The jointly funded federal-state Medicaid program is the primary source of financing for long-term care services. About one-third of the total $228 billion in Medicaid spending in fiscal year 2001 was for long-term care in both institutional and community-based settings. States administer this program within broad federal rules and according to a state plan approved by CMS, the federal agency that oversees and administers Medicaid. Some services, such as nursing home care and home health care, are mandatory services that must be covered in any state that participates in Medicaid. Other services, such as personal care, are optional, which a state may choose to include in its state Medicaid plan but which then must be offered to all individuals statewide who meet its Medicaid eligibility criteria. States may also apply to CMS for a section 1915(c) waiver to provide home and community-based services as an alternative to institutional care in a hospital, nursing home, or intermediate care facility for the mentally retarded (ICF/MR). If approved, HCBS waivers allow states to limit the availability of services geographically, to target services to specific populations or conditions, or to limit the number of persons served, actions not generally allowed for state plan services. States often operate multiple waivers serving different population groups, such as the elderly, persons with mental retardation or developmental disabilities, persons with physical disabilities, and children with special care needs. States determine the types of long-term care services they wish to offer under an HCBS waiver. Waivers may offer a variety of skilled services to only a few individuals with a particular condition, such as persons with traumatic brain injury, or they may offer only a few unskilled services to a large number of people, such as the aged or disabled. The wide variety of services that may be available under waivers includes home modification, such as installing a wheelchair ramp, transportation, chore services, respite care, nursing services, personal care services, and caregiver training for family members. CMS’s waiver application form for states includes a list of home and community-based services with suggested definitions. States are free to include as many or as few of these as they wish, to include additional services, or to include different definitions of services from those supplied with the form. See appendix II for a list of services provided through the HCBS waivers serving the elderly and CMS’s suggested definitions of these services. To be eligible for waiver services, an individual must meet the state’s criteria for needing the level of care provided in an institution, such as a nursing home, and be able to receive care in the community at a cost generally not exceeding the cost of institutional care. States are responsible for determining the specific financial and functional eligibility criteria used, conducting the necessary screening and assessment, and arranging for services to be provided. Factors that states use in assessing functional eligibility for nursing home care and for waiver services include the individuals’ medical condition and their degree of physical or mental impairment. Other factors that states generally consider, and which may affect the states’ ability to provide care in the community at a cost not exceeding that of institutional care or to adequately protect beneficiaries’ health and welfare, include the mix of services needed by the individual, the availability of needed services, the cost of services, the need for home modification, and the availability of family members or other caregivers. In order to receive federal funds for waiver services, a state must submit an application to the Secretary of Health and Human Services (HHS) that identifies the target population, specifies the number of persons that will be served, and lists the services to be included. In addition, states are required to provide certain assurances that necessary safeguards have been taken to assure financial accountability and to protect the health and welfare of beneficiaries under the waiver. Federal regulations specify that the state’s safeguards for the health and welfare of beneficiaries must include (1) adequate standards for all providers of waiver services and (2) assurance that any state licensure or certification requirements for providers of waiver services are met. CMS requires that a state’s waiver application include documentation regarding the standards applicable for each service provider. If the only requirement for a particular provider is licensure or certification, the state must provide a citation to the applicable state statute or regulation. If other requirements apply, the state must specify the applicable standards that providers must meet and explain how the provider standards will ensure beneficiaries’ welfare. Finally, states must annually report on, among other things, how they implement, monitor, and enforce their health and welfare standards and the waiver’s impact on the health and welfare of beneficiaries. Initial waiver applications and amendments to initial waivers are reviewed and approved by CMS headquarters. CMS’s 10 regional offices have primary responsibility for reviewing and approving applications to renew waivers and amendments to renewed waivers. If CMS determines that a waiver application meets program requirements, including sufficient documentation to indicate that necessary safeguards are in place to protect the health and welfare of waiver beneficiaries, it will approve an initial waiver for a 3-year period. Subsequently, waivers may be extended for additional 5-year periods. Section 1915(c)(3) of the Social Security Act provides that, upon request of a state, HCBS waivers may be extended, unless the Secretary of HHS determines that the assurances provided during the preceding term have not been met. Among the assurances that the state makes are that necessary safeguards have been taken to protect the health and welfare of waiver participants and that the state will submit annual reports on the impact of the waiver on the type and amount of medical assistance provided under the state Medicaid plan and on the health and welfare of recipients. Regulations implementing section 1915(c) provide that an extension of a waiver will be granted unless (1) CMS’s review of the prior waiver period shows that the assurances the state made were not met and (2) the state fails to provide adequate documentation and assurances to justify an extension. In its explanation of this regulation, HCFA indicated that a review of the prior period is an indispensable part of the renewal process. Reviews of waiver programs for which a renewal has been requested are, therefore, expected to occur at some point during the initial 3-year period, and at least once during each renewal cycle. CMS guidance on the reviews calls for on-site visits that include an examination of beneficiary and provider records as well as interviews with state officials. If a state’s efforts to protect the health and welfare of waiver beneficiaries are determined to be inadequate, CMS officials told us that the agency can either bar the state from enrolling any new waiver beneficiaries until corrective actions are taken or terminate the waiver. According to a recent CMS-sponsored review, oversight of waivers is often decentralized and fragmented among a variety of agencies and levels of government, and rarely does a single entity have accountability for the overall quality of care provided to waiver beneficiaries. Some waiver service providers are regulated by state licensing agencies, some are certified by private accreditation organizations, and others operate under terms of a contract or other agreement with a state agency. While the state Medicaid agency is ultimately accountable to the federal government for compliance with the requirements of the waivers, it may delegate administration of the waivers to state units on aging, mental health departments, or other departments or agencies with jurisdiction over a specific population or service. About one-third of waivers for the elderly are administered by an agency or department other than the Medicaid agency, most often the state unit on aging. These agencies may then contract with local networks, agencies, or providers to provide or arrange for beneficiary services. Medicaid-covered HCBS services have become a growing component of state long-term care systems, with most of the growth accounted for by substantial increases in the number of HCBS waivers and the beneficiaries served through waivers. In a few states, these waivers are beginning to replace nursing homes as the dominant means for providing long-term care to the elderly under Medicaid. Over the past 10 years, total Medicaid long-term care spending has more than doubled—from $33.8 billion in fiscal year 1991 to $75.3 billion in fiscal year 2001. However, the share of spending for institutional care declined from 86 to 71 percent, while the share spent for home and community-based care grew from 14 to 29 percent. Most of the growth in home and community-based care spending under Medicaid can be accounted for by HCBS waivers. Total Medicaid home and community-based care spending grew from $4.8 billion in fiscal year 1991 to $22.2 billion in fiscal year 2001, while spending for waiver services grew from $1.6 billion in fiscal year 1991 to $14.4 billion in fiscal year 2001. As shown in figure 1, waiver spending grew from 5 percent of all Medicaid long-term care spending in fiscal year 1991 to 19 percent in fiscal year 2001. In all but two states—California and New York—and the District of Columbia, over one-half of Medicaid home and community-based services spending in fiscal year 2001 was through waivers, with a much smaller portion going to nonwaiver mandatory home health care or state plan optional personal care services. See appendix III for a summary of Medicaid long-term care expenditures by type and state. Both the number and size of HCBS waivers have grown considerably over the past 20 years. Every state except Arizona operates at least one such waiver for the elderly. In 1982, the first year of the waiver program, 6 states operated HCBS waivers. By 1992, 48 states operated a total of 155 HCBS waivers. As of June 2002, 49 states and the District of Columbia operated a total of 263 HCBS waivers, with 77 serving the elderly. The average waiver for the elderly served 3,305 Medicaid beneficiaries in 1992 and 5,892 beneficiaries in 1999. In 1999, 15 states served more than 10,000 persons in their waivers for the elderly, an increase from only 4 states in 1992. The total number of HCBS waiver beneficiaries—elderly and nonelderly— nationwide nearly tripled from 235,580 in 1992 to 688,152 in 1999, the most recent year for which data were available. The number of beneficiaries served in waivers for the elderly more than doubled from 155,349 in 1992 to 377,083 in 1999. Over this same period, the number of Medicaid beneficiaries who used some nursing home care during the year grew by only 2.5 percent from 1.57 million to 1.61 million beneficiaries. By 1999, waivers for the elderly were serving 19 percent of all Medicaid beneficiaries served either in a nursing home or through an HCBS waiver for the elderly, an increase from 9 percent in 1992. In two states, Oregon and Washington, more elderly and disabled Medicaid beneficiaries were served in HCBS waivers in 1999 than were served in nursing homes. Appendix IV includes the number of Medicaid beneficiaries served by HCBS waivers for the elderly and in nursing homes in each state. In 1999, the average per beneficiary expenditure in HCBS waivers serving the elderly was $5,567, an increase from $3,622 in 1992. However, the average per beneficiary expenditure for such waivers varied widely across states, reflecting differences in the type, number, and amount of services provided under waivers in different states. As shown in table 1, among those states with waivers serving the elderly in 1999, per beneficiary expenditures ranged from an average of $15,065 in Hawaii to $1,208 in New York. In Hawaii, one such waiver that provided an average of 85 hours of personal assistance services per month to 91 percent of beneficiaries of that waiver had an average cost of $10,893 per beneficiary. A second Hawaii waiver that provided adult foster care, residential care, or assisted living for waiver beneficiaries had an average cost of $16,958 per beneficiary. In contrast, New York’s waiver for the elderly did not include personal care or residential services; the primary benefits included social work services, personal emergency response systems, and home- delivered meals. Appendix V provides summary information on states’ HCBS waivers for the elderly, including per beneficiary expenditures. No comprehensive nationwide data are available on states’ quality assurance systems for or the quality of care provided through HCBS waivers, including those serving the elderly. In the absence of detailed federal requirements for HCBS quality assurance systems, states’ waiver applications and annual reports often contained little or no information on the mechanisms used to ensure quality, raising a question as to whether CMS had adequate information to approve or renew some waivers. More than half of the waivers serving the elderly for which we were able to obtain a CMS waiver oversight report, an annual state waiver report, or a state audit report identified oversight weaknesses and quality-of-care problems. Frequently cited quality-of-care problems included (1) failure to provide authorized or necessary services, (2) inadequate assessment or documentation of beneficiaries’ care needs in the plan of care, and (3) inadequate case management. We were unable to analyze over one- third of waivers serving the elderly because they lacked a recent regional office review, the annual state waiver report lacked the relevant information, or they were too new to have annual state reports. Although the state waiver applications and annual waiver reports we reviewed for waivers serving the elderly identified more than a dozen quality assurance approaches, many contained little or no information about how states ensure quality. For example, 11 applications for the 15 largest waivers serving the elderly identified three or fewer quality assurance mechanisms and none of these 11 waivers mentioned important approaches, including complaint systems or sanctions. Eighteen of 52 state annual waiver reports that we reviewed contained no information on the mechanisms used to help ensure quality. Moreover, when waiver applications and annual waiver reports did contain some information, the information was often incomplete. Our work in South Carolina, Texas, and Washington identified additional quality assurance mechanisms that were not listed in their waiver applications or annual reports, suggesting that such documents may understate the nature and extent of their oversight approaches. As a result, CMS’s understanding of how these states ensure quality in the waivers may be incomplete. Information provided to CMS in state waiver applications and annual reports identified a variety of mechanisms used to protect the health and welfare of beneficiaries in waivers serving the elderly. Table 2 describes 14 quality assurance approaches that states reported using in HCBS waivers for the elderly. Some of these approaches focus on the waiver beneficiary, such as case management or beneficiary satisfaction surveys. Other approaches are focused on providers, including licensure and inspections, corrective action plans, sanctions, and program manuals. States may require that certain providers be licensed or certified or meet other requirements contained in state laws or regulations. Such providers are generally subject to periodic inspections that may include a review of beneficiary records to determine whether the records meet program standards. A third set of quality assurance approaches focuses on waiver program operations, including internal or external evaluations of the waiver program, supervisory reviews of waiver beneficiary assessments and plans of care, and audits or reviews of case management agencies. Because CMS has not provided detailed guidance to states on federal requirements for HCBS quality assurance systems, the waiver applications and annual reports submitted by states to CMS for waivers serving the elderly often contained little or no information on state mechanisms for ensuring quality, raising a question as to whether CMS had adequate information to approve or renew some waivers. Waiver applications. Our review of the most current waiver applications for the 15 largest waivers serving the elderly found that many states provided CMS limited information about how they plan to protect the health and welfare of beneficiaries. Eleven of the 15 states cited three or fewer quality assurance mechanisms. For example, New York’s application only contained information about the state licensure and certification requirements for its waiver services. None of these 11 applications included well-recognized quality assurance tools such as complaint systems, corrective action plans, sanctions, or beneficiary satisfaction surveys. The remaining 4 states each identified six to eight quality assurance approaches, including at least one of these four important tools. As shown in table 3, the two mechanisms most frequently cited by states were (1) licensure for some HCBS waiver providers, such as home health agencies and residential care providers, and (2) case management. Annual waiver reports. Compared to waiver applications, annual state waiver reports identified more quality assurance mechanisms for waivers serving the elderly. The quality assurance mechanisms states’ annual reports cited most frequently included (1) audits of case management agencies, (2) reviews of provider or direct-care staff, (3) licensure and certification of providers, (4) beneficiary satisfaction surveys or interviews, (5) case management, and (6) training and technical assistance. As shown in table 3, these six mechanisms were mentioned by at least half of the 40 states that provided such information. However, as was the case with most of the 15 waiver applications we reviewed, complaint systems, corrective action plans, and sanctions were identified less frequently. For example, only 13 of the 40 states identified complaint systems for waivers serving elderly beneficiaries as a monitoring tool in their annual waiver reports. Responding to beneficiary complaints is a key element in protecting vulnerable nursing home residents and home health beneficiaries. Moreover, 18 of the elderly waiver reports (26 percent) from 12 states did not include a description of the process for monitoring the standards and safeguards under the waiver, as required on the reporting form. State officials in South Carolina, Texas, and Washington informed us they use a wider range of quality assurance mechanisms in their waiver programs than were described in either their waiver application or their annual state waiver report. Officials in Washington informed us they use 12 of the 14 mechanisms identified in table 3, yet they included only 2 of these on their application and 3 in their most recent annual report. For example, Washington operates a complaint system for waiver providers but did not refer to this approach in its waiver application or annual report. On the other hand, only Washington included reviews or audits of case managers or case management agencies in its application or annual report, yet all three states provided information on their use of this quality assurance tool during our interviews. States’ formal reports to CMS on their quality assurance mechanisms may therefore understate the nature and extent of their oversight approaches. Although information on the quality of care provided in the 79 waiver programs serving the elderly is limited, state oversight problems were identified by CMS regional offices or states in 15 of 23 waivers and quality- of-care problems in 36 of 51waivers that we were able to examine. We were unable to analyze findings related to 28 waivers serving the elderly for various reasons: they lacked a current regional office review or a waiver review report was never finalized, the annual state waiver report lacked the relevant information, or the waivers were too new to have an annual state report. Because of incomplete information and the absence of current reviews for many of the active waivers, the extent of quality-of- care problems is unknown. CMS regional office reviews or state audits identified weaknesses in state oversight for waivers serving the elderly in 15 of the 23 waivers we examined. In some cases, the waiver programs did not have essential oversight systems or processes in place. For example, in the case of a Virginia assisted living waiver that had over 1,250 beneficiaries, the Philadelphia regional office found several state oversight problems, including (1) no system in place to track the completion of the required annual resident assessments, (2) insufficient monitoring to ensure that beneficiaries were cared for in settings able to meet their needs, (3) insufficient monitoring to ensure that state standards were met for basic facility safety and hygiene, and (4) failure to inspect medication administration records sufficiently to ensure that medication was being dispensed safely and by qualified staff. The regional office identified serious lapses in Virginia’s oversight of the waiver and the protection of beneficiaries, resulting in both medical and physical neglect of waiver beneficiaries. On the basis of the regional office review findings, HCFA allowed the waiver to expire in March 2000. In other cases, states may have had an oversight system or process in place, but they were determined to be inadequate. Five state audit agency reports we reviewed identified inadequate monitoring systems in state waiver programs. For example, Connecticut had a policy in place for monitoring and evaluating its HCBS waiver program, but, from January 2000 through March 2001 it conducted no quality assurance reviews of the agencies it contracted with to coordinate and manage services for waiver beneficiaries. CMS regional office reviews and states’ annual waiver reports identified quality-of-care related problems in 36 of 51 HCBS waiver programs for the elderly that we were able to examine. Specifically, they found weaknesses in the delivery of key elements of home and community-based services that could affect waiver beneficiaries’ health and welfare (see table 4). Typically, the reports did not provide sufficient detail to demonstrate the impact of these weaknesses on waiver beneficiaries. Consequently, few, if any, specific cases of beneficiary harm were identified. The most frequently identified quality-of-care problems in waivers serving the elderly involved failure to provide authorized or necessary services, inadequate assessment or documentation of beneficiaries’ care needs in the plan of care, and inadequate case management. Provision of authorized or necessary services. Identified problems included (1) services identified in plans of care not rendered, (2) inadequate nutrition provided to waiver beneficiaries, and (3) discontinuation of services without adequate notice to beneficiaries. For example, CMS’s Dallas regional office found that significant numbers of Oklahoma waiver beneficiaries did not receive personal care services from their direct-care provider—4,303 beneficiaries (27 percent) received none of their authorized personal care services and 7,773 beneficiaries (49 percent) received only half of their authorized services. While the consequences for beneficiaries were not identified in this review, failure to provide authorized needed services may result in harm and could affect the continued ability of beneficiaries to be cared for at home. Plan of care. Issues included plans of care that (1) insufficiently addressed the needs of waiver beneficiaries, (2) were not completed or updated appropriately, and (3) were missing from beneficiaries’ files. In the review of one of the Florida waivers, CMS’s Atlanta regional office staff found several instances where needs identified through individual assessments, including significant changes in waiver beneficiaries’ conditions, were not addressed in the plan of care, a situation that could lead to beneficiaries not receiving the necessary services. Without an appropriate plan of care to direct the type and amount of services to be delivered, the waiver beneficiary may not receive an adequate level of care. Case management. Examples of case management problems included case managers who (1) were unaware of beneficiaries having lapses in delivery of care, (2) were not always aware of procedures or protocols for reporting abuse, neglect, or exploitation, (3) failed to complete resident assessments—service plans were either incomplete or inappropriate, and updates to plans of care were late, or (4) did not always appear to have a clear understanding of service definitions or requirements of the waiver or Medicaid program. CMS has not developed detailed guidance for states on appropriate quality assurance approaches as part of the initial waiver approval process. Moreover, although CMS oversight has identified some quality problems, it does not adequately monitor HCBS waiver programs or the quality of care provided to waiver beneficiaries for waivers serving the elderly as well as those serving other target populations. CMS does not hold its regional offices accountable for conducting and documenting periodic waiver reviews, nor does CMS hold states accountable for submitting annual reports on the status of quality in their waivers. As of June 2002, about one-fifth of the 228 waivers in place for 3 years or more had either never been reviewed or were renewed without a review. We found that the reviews varied considerably in the number of beneficiary records examined and the method of determining the sample, potentially limiting the generalizability of findings. According to CMS regional office staff, the allocation of staff resources and travel funding levels have at times impeded the scope and timing of their reviews. In addition, some regional office staff told us that limited travel funds have resulted in the substitution of more limited desk reviews for on-site visits and in the conduct of reviews with one staff member when two would have been preferable. CMS has a number of initiatives under way to generate information and dialogue on quality assurance approaches, but the agency’s initiatives stop short of (1) requiring states to submit detailed information on their quality assurance approaches when applying for a waiver or (2) stipulating the necessary components for an acceptable quality assurance system. CMS recognizes that insufficient attention has been given to the various mechanisms that states could and should use to monitor quality in their waiver programs. As described in appendix VI, the initiatives CMS has under way include identification of strategies that states are currently using to monitor and improve quality in home and community-based care, distribution of a guide on quality improvement and assessment mechanisms for states and regional offices, and provision of a variety of technical assistance and resources to states. The agency also has implemented a new HCBS waiver quality review protocol for use by regional offices in assessing whether state waivers should be renewed. Regional office staff told us that some states have begun to modify their approaches to quality assurance in HCBS waivers based on the use of the new waiver review protocol. For example, Washington officials established a new quality assurance unit within the agency that oversees its waiver for the elderly. In May 2002, CMS also introduced a voluntary application template for its new consumer-directed HCBS waiver that asks for a detailed description of states’ quality assurance and improvement programs, including (1) the frequency of quality assurance activities, (2) the dimensions monitored, (3) the qualifications of quality assurance staff, (4) the process for identifying problems, including sampling methodologies, (5) provisions for addressing problems in a timely manner, and (6) the system for handling critical incidents or events. While these CMS activities are intended to facilitate the development of HCBS-related quality assurance approaches, they do not constitute a consistent set of minimum requirements and guidance for states’ use to obtain approval for their HCBS programs. In addition to the lack of detailed guidance for states, CMS is not holding its own regional offices or states accountable for oversight of the quality of care provided to individuals served under HCBS waivers. CMS regional offices are expected to conduct periodic waiver reviews to determine whether states are protecting the health and welfare of waiver beneficiaries. Annual state reports are required by statute, and CMS regulations indicate that they are intended to play a key role in determining whether a waiver should be renewed. We found that regional offices are neither conducting waiver reviews prior to renewal nor obtaining complete annual state reports in a timely manner. As a result, CMS has not fully complied with the statutory and regulatory requirements that condition the renewal of HCBS waivers on states fulfilling their assurances that necessary safeguards are in place to protect the health and welfare of waiver beneficiaries. Most CMS regional offices have not conducted timely reviews of the state agencies administering waivers serving the elderly and other target populations or completed reports to document the results of their reviews. Periodic on-site reviews are used to determine, among other things, whether a state is ensuring the health and welfare of waiver beneficiaries. Guidance from CMS headquarters instructs the regional offices to conduct reviews before the first renewal of a waiver at the end of 3 years and within 5 years for subsequent waiver renewals. Eighteen percent of all HCBS waivers (42 of 228) that have been in place for 3 years or more as of June 2002 either have never been reviewed by the regional offices or had not been reviewed prior to their last waiver renewal. Approximately 132,000 beneficiaries were served by these 42 waivers in 1999. Fourteen of the 42 waivers—serving approximately 37,000 waiver beneficiaries in 1999—have had 10 or more years elapse without a regional office review (see table 5). CMS’s Dallas regional office was responsible for 9 of these 14 waivers. Over a 10-year period, a regional office should have conducted at least two reviews for each waiver. The New Mexico AIDS Waiver, initially approved in June 1987, has been in place the longest without ever being reviewed—15 years. CMS officials were aware that regional offices had not reviewed some waivers but were unaware of the extent of the problem. As of June 2002, based on an analysis of the most recent regional office review that occurred prior to October 2001 for each of the waivers, we found that 23 percent of the review reports (36 of 158) in over half of the regional offices had not been finalized. CMS requires its regional offices to prepare a final report on each HCBS review to document their findings, recommendations, and the state response. Without such a final report, there is no formal document to indicate whether a state has fulfilled the required assurances, including those related to the health and welfare of waiver beneficiaries. The New York regional office did not finalize 11 of its 12 reviews, dating back to 1998, and the San Francisco regional office did not finalize 7 of its 13 reviews, 1 of which was for a review that occurred in 1990. Without a final report documenting the review results, CMS cannot be assured that, if problems were identified, they were appropriately addressed. Many state annual waiver reports submitted to CMS regional offices are neither timely nor complete. During the interval between regional office reviews, the required annual state waiver reports provide key information on how states monitor beneficiaries’ quality of care and on any quality-of- care related problems. According to regional office officials, states routinely fail to submit these annual reports within the required time frame—within 6 months after the period covered. In August 2000, officials in CMS’s Philadelphia regional office reported that they had current annual state reports for less than half (11 of 28) of the waiver programs in their region. Our review of the most recent annual state reports for 70 of 79 HCBS waivers serving the elderly confirmed that producing these reports remains a problem: (1) reports for more than a third of the waivers were at least 1 year late—the most recent report from one of Louisiana’s HCBS waivers was for calendar year 1997, (2) reports for approximately one-fourth of the waivers provided no information on whether deficiencies had been identified through the monitoring processes, and (3) five reports indicated that deficiencies had been identified but provided no additional information about the nature of or response to the problems. CMS headquarters has no central repository for annual state reports but is in the process of establishing a centralized database for state report information sometime in 2003, a development that could facilitate ongoing monitoring of the timeliness and completeness of these reports. Our analysis of CMS’s oversight activities for the 15 largest HCBS waivers serving the elderly demonstrates the extent of oversight weaknesses. Overall, 8 of the 10 CMS regional offices provided inadequate oversight for 13 of these 15 largest state waivers for the elderly, which, in 1999, served about 215,000 beneficiaries—over half (57 percent) of the total elderly waiver beneficiary population at that time (see table 6). We found that Four of the 15 HCBS waivers were not reviewed in a timely manner by the CMS regional office—none of the 4 had reviews for 8 or more years and yet were renewed. Four of the 15 waivers had no waiver review final report completed by the regional office. Two of the reviews occurred in 1999, and for the remaining 2 waivers the regional office could not tell us the date of the reviews or whether a final report was available. Four of the 15 waivers lacked a timely annual state report to the regional office. As of April 2002, the most recent annual report for these 4 waivers was either for the waiver period ending August 1999 (1 waiver) or September 2000 (3 waivers). Seven of the 15 waivers had annual state reports that were incomplete because they either lacked information on their quality assurance mechanisms or on whether deficiencies had been identified. The limited scope and duration of periodic regional office waiver reviews raise a question about the confidence that can be placed in findings about the health and welfare of waiver beneficiaries. CMS regional offices conduct reviews using guidance provided by headquarters. The guidance instructs regional office staff to review beneficiary records; interview waiver beneficiaries, primary direct-care staff of waiver providers, and case managers; and observe waiver beneficiaries and the interaction between the beneficiary and direct-care staff. This guidance was updated in January 2001 when use of the new HCBS waiver quality review protocol became mandatory. However, the new protocol does not address important operational issues such as an adequate sample size or sampling methodology for the beneficiary record reviews and interviews to provide a basis for generalizing the review findings; whether the sample should be stratified according to the different groups served under the waiver (i.e., for a waiver serving both the elderly and the disabled, selecting a stratified sample based on the proportion of persons aged 65 and over and those aged 18 to 64 with disabilities); and the appropriate duration of an on-site review, taking into consideration the number of sites and beneficiaries covered in the waiver. Our analysis of regional office review reports for 21 HCBS waivers serving the elderly found that the reviews varied considerably in the number of beneficiary records evaluated and their method of determining the sample, potentially limiting their ability to generalize findings from the sample to the universe of waiver beneficiaries. Specifically, we found a wide range of sample sizes in 15 of the 21 regional office reviews that included such information. The sample sizes for record reviews ranged from 14 beneficiaries (of 73 served) in the Boston regional office review of the Vermont waiver to 100 beneficiaries (of 24,000 served) in the Seattle regional office review of the Washington waiver. (See app. VII for a summary of the sample sizes in the regional office reviews.) Eleven of the 15 CMS waiver review reports included information on the specific number of beneficiaries interviewed or observed during the review; however, we could not determine whether beneficiary interviews or observations had been conducted in other waiver reviews. The method by which the beneficiary record review samples were selected varied, with some regional offices using randomized sampling methods, some basing their sample on geographic location, and others reporting no method of sample selection. For most of these same 15 waivers serving the elderly, we found that the regional staff typically spent 5 days conducting the waiver review— regardless of the number of waiver beneficiary records sampled or the overall size of the waiver. However, the Seattle regional office staff conducted only three reviews in the past 4 years, targeting its largest HCBS waivers. For example, the regional office has spent 3 to 4 weeks per waiver for the on-site portion of the review and another week for state agency interviews and review of documents. Generally, the number of beneficiary records reviewed and beneficiaries interviewed is dependent on (1) the number of days allocated to the waiver review by a regional office and (2) the number of regional office staff members available. The limited number of assigned staff and available clinical specialists, coupled with insufficient travel funds allocated to regional office oversight of HCBS waivers, have contributed to the timeliness and scope problems we identified. According to regional offices, the level of attention given to HCBS waiver oversight, including periodic reviews when waivers come up for renewal, is at the discretion of regional office management and competes with other workload priorities. In August 2000, some regional office officials formally communicated to HCFA headquarters their concern that the agency was not devoting sufficient resources to properly monitor the quality of HCBS waiver programs. Regional office officials responsible for waiver oversight told us that the number of staff available for waiver oversight has not kept pace with the growth in the number of waivers and beneficiaries served and that resource issues remain a key challenge for waiver oversight. We found that CMS regional offices differed substantially in the number of staff assigned to waiver oversight and the extent to which staff with clinical or program expertise were assigned to waiver oversight. According to Dallas, Denver, and Philadelphia regional office staff, the level of resources allocated by the regional offices for such reviews dictated the number of waiver beneficiary records reviewed or beneficiary interviews conducted. Six of the 10 regional offices had two or fewer full- time-equivalent (FTE) staff assigned to monitoring HCBS waivers (see table 7). Moreover, we found that the number of regional office staff assigned to monitoring HCBS waivers bore little relationship to the waiver workload. For example, the Chicago regional office had six FTE staff to monitor 34 HCBS waivers with 131,902 waiver beneficiaries, while the Dallas regional office had one-and-a-half FTE staff for 28 HCBS waivers with 63,614 waiver beneficiaries. Until a few years ago, one person in the Philadelphia regional office was assigned to oversee HCBS waivers— despite growth in the number and size of the region’s HCBS waivers over the past decade. As shown in table 7, 3 of the 10 regional offices had specialists assigned to waiver oversight, such as registered nurses or qualified mental retardation professionals. When asked to identify one of the greatest improvements that could be made in federal waiver oversight, 3 of the 10 regional offices identified the direct assignment of specialist staff. CMS’s waiver review protocol specifies that the participation of clinical and other specialist staff is important to assessing issues related to beneficiaries’ health and welfare. However, many regional offices indicated that they had to “borrow” specialist staff from other departments within the region in order to conduct their waiver reviews. The Seattle and Boston regional offices provide contrasting examples of the role played by regional office management in obtaining clinical staff to conduct reviews. According to Seattle regional office staff, it has been a challenge to obtain specialist staff on the waiver review teams. For 4 to 5 years, the region did not conduct any HCBS waiver reviews. In the past 4 years, it has only conducted three reviews—regardless of the number of waivers due for review. The region has four waivers that have never been reviewed, two dating back to 1989. According to the staff, the prior regional administrator did not target resources for HCBS waiver reviews, and it was difficult to obtain clinical and other specialist staff from other departments to assist in conducting reviews. Although it has no specialist staff assigned to waivers, Boston regional office officials informed us that conducting HCBS waiver reviews has been a management priority, as evidenced by the fact that the region always includes a registered nurse or other relevant specialist on the review team. We noted that the Boston regional office has conducted timely reviews of all of its waivers. When asked to identify the greatest challenges related to HCBS waiver oversight, 4 of the 10 CMS regional offices identified insufficient travel funding. Regional office staff indicated that there appears to be no correlation between the amount of travel dollars made available by the regional offices for the reviews and the review schedule set forth by CMS headquarters. Moreover, they told us that they had to compete for limited travel resources with the regional office staff responsible for overseeing nursing homes. Regional office responses to inadequate travel funds have included (1) conducting a “desk review” without visiting state agency officials, providers, and waiver beneficiaries, (2) limiting the number of days allotted for the review, (3) reducing the number of staff assigned to conduct the review, or (4) not reviewing a particular waiver at all. In the New York regional office, a lack of travel funds led to desk reviews for 9 of 15 waivers. According to the Philadelphia regional office’s final report for a Virginia HCBS waiver, some cases that should have been pursued were not reviewed because only 1 week had been allotted for fieldwork, and 2 of the 18 cases selected for field review were dropped because there was insufficient time to conduct the review. In 2001, the Chicago regional office conducted a limited on-site review of a Michigan HCBS waiver serving over 6,000 beneficiaries. During the review, three case files were examined and one beneficiary was interviewed. According to Denver regional office officials, travel budget problems have meant that the reviews are conducted by one staff member when two would be preferable. HCBS waivers give states considerable flexibility to establish customized programs offering long-term care services for specific populations, such as elderly persons, persons with mental retardation, or children with special needs. While maintaining this flexibility is important, insufficient emphasis has been placed on balancing flexibility with measures to ensure accountability. At present, states may obtain a waiver serving the elderly with a limited explanation of how they plan to monitor quality, and CMS has not held states accountable for submitting complete and timely annual waiver reports detailing their quality assurance activities. Moreover, CMS has not fully complied with the statutory and regulatory requirements that condition the renewal of HCBS waivers on whether the state has fulfilled its assurances that necessary safeguards are in place to protect the health and welfare of waiver beneficiaries. The current size and likely future growth in HCBS waiver programs that serve a vulnerable population— particularly elderly individuals eligible for nursing home placement—make it even more essential for states to have appropriate mechanisms in place to monitor the quality of care. While CMS requires periodic reviews of state waiver programs to help ensure that beneficiaries’ health and welfare are adequately protected, many have been renewed without such a review. In addition, guidance on how these waiver reviews should be conducted does not address important operational issues such as sample size and sampling methodology. Consequently, there is little relationship among the amount of time spent on-site conducting waiver reviews, the number of beneficiary records reviewed, and the number of beneficiaries served. CMS expects its regional offices to interview and observe waiver beneficiaries to obtain a first-hand perspective on care delivery and the adequacy of case management, but beneficiary interviews are not a component of all regional office reviews. Moreover, staff resources and travel funds currently allocated to conduct waiver reviews are insufficient. Without necessary attention from CMS, these guidance and resource issues will only be exacerbated by the expected future growth in the number of persons served through HCBS waiver programs. CMS has a number of initiatives directed towards improving quality and quality assurance for home and community-based waiver programs. They do not, however, address the specific oversight weaknesses we have identified in this report, such as the lack of detailed criteria or guidance for states regarding the necessary components of a quality assurance system to help ensure the health and welfare of waiver beneficiaries. To ensure that state quality assurance efforts are adequate to protect the health and welfare of HCBS waiver beneficiaries, we recommend that the Administrator of CMS develop and provide states with more detailed criteria regarding the necessary components of an HCBS waiver quality assurance system, require states to submit more specific information about their quality assurance approaches prior to waiver approval, and ensure that states provide sufficient and timely information in their annual waiver reports on their efforts to monitor quality. To strengthen federal oversight of the growing HCBS waiver programs and to ensure the health and welfare of HCBS waiver beneficiaries, we recommend that the Administrator ensure allocation of sufficient resources and hold regional offices accountable for conducting thorough and timely reviews of the status of quality in HCBS waiver programs, and develop guidance on the scope and methodology for federal reviews of state waiver programs, including a sampling methodology that provides confidence in the generalizability of the review results. We provided a draft of this report to CMS and South Carolina, Texas, and Washington, the three states in which we obtained a more in-depth perspective on states’ quality assurance approaches. (CMS’s comments are reproduced in app. VIII.) CMS affirmed its commitment to its ongoing responsibility, in partnership with the states, to ensure and improve quality in HCBS waivers. The agency stated that the federal focus should be on assisting states in the design of HCBS programs, respecting the assurances made by states, improving the ability of states to remedy identified problems, providing assistance to states to improve the quality of services, and thereby assisting people to live in their own homes in communities of their choice. CMS generally concurred with our recommendations to improve state and federal accountability for quality assurance in HCBS waivers but raised concerns about our definition of quality, how best to ensure quality in state waiver programs, the appropriate state and federal oversight roles, and the resources and guidance required to carry out federal quality oversight. CMS stated that the draft report’s definition of quality in waivers was too narrow because it ignored a wide variety of activities used to promote quality. Furthermore, CMS cited the availability of a broad array of waiver services with choice over how, where, and by whom services are delivered as important to beneficiaries’ quality of life. According to CMS, growth in the number of persons served by HCBS waivers was evidence of beneficiary satisfaction. (See CMS’s “General Comments,” 2 and 3.) Rather than defining quality ourselves, we reported the approaches states used to assure quality in their waiver programs. By analyzing state applications for waivers serving the elderly and state annual waiver reports, we identified a broad array of state quality assurance activities, including licensing and certification of providers and beneficiary satisfaction surveys (see tables 2 and 3). We disagree with CMS’s assertion that beneficiaries’ preference for services that allow them to remain in the community can be equated with satisfaction for the services delivered. Even assuming that beneficiary satisfaction alone is a reliable indicator of quality, CMS offered no empirical evidence to support its position. Only about half of the state annual waiver reports we reviewed indicated that states measured beneficiary satisfaction with services. Moreover, our review of quality-of-care problems identified in waiver programs serving the elderly demonstrated that failure to provide needed or authorized services was a frequently cited problem. For example, as we noted in the draft report, a CMS review found that 27 percent of beneficiaries served by one state’s HCBS waiver for the elderly did not receive any of their authorized personal care services, and 49 percent received only half. CMS commented that the draft report failed to recognize that HCBS programs require a different approach to quality than their institutional alternatives and “leaves the distinct impression that the most effective way to assure and improve quality is through the process of inspection and monitoring.” CMS asserted that design of an HCBS waiver, as opposed to monitoring its implementation, is the most important contributor to quality, and the agency’s recent efforts have focused on working with states to improve design decisions and design options. (See CMS’s “General Comments,” 4 and 7.) We disagree with CMS’s characterization of our findings. Our report recognizes the importance of maintaining states’ considerable flexibility in ensuring quality in HCBS waivers but concludes that insufficient emphasis has been placed on balancing this flexibility with measures to ensure the accountability called for by both statute and regulations. Contrary to CMS’s comments, we did not recommend an additional or increased federal oversight role or the adoption of oversight systems such as those used for institutional providers. Our analysis and conclusions were based on the criteria established in both statute and regulations that entail federal oversight of waivers and that condition federal approval and renewal of waivers on states’ demonstrating to CMS that they have established and are fulfilling assurances to protect the health and welfare of waiver beneficiaries. We found that CMS currently receives too little information from states about their quality assurance approaches to hold them accountable, raising a question as to whether the agency has adequate information to approve or renew some waivers. While we agree that waiver design is important to ensuring quality, a state’s implementation of its quality assurance approaches is equally, if not more, important. In its protocol for reviewing states’ HCBS waivers, CMS gives equal emphasis to both the design and implementation of quality assurance mechanisms. Despite its concerns, CMS generally concurred with our recommendation to develop and provide states with more detailed criteria regarding the necessary components of an HCBS waiver quality assurance system. CMS cited its current effort to provide such guidance and indicated that it would work to more clearly define its criteria and expectations for quality. CMS commented that “the report lends itself to the conclusion that the federal government ought to be the primary source of quality monitoring and improvement, and fails to recognize that the federal statutes convey respect for state authority and competence in the administration of HCBS programs.” (See CMS’s “General Comments,” 6.) We agree that the states and the federal government have distinct quality monitoring roles but believe that CMS has mischaracterized our description of those roles as defined in statute and regulations. In addition, we believe that CMS has understated the importance of federal oversight. The report describes states’ statutory and regulatory responsibility to (1) include information in their waiver applications on their approaches for protecting the health and welfare of HCBS beneficiaries and (2) report annually on state quality assurance approaches and deficiencies identified through state monitoring. We reported that waiver applications contained limited information on state quality assurance approaches and that many state annual waiver reports were neither timely nor complete. Eleven of the 15 applications for the largest waivers serving the elderly included none of the following well-recognized quality assurance tools: complaint systems, corrective action plans, sanctions, or beneficiary satisfaction surveys. Annual reports for more than a third of 70 waivers serving the elderly were at least 1 year late, and one-quarter of such reports did not indicate whether deficiencies had been identified, as required. CMS acknowledged the need for more comprehensive information from states at the time of application and at subsequent renewals. Consistent with our recommendation, CMS agreed to revise and improve the application process and annual state waiver report to include more information on states’ quality approaches and activities. The report also describes CMS’s statutory responsibility for ensuring that states adequately implement their quality assurance approaches—a responsibility operationalized in policy guidance to the agency’s regional offices. Waiver reviews are expected to occur at least once during the initial 3-year waiver period and during each 5-year renewal cycle. We did not propose an expanded federal quality assurance role. We reported that, in some cases, CMS had an insufficient basis for determining that states had met the required assurances for protecting beneficiaries’ health and welfare. As of June 2002, almost one-fifth of all HCBS waivers in place for 3 years or more had either never been reviewed or were renewed without a review; 14 of these waivers had 10 or more years elapse without a regional office review. Some CMS waiver reviews have uncovered serious state oversight weaknesses as well as quality-of-care problems. For example, the review of one state’s waiver found both medical and physical neglect of beneficiaries because of serious lapses in state oversight, resulting in a decision to let the waiver expire. The full extent of such problems is unknown because many state waivers lacked a recent CMS review. CMS did not comment directly on our conclusion that the agency is not fully complying with statutory and regulatory requirements when it renews waivers. The agency suggested it would be far more efficient and equally effective for federal waiver reviews to focus on only one waiver in cases where there are multiple waivers in a state serving subsets of the same target group and using the same quality assurance system; however, CMS’s own guidance to its regional offices calls for each waiver to receive at least one full review during a given waiver cycle, with each waiver receiving at least some level of review. CMS commented that the draft report’s recommendations to hold regional offices accountable for conducting thorough and timely reviews of quality in HCBS waiver programs, including a sampling methodology that provides confidence in the generalizability of the review results, would require a huge new investment or redirection of federal resources. Specifically, CMS commented that the report “does not address the significant resources that would need to be found or redirected to implement its recommendations” and “fails to acknowledge the lack of appropriated funds for HCBS quality.” The agency stated that such funds would have to come from CMS’s operating budget. CMS also pointed out that it had already taken steps organizationally to ensure that enough resources are devoted to quality and that they are appropriately positioned within CMS. (See CMS’s “General Comments,” 5, 8, and 9.) CMS’s existing waiver review protocol directs regional offices to select a sample of waiver beneficiaries for activities such as interviews and observations, but it does not adequately address sampling methodology. We found that sample selection methods varied with some regional offices selecting random samples, some basing their sample on geographic location, and others reporting no methodology for sample selection. Given that the regional offices are already generalizing their findings to the waiver program as a whole, we believe explicit and uniform sample selection guidance is imperative. At the same time, we believe that, as CMS suggested, samples may appropriately be targeted to certain types of participants or services so that, over time, greater assurances are provided about the quality of care. In response to our recommendation to develop guidance on the scope and methodology for federal reviews of state waiver programs, CMS said it is committed to developing additional policy guidance. We did not recommend significant increases in appropriated funds for conducting waiver reviews. Rather, our draft report recommended that CMS ensure allocation of sufficient resources and hold regional offices accountable for conducting thorough and timely reviews of the status of quality in HCBS waiver programs. The CMS Administrator is responsible for assessing whether existing funding levels are adequate to satisfy statutory and regulatory requirements, including periodic regional office review of the states’ assurances. The Administrator may indeed conclude that, to carry out these oversight responsibilities for the growing numbers of frail beneficiaries who prefer and rely on these services, there may be a need to reallocate existing funds or to request additional funds. CMS also noted that it had recently redeployed and reorganized headquarters staff to incorporate the quality function into each program area, including the operational unit that oversees HCBS waivers. Despite CMS’s concerns about the need for significant funding increases, the agency noted the importance of further investments to advance both state and federal capability to assure quality in waiver programs. CMS commented that the draft report had numerous technical inaccuracies, but cited only one and provided no additional examples or technical comments to accompany its written response (CMS’s “General Comments,” 1). Although CMS stated that our characterization of federal requirements concerning waiver renewals was inaccurate, its suggested changes and our report language were essentially the same. To avoid any confusion, however, we have added the statute’s specific language to the background section of the report. CMS further commented that our report should recognize that the Congress created an enforcement mechanism that places great reliance on a system of assurances. Our draft report made that point while also describing CMS’s responsibility, as specified in its implementing regulations, to determine that each state has met all the assurances set forth in its waiver application before renewing a waiver. CMS stated that the draft report failed to acknowledge the steps it has already taken to ensure quality. (CMS’s “General Comments,” 10.) To the contrary, the draft report described each of the efforts CMS referred to as under way to monitor and improve HCBS quality and addressed each activity: the waiver review protocol, the HCBS quality framework, the development of tools to assist states, development of the Independence Plus template, and the national technical assistance contractor. However, we found that CMS’s waiver review protocol does not address key issues relating to the scope and methodology of federal oversight reviews. Moreover, the use of the Independence Plus template, which requires more specific information on states’ quality assurance approaches, is voluntary rather than mandatory. In its written comments, Texas stated that it supports proper federal oversight of HCBS waivers but stressed the need to maintain flexibility in designing waivers to meet the unique needs of residents requiring community care. The state believes that such flexibility should not be lost in establishing more specific quality assurance criteria. As arranged with your offices, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days after its issue date. At that time, we will send copies of this report to the Administrator of the Centers for Medicare & Medicaid Services and appropriate congressional committees. We also will make copies available to others upon request. In addition, the report will be available at no charge on the GAO Web site at http://www.gao.gov. Please contact me at (202) 512-7118 or Walter Ochinko at (202) 512-7157 if you have questions about this report. Other contributors to this report included Eric Anderson, Connie Peebles Barrow, and Kevin Milne. This appendix describes our scope and methodology, following the order that our results are presented in the report. Data on HCBS Waivers. To identify the universe of state HCBS waivers as of June 2002, we asked the CMS regional offices to identify each waiver, including the target population and the waiver start date. The regional offices identified a total of 263 waivers. Using this information and other data, we identified 77 waivers serving the elderly. To identify trends in Medicaid long-term care and Medicaid waiver spending, we analyzed data covering fiscal years 1991 through 2001 from HCFA reports (HCFA Form 64) compiled by The MEDSTAT Group. To identify trends in the overall number of Medicaid waiver beneficiaries, number of elderly waiver beneficiaries, average waiver size, and average per beneficiary expenditures for waivers serving the elderly, we analyzed data from state annual waiver reports (HCFA Form 372) covering fiscal years 1992 through 1999 in a database compiled by researchers at the University of California, San Francisco. State Quality Assurance Mechanisms. In the absence of comprehensive, readily available information on HCBS quality assurance mechanisms that states use, we analyzed the information available in a subset of state waiver applications and annual state waiver reports for waivers serving the elderly. Specifically, we analyzed (1) initial and/or renewal applications for the 15 largest waivers serving the elderly as of 1999 and (2) annual state waiver reports from 70 of the 79 waivers serving the elderly. The waiver applications are used by CMS, in part, to assess whether the quality assurance mechanisms in place warrant waiver approval. The annual waiver reports are required to provide a description of the process for monitoring the standards and safeguards under the waiver and the results of state monitoring. Of the 70 state annual waiver reports that we analyzed, 52 contained some information about states’ monitoring processes. Eight of the remaining 9 annual waiver reports were new waivers for which the state had not yet submitted an annual report, and for 1 waiver, a regional office did not provide a copy of the annual state report. State Oversight and Quality of Care. To assess state oversight issues in waivers serving the elderly, we examined regional office waiver review reports for 21 waivers and state audit reports related to 5 waivers, the only reports we were able to analyze, for a total of 23 discrete waivers. To assess quality-of-care problems in waivers serving the elderly, we reviewed 51 waivers for which we were able to analyze regional office final reports and annual state reports. Regional office waiver review reports identified problems in 19 waivers, and annual state reports identified problems in 22 waivers, for a total of 36 discrete waivers. These reports identified no quality-of-care problems in the remaining 15 waivers. We were unable to analyze findings from 28 additional waivers because they either (1) lacked a recent regional office waiver review completed during the period of October 1998 through May 2002 or an annual state waiver report, (2) the annual state waiver report did not address whether deficiencies had been identified, or provided no information on the deficiencies found, or (3) the waivers were too new to have had a regional office review or to provide an annual state report. CMS Oversight. To determine the adequacy of CMS regional office oversight of states’ waiver programs, we asked all 10 CMS regional offices to provide the following information for each of the waivers for which they were responsible, including both waivers for the elderly as well as those serving other target populations: (1) the waiver start date, (2) the current waiver time period, (3) the fiscal year the waiver was last reviewed, and (4) whether or not the waiver review report was finalized. Of the 263 waivers, 228 had been in place for 3 years or more and therefore should have had a regional office review. The other 35 waivers were less than 3 years old and would not have yet qualified for a review as of June 2002. For information on sample sizes and duration of the reviews, we analyzed CMS’s HCBS waiver review final reports for waivers serving the elderly that were issued during the period of October 1998 through May 2002. Fifteen of the 21 waiver review reports that we received included information on the number of waiver beneficiary records reviewed and on the duration of the reviews. Some review reports also provided the number of beneficiaries that were interviewed or observed. We also discussed regional office oversight activities with CMS headquarters’ staff. Table 8 contains a list of services provided through the HCBS waivers serving the elderly and the suggested CMS definitions. However, states may provide alternative definitions in their waiver applications. Percent of beneficiaries served by waivers for the elderly Arizona does not have any HCBS waivers for the elderly as it operates its Medicaid program as a demonstration project under a section 1115 waiver. In 1999, the District of Columbia did not have any HCBS waivers for the elderly in operation. Number of beneficiaries served by waivers for the elderly Arizona does not have any HCBS waivers for the elderly as it operates its Medicaid program as a demonstration project under a section 1115 waiver. With the exception of the number of waivers for the elderly, the data for this state are based on author’s estimates. See Harrington, Aug. 2001. In 1999, the District of Columbia did not have any HCBS waivers for the elderly in operation. CMS has undertaken a series of initiatives to generate information and dialogue on existing systems of quality assurance in HCBS waivers and to provide a range of assistance to states in this area. Approximately $1 million was budgeted for these HCBS quality initiatives in fiscal year 2001 and $3.4 million in fiscal year 2002. Through its HCBS quality initiatives, CMS intends to more closely assess the status of quality assurance efforts currently in place and to provide direct assistance to states in this area. CMS’s initiatives include (1) developing a conceptual framework for defining and measuring quality, (2) creating tools for states to adapt and use in assessing quality, such as model consumer experience surveys, and (3) providing technical assistance and resources for quality assurance and improvement. These initiatives, while important, do not address the lack of detailed requirements for states on the necessary components of an acceptable quality assurance system or the weaknesses in regional office oversight of state HCBS waivers that we identified elsewhere in this report. Quality Framework and Expectations. CMS sponsored the development of a framework for quality in home and community-based services that focuses on outcomes in several key areas including beneficiary access to care, safety, satisfaction, and meeting beneficiary needs and preferences. The next phase involves identifying strategies that states are currently using to monitor and improve quality within these key areas. While the expectations contained in the quality framework have not been specified in CMS regulations, they are reflected in the application template for CMS’s new consumer-directed HCBS waiver, Independence Plus. States’ use of the template for the Independence Plus waiver is voluntary. The template asks states for a detailed description of their quality assurance and improvement programs—something not currently required as part of the general HCBS waiver application. Guidance for using the template notes that the description should include (1) information on the frequency of quality assurance activities, (2) the dimensions that will be monitored, (3) the qualifications of persons conducting quality assurance activities, (4) the process for identifying problems, including sampling methodologies, (5) provisions for assuring that problems are addressed in a timely manner, and (6) the system to receive, review, and act on critical incidents or events. Quality Assurance Mechanisms. CMS is also developing quality assessment and improvement mechanisms for states. For example, to develop a guide for states and CMS regional offices, a contractor reviewed the literature on quality measurement and improvement in home and community-based care, convened an expert panel, and conducted interviews with state officials. As of April 2003, the guide was undergoing final clearance within CMS. It is expected to include (1) benchmarks for effective quality assurance programs in home and community-based care, (2) a discussion of the knowledge and mechanisms needed to design, implement, and assess quality activities in home and community-based care, and (3) suggestions for addressing limitations and problems in assuring quality in home and community-based care. Another contractor has developed and field-tested consumer experience surveys for use in waiver programs for the elderly and for persons with developmental disabilities. This contractor is also developing a set of performance indicators for states to use in guiding development and assessing quality in new self-directed HCBS waivers. Technical Assistance and Resources. Other CMS efforts focus on providing technical assistance and resources to states. One contractor has assembled a team of professionals with expertise in home and community- based services that can serve as a resource for both states and the CMS regional offices. Services available from these teams are expected to include conducting targeted reviews of waiver programs; providing suggestions to states regarding their quality assurance activities; consulting with CMS staff regarding quality aspects of specific waivers; and providing resource materials on quality assurance monitoring and improvement tools. This contractor is also assessing the types of data currently gathered by a sample of states that is, or could be, used for quality measurement and improvement; compiling information on selected data-driven state quality efforts; and providing technical assistance to the states. Finally, CMS sponsored a national conference on HCBS quality measurement and improvement in May 2002. This day-and-a-half-long conference—attended by state officials, CMS staff, and others—offered training and information on strategies and techniques for quality assurance and improvement in home and community-based care. review (days) The regional office review contained no information on beneficiary interviews or observations. This waiver review was conducted at the regional office rather than on-site at the relevant state agencies.

Summary: Home and community-based settings have become a growing part of states' Medicaid long-term care programs, serving as an alternative to care in institutional settings, such as nursing homes. To cover such services, however, states often obtain waivers from certain federal statutory requirements. GAO was asked to review (1) trends in states' use of Medicaid home and community-based service (HCBS) waivers, particularly for the elderly, (2) state quality assurance approaches, including available data on the quality of care provided to elderly individuals through waivers, and (3) the adequacy of federal oversight of state waivers. GAO is recommending that the Administrator of CMS take steps to (1) better ensure that state quality assurance efforts are adequate to protect the health and welfare of HCBS waiver beneficiaries, and (2) strengthen federal oversight of the growing HCBS waiver programs. Although CMS raised certain concerns about aspects of the report, such as the respective state and federal roles in quality assurance and the potential need for additional federal oversight resources, CMS generally concurred with the recommendations. From 1991 through 2001, Medicaid long-term care spending more than doubled to over $75 billion, while the proportion spent on institutional care declined. Over a similar time period, HCBS waivers grew from 5 percent to 19 percent of such expenditures--from $1.6 billion to $14.4 billion--and the number of waivers, participants, and average state per capita spending also grew significantly. Since 1992, the number of waivers increased by almost 70 percent to 263 in June 2002, and the number of beneficiaries, as of 1999, had nearly tripled to almost 700,000, of which 55 percent were elderly. In the absence of specific federal requirements for HCBS quality assurance systems, states provide limited information to the Centers for Medicare & Medicaid Services (CMS), the federal agency that administers the Medicaid program, on how they assure quality of care in their waiver programs for the elderly. States' waiver applications and annual reports for waivers for the elderly often contained little or no information on state mechanisms for assuring quality in waivers, thus limiting information available to CMS that should be considered before approving or renewing waivers. GAO's analysis of available CMS and state waiver oversight reports for waivers serving the elderly identified oversight weaknesses and quality of care problems. More than 70 percent of the waivers for the elderly that GAO reviewed documented one or more quality-of-care problems. The most common problems included failure to provide necessary services, weaknesses in plans of care, and inadequate case management. The full extent of such problems is unknown because many state waivers lacked a recent CMS review, as required, or the annual state waiver report lacked the relevant information. CMS has not developed detailed state guidance on appropriate quality assurance approaches as part of initial waiver approval. Although CMS oversight has identified some quality problems in waivers, CMS does not adequately monitor state waivers and the quality of beneficiary care. The 10 CMS regional offices are responsible for ongoing monitoring for HCBS waivers. However, CMS does not hold these offices accountable for completing periodic waiver reviews, nor does it hold states accountable for submitting annual reports on the status of waiver quality. Consequently, CMS is not fully complying with statutory and regulatory requirements when it renews waivers. As of June 2002, almost one-fifth of waivers in place for 3 years or more had either never been reviewed or were renewed without a review; for an additional 16 percent of waivers, reports detailing the review results were never finalized. Regional office personnel explained that limited staff resources and travel funds often impede the timing and scope of reviews. While regional office reviews include record reviews for a sample of waiver beneficiaries, they do not always include beneficiary interviews. The reviews also varied considerably in the number of beneficiary records reviewed and their method of determining the sample.