deposits, utilities, household goods, assistive technology, furniture, or 
home modifications.  To keep the supply of nursing home beds from growing too high, 
Washingtons certificate of need program includes use of HCBS in the calculation of unmet need 
for nursing home beds.  As a result of these combined efforts, the number of Medicaid nursing 
home residents declined by 16 percent (16,234 to 13,693) from July 1995 to July 2000. 
 
Wisconsin   
 
Wisconsin helped more than 150 people leave nursing homes in 2001 by targeting resources to 
people who wanted to move from nursing homes and return to the community.  Funds were 
made available under the Community Options Program  Waiver (COP-W) and Community 
Integration Program II (CIP II), each part of a Medicaid HCBS waiver that serves older persons 
and persons with physical disabilities.  Wisconsin allocates most HCBS waiver funding to 
counties, who operate the waivers at the local level.  Most counties have waiting lists, requiring 
applicants to wait several months or longer before they can receive services.  To target persons 
who live in a nursing home and who have indicated that they would like to live in the 
community, Wisconsin set aside approximately $1.9 million of state and Medicaid HCBS waiver 
funds in 2001 to pay for one-time transition expenses and for ongoing services.  The funds were 
initially available to a person leaving the nursing home.  Once this person no longer needs 
waiver services, the funds will remain available for other people in that county who need home 
and community-based services.  Page 5  State Medicaid Director 
 
Wisconsin also provides HCBS Waiver funds (under the states CIP II program) for persons 
who relocate from a nursing home because the facility is downsizing or closing.  State law 
provides that when all or part of a nursing home voluntarily closes, the Wisconsin Department of 
Health and Family Services may create new HCBS waiver slots.  Each resident is eligible to 
benefit from an assessment to identify whether the person is willing to live in the community.  
Medicaid participants who move from the closing nursing home can access CIP II funding 
immediately upon leaving the nursing home.  For each participant who transitions to the 
community, the State adds the average funding for one HCBS waiver participant to the county's 
waiver allocation.  Since the funds remain in the HCBS waiver budget even after the participant 
leaves the program, the state replaces the nursing home payment for a participant with a less 
expensive HCBS waiver payment.   
 
Wisconsin also has implemented a new program in approximately one-third of the State that 
relies on Centers for Medicare & Medicaid Services (CMS) Medicaid waivers to integrate all 
Medicaid long-term care funding into a coherent package.  Such funding includes HCBS 
waivers, and most services in the Medicaid State Plan except hospital, physician, and certain 
other acute care services.  The program, entitled Family Care, allows funding to follow the 
person to the most appropriate and preferred setting, be it a community, assisted living, nursing 
facility or other setting.   
 
Lessons Learned from early Nursing Facility Transition grants 
 
The CMS has been awarding nursing facility transition grants since 1998.  In the past two years, 
awards were made to 23 states totaling $15.8 million as part of the Systems Change Grants for 
Community Living.  Prior to the Systems Change grants, CMS, in association with the Assistant 
Secretary of Planning and Evaluation, awarded grants to 12 states from 1998 to 2000 totaling 
$4,700,000 under the Nursing Home Transitions Demonstration Program.  The evaluation of the 
Nursing Home Transitions Demonstration Program is currently underway, using a case study 
approach based upon site visits to nine grantee states.    
 
Under this initiative, states have implemented new programs or augmented existing programs 
that provided a coordinator to help individuals in nursing facilities obtain housing and supports 
in the community, and used flexible funds to pay for housing deposits, furnishings, and other 
items a person may need during transition.  While the evaluation is not complete, states 
conducting nursing home transition programs under the Nursing Facility Transition grants have 
identified some common elements of success that include:  
 
  Dedicated staff are hired specifically to facilitate transitions for nursing home residents 
wishing to return to community life. 
 
  Persons hired to facilitate nursing home transitions are highly dedicated to the challenge.  
Often the most dedicated transition facilitators are people who themselves have lived in 
institutional settings and have successfully returned to the community.  Page 6  State Medicaid Director 
 
  Adequate and flexible funding is made available to establish a community residence for 
transitioned individuals.  These funds can be used for security deposits, utility set up, moving 
expenses, furnishings, and other necessary expenses. 
 
  Nursing facility transition programs are closely coordinated with community-based services 
programs to ensure that community services are available for transitioned residents as soon 
as they return to community life. 
 
  Program staff work with public housing authorities and private landlords to ensure people 
leaving nursing homes have access to housing in the community. 
 
  Transition programs implement aggressive outreach efforts to notify nursing facility residents 
of the opportunities for receiving assistance with moving back to community life. 
 
  Nursing facility residents who request assistance with transition services take an active role 
in planning their own return to community life. 
 
 
In closing, we encourage states to continue their efforts to remove barriers to full participation in 
the community on the part of persons with disabilities and ensure that individuals of any age who 
have a disability long-term illness can live or remain in the community and receive quality 
HCBS and supports.  We hope you find this information useful and encourage you to share with 
us other promising practices for transitioning persons with disabilities of all ages out of nursing 
facilities. 
 
Any questions concerning this letter may be referred to Mary Jean Duckett at (410) 786-3294. 
 
Sincerely, 
 
            /s/ 
 
Dennis G. Smith 
Director 
 
 
cc:   
 
CMS Regional Administrators 
 
CMS Associate Regional Administrators 
   for Medicaid and State Operations 
 
 
  Page 7  State Medicaid Director 
 
Lee Partridge 
Director, Health Policy Unit 
American Public Human Services Association 
 
Joy Wilson 
Director, Health Committee 
National Conference of State Legislatures 
 
Matt Salo 
Director of Health Legislation 
National Governors Association 
 
Brent Ewig 
Senior Director, Access Policy 
Association of State and Territorial Health Officials 
 
Jim Frogue 
Acting Director, Health and Human Services Task Force  
American Legislative Exchange Council 
 
Trudi Matthews 
Senior Health Policy Analyst 
Council of State Governments