In–Home Supportive Services

The administration budget plan proposes to achieve General Fund savings in the IHSS program by modifying (1) the state buyout of the “share of cost” for certain recipients, (2) the service hours provided to certain recipients, and (3) state support for the wages paid to providers. We assess the Governor’s proposals below and present other options for the Legislature to consider.

Share of Cost Buyout Proposals

What Is a Share of Cost (SOC)? As previously noted, to qualify for IHSS, recipients generally have income at or below the SSI/SSP grant level. However, when an IHSS recipient has income in excess of the SSI/SSP grant levels, that recipient may still be eligible to receive IHSS services with a SOC. An IHSS recipient with a SOC must make an out–of–pocket monthly payment towards the receipt of IHSS services. For example, if an IHSS recipient has monthly income that is $200 over the SSI/SSP grant level, that recipient will pay about $200 towards their IHSS services each month before the IHSS program pays the remainder of the cost of their services.

History. In 2004, the state applied for, and received, a federal waiver that allowed 64,000 recipients (out of about 66,000) in the state–only IHSS Residual program to be eligible for federal Medicaid funding in the existing IHSS Personal Care Services Program (PCSP) or in the newly established IHSS Waiver program. This change permitted the state to achieve significant General Fund savings in IHSS.

Intersection Between IHSS and Medi–Cal. The federal Medicaid program is known as Medi–Cal in California. When IHSS recipients with a SOC were moved from the Residual program to either the PCSP or IHSS Waiver programs, they could have been subject to paying a higher Medi–Cal SOC. This is because both the PCSP and the IHSS Waiver programs are partially funded by Medicaid. The Medi–Cal SOC is usually greater than the IHSS SOC because it is based on the income of their entire family, while the amount of the IHSS SOC is based only on the individual recipient’s income.

In order to avoid creating a higher Medi–Cal SOC obligation for these IHSS recipients, the state agreed to use state funds to pay for the difference in the IHSS and Medi–Cal SOC. For example, if a recipient had an IHSS SOC of $200 per month in the Residual program, but now had a higher Medi–Cal SOC of $1,000 per month, the recipient was only obligated to pay the lower IHSS SOC amount ($200).The state paid the difference between the IHSS SOC and the Medi–Cal SOC ($800). Essentially, this policy holds the IHSS recipient harmless from this program change.

Program Caseload and Costs Growing. The SOC buyout program has grown significantly since the establishment of the IHSS Waiver program in 2004, and that growth is projected to continue. The Governor’s budget estimates that 9,691 recipients will benefit from the state buyout in 2008–09, and that this number will increase to 11,080 recipients in 2009–10 (an increase of over 14 percent). In the budget year, the total cost of the SOC buyout program is estimated to be $57 million General Fund (up from $47 million in the current year).

The range of monthly SOC buyouts paid to individual recipients varies widely, from under $100 to over $10,000 per month. Figure 7 shows the distribution of SOC buyouts. The average General Fund cost of the buyout is estimated to be $427 per person per month in 2009–10.

Incentive to Apply for IHSS for SOC Buyout, Not Services. Because of the SOC buyout program, there is an incentive for someone with a high Medi–Cal SOC to apply for IHSS. This is because once a recipient applies for and receives any amount (even one hour a month) of authorized IHSS hours, the state is obligated to buy out their SOC. This means that—from the earlier example—a person with a monthly $1,000 SOC on Medi–Cal would have their SOC reduced to the $200 level once approved for IHSS. The buyout occurs regardless of whether he or she then uses the IHSS services. For example, during one month, DSS made buyout payments for 174 IHSS recipients (at an average cost of $327 per month) who had not hired providers or claimed hours that month.

Governor’s Proposal: Eliminate SOC Buyout for Less Impaired. The Governor’s budget proposes to eliminate the SOC buyout program for less–impaired IHSS recipients. The level of a recipient’s impairment is assessed by a county social worker using a uniform assessment tool to rank the recipient’s impairment for each task on a five–point scale known as the Functional Index (FI) ranking. Figure 8 shows each of the potential FI rankings that may be assessed by a social worker, and what they mean for the impairment level of the recipient. The budget plan proposes to eliminate the SOC buyout program for recipients with an average FI ranking of less than four to reduce General Fund costs by $6.4 million in 2008–09 and $46 million in 2009–10. The administration estimates that this proposal will impact about 8,900 IHSS recipients in 2009–10, raising their SOC by an average of about $427 per month.

Administration Savings May Be Less Than Estimated. Our analysis indicates that the Governor’s budget proposal does not account for potential increases in state administrative and program costs that could result from the proposed restrictions on the SOC buyout. That is a concern because we believe that this proposal could result in increased requests by recipients for reassessments and appeals. When some individual recipients learn that their SOC is increasing by over $400 because their FI ranking is not higher, a significant number will likely appeal or ask for a reassessment of their FI ranking. A combination of increased administrative and program costs from recipients who successfully appeal their FI ranking may significantly erode the savings estimated in the Governor’s budget plan.

LAO Option 1: Reduce SOC Buyout by 50 Percent for All IHSS Recipients. In our view, the SOC buyout is an issue of ability to pay, and is not related to the FI ranking of the recipient. In other words, a recipient’s ability to pay a Medi–Cal SOC is related to his/her level of monthly income rather than his/her level of disability. Accordingly, the Legislature may wish to consider a different approach to achieving savings on SOC buyout costs. Under this option, state participation in SOC buyouts would decrease by 50 percent for all recipients, regardless of their FI ranking. This proposal would save less than the Governor’s—about $4 million in 2008–09 and $28 million in 2009–10. However, these savings would not likely be eroded because, unlike the Governor’s proposal, there is no reason for recipients to appeal their FI ranking. All recipients, regardless of their FI ranking, would be treated the same under this approach.

LAO Option 2: Cap the Buyout at a Determined Level. One variation of the 50 percent reduction in the SOC buyout is to consider placing a specific dollar cap on the buyout amount. In other words, the state would continue to buy out the difference between the Medi–Cal SOC and the IHSS SOC up to a certain amount per month. Any amount above that would be the responsibility of the recipient. The savings associated with this proposal would depend upon the amount of the cap—the lower the level of the cap, the more savings achieved. For example, if the Legislature decided to cap the buyout amount at $400 per month, savings would be approximately $13 million annually.

LAO Option 3: Prospectively Eliminate SOC Buyout. The original rationale for the SOC buyout program was that it allowed IHSS recipients to transfer from the Residual program to the other IHSS programs without increasing their SOC obligation, essentially holding them harmless. Although it was reasonable to buy out the difference between the Medi–Cal SOC and the IHSS SOC for recipients who were already in the program when the IHSS Waiver was obtained, it arguably is not necessary to provide this service prospectively. Under this option, those in the existing caseload would continue to receive the existing state buyout, but the growth in the SOC buyout caseload would end. This option would save at least $9.4 million in 2009–10, with increased savings in future years as existing SOC buyout recipients exited the IHSS program.

Conclusion. Given the growth in the SOC buyout program, and the current fiscal situation, we recommend the Legislature adopt one or a combination of these savings options. We note that it is not necessary to limit action to one of these proposals, as they may be combined. For example, it is possible to both eliminate the SOC buyout program prospectively and reduce state participation in the buyout by 50 percent for the existing SOC buyout recipients.

Service Hour Proposals

As we noted earlier, after the needs of an IHSS recipient are assessed by a social worker, the recipient is authorized to receive a specific number of hours each month for a variety of services. This care is allocated among certain tasks to create a package of services to assist recipients in remaining in their homes. Recipients may be authorized domestic and related care services tasks as a component of their package of services, as long as their relevant FI ranking exceeds 1. Domestic and related care services include general housekeeping activities, meal preparation, meal clean–up, shopping for food, and errands. Over 95 percent of all IHSS recipients receive some level of domestic and related care.

Governor’s Proposal: Eliminate Domestic and Related Care Services for Less Disabled Recipients. The Governor’s budget proposes to eliminate domestic and related care service hours for IHSS recipients with related FI rankings below four. The DSS estimates that approximately 81,000 IHSS recipients will lose each month an average of 22.6 domestic and related care service hours (out of a typical total of 84.9 hours) as a result of this policy.

After accounting for some savings erosion due to administrative costs and hour restorations for some recipients who would successfully appeal decisions to eliminate their services, the administration estimates that this proposal will save about $12 million in 2008–09 and $71 million in 2009–10.

LAO Option: A Tiered Reduction to Domestic and Related Care Services. We believe that the administration’s proposal has some merit because it targets services to those recipients who have been assessed as being the most impaired. However, instead of a 100 percent reduction in domestic and related care services for recipients with FI rankings between 1.01 and 3.99, the Legislature may wish to consider use of a tiered approach to making the reductions. For example, recipients with functional rankings between 1.01 and 2.5 would have their hours capped at a level that would be lower than for individuals with functional rankings between 2.5 and 3.99. This approach would not completely eliminate domestic and related care service hours for any IHSS recipient, and would tend to result in fewer appeals and less erosion of savings. The amount of the savings from this proposal would depend on the tiers set by the Legislature. We think it is reasonable to set the tiers at a level to achieve savings of about half of the Governor’s proposal, or about $36 million in 2009–10.

IHSS Wage Proposals

Although the state participates in wages and benefits up to $12.10 per hour, as shown in Figure 9, the combined wages and benefits actually paid in each county varies from $8.00 per hour to $14.68.

Governor’s Proposal: Reducing State Participation in Provider Wages to Minimum. The Governor’s budget proposes to reduce state participation in IHSS provider wages and benefits to a combined $8.60 per hour (the $8.00 minimum wage established under state law, plus $0.60 for health benefits). This proposal results in General Fund savings of about $45 million in 2008–09, increasing to $267 million in 2009–10, and eliminates out–year costs associated with future county wage increases that would likely occur under current law.

The proposed reduction would not limit the amount counties could pay their IHSS providers, but rather would reduce the state’s level of support for the wages. Depending on county decisions, this proposal would either result in county general fund costs (because a county elects to backfill the decreased state funds) or reduced provider wages (because a county does not backfill).

LAO Option 1: Reduce State Participation in IHSS Wages and Benefits to $10 Per Hour. The Legislature may wish to consider a modification of the Governor’s approach for achieving IHSS savings. This option would reduce state participation in wages and benefits to $10 per hour (roughly the current average wage and benefit level). This proposal would not immediately impact counties currently paying providers less than $10 per hour. Counties with current wages and benefits above $10 per hour could share the marginal cost with the federal government, or could reduce wages and benefits. This proposal would save about $28 million in the current year and $170 million in 2008–09.

LAO Option 2: State Participation in Lower Wages for Close Relative Providers. Currently, about 53 percent of IHSS providers are either the parent, spouse, or child of the person for whom they are providing care. We define these providers as “close relative providers.” One option to consider is lowering state participation in wages to the minimum wage for close relative providers. The rationale behind this proposal is that wages do not need to be as high for close relative providers as they may need to be to attract outside providers. This option would save about $140 million General Fund in the budget year.

Impact on Supply of Providers. In the past, we have noted that long–term wage decreases could eventually impact the supply of qualified IHSS providers. However, given the current condition of the economy, and the high unemployment rates throughout the state, we do not believe that a wage reduction proposal would have a significant impact on the availability of IHSS providers at this time. The various wage–related proposals discussed above would reduce provider income, but are unlikely to impact services for IHSS recipients.

Conclusion. Given the state fiscal difficulties, and the growing expense of the IHSS program, we recommend that the Legislature take action to reduce the costs associated with IHSS provider wages. The options above provide a framework to consider a number of IHSS wage changes. Our analysis indicates that wage reduction proposals will result in IHSS savings in a way that minimizes the impact on IHSS recipients.