DISCUSSION PAPER

 

MOVING ILLINOIS
TOWARD A COST-EFFECTIVE POLICY OF DEINSTITUTIONALIZATION
FOR PERSONS WITH MENTAL ILLNESS

 

 

The State of Illinois is now embarking on what could be termed the “second wave of deinstitutionalization”.  The Supreme Court – in the case of Olmstead v. L.C. Ex Rel. Zimring (119 S. Ct. 2176) - held that unwarranted institutionalization of people with disabilities is a form of discrimination that is actionable under the Americans with Disabilities Act.

 

For the State of Illinois and other states, this means that persons with disabilities who live in institutions – seniors, the physically disabled, the developmentally disabled and persons with mental illness – have the legal right to move to the least restrictive setting that is appropriate to their desires, needs and capacity. 

 

In the first wave of deinstitutionalization in the 1960s and 1970s, state institutions were depopulated, but too many persons with disabilities were left homeless and without community supports.  Now the State of Illinois has the opportunity and obligation to move forward in implementing Olmstead, but to do so in a responsible and strategic manner.   

 

The United States Supreme Court held that a state can meet its obligations under Olmstead if it has a “comprehensive, effectively working plan for placing qualified persons with mental disabilities in less restrictive settings, and a waiting list that moved at a reasonable pace not controlled by the State's endeavors to keep its institutions fully populated”. 

 

The House of Representatives in 2000, pursuant to House Resolution 765, named the Illinois Department of Human Services as the lead agency to develop this “comprehensive, effectively working plan” for Olmstead implementation. The plan was to include:

 

·        Procedures for avoiding unnecessary institutionalization of persons with disabilities;

·        Procedures for placing qualified persons with disabilities in the most integrated setting appropriate to their needs, along with the necessary supports; and

·        Provision of community-based or in-home services and supports along a full continuum.

 

 

The State’s Progress Toward Implementing Olmstead for Persons with Mental Illness

 

To date, a comprehensive plan for implementing Olmstead has not been developed and the State instead is resorting to piecemeal approaches.  In the FY2002 budget, for example, some services for the developmentally disabled were added, e.g. a loan and grant program for the purchase of assistive technologies, funding of 150 Community Integrated Living Arrangement (CILA) beds for the developmentally disabled, and $1-per-hour wage increase for direct care workers who work with the developmentally disabled.

 

However, funding for services for persons with mental illness has lagged far behind.  In the FY 2002 budget, the only increase for services for persons with mental illness was a $2 million expansion of services in juvenile detention centers to serve juveniles with mental illness.  During the last ten years, funding was provided only three years for the development of Community Integrated Living Arrangements (CILAs) for persons with mental illness – a total of $4.7 million – although there has been some growth in other residential alternatives for persons with mental illness.

 

And while significant substantive mental health legislation was adopted in 2001, the new law benefits only those persons who have health insurance.  Under Senate Bill 1341 (Public Act 92-185), insurance coverage for persons with certain serious mental illnesses now must be provided on the same terms and conditions as are applicable to other illnesses and diseases.  It is hoped that this law will make it possible for persons with health insurance to seek treatment earlier and thereby remain self-sufficient.

 

 

Institutionalization of Adults with Mental Illness

 

Today, persons with mental illness in Illinois reside in a variety of settings. Many persons with mental illness are able to live independently; receive outpatient treatment, medicine and assistance; and generally maintain a self-sufficient lifestyle.  Others reside in apartments, group homes and nursing homes, under some degree of supervision.  Short-term crisis care – not considered permanent housing — is available in community programs and through state and private psychiatric hospitals. 

 

Persons with mental illness receive housing assistance with state funding in 10 different settings.  The vast majority of assistance provided in Illinois today is provided through institutions. The definition, capacity, number of persons served through state funding, daily rates and annual state costs for each type of program are found in Appendix A.

 

As of March 1, 2001, at least 27,000 persons with mental illness resided in nursing homes (Appendix A, #5-#6) – a restrictive institutional setting for the persons with mental illness contemplated by the Supreme Court in Olmstead.  An additional 9,000 persons with mental illness received state funding assistance for community-based, supportive (i.e. not independent) housing (Appendix A, #1-#4).

 

It is widely believed that some, though not all, persons with mental illness would choose to and are able to live in less restrictive environments than in nursing facilities.  To date, the State has appropriated no funding and made no efforts to target Olmstead implementation activities to persons with mental illness who now reside in these institutions.

 

In Illinois, Institutions for Mental Diseases (IMD) play a key role in providing institutional care for persons with mental illness.  A nursing home and an IMD may not differ much in the medical or psychiatric needs of the residents themselves but they differ a great deal with respect to the impact on the State budget.

 

Generally, if a resident of a nursing home qualifies for Medicaid, the State seeks 50/50 reimbursement from the federal government for each separate service related to that resident.  However, the federal government does not provide Medicaid reimbursement if the nursing facility “primarily” (i.e. over 50% of total resident population) serves persons with mental illness.  In such case, federal Medicaid reimbursement is available only for IMD residents who are under 22 years and over 64 years of age. 

 

Today, 29 IMDs in Illinois each have a resident population of more than 50% and generally more than 75% persons with mental illness – technically referred to as “mental illness without override”, meaning that there is a mental disorder but no medical or physical condition that would require nursing facility level of care.[1]

 

Because residential and ancillary health services provided by these 29 facilities for persons 22-64 years of age do not qualify for federal matching funds, as of March 1, 2001, there were a total of 4,149 adults in IMDs for whom the State paid 100% of care – even though most residents would qualify for Medicaid by income standards.  [NOTE:  A new rule related to mental health services in nursing facilities is intended to discourage any additional facilities from becoming IMDs.  However, the proposed rule does not reduce or consolidate the number of IMDs operating in Illinois.]

 

Total Expenditures for Institutions for Mental Disease (IMD), FY 2001

 

 

In summary, Illinois spends over $160 million for about 4,100 residents in IMDs – or over $38,000 GRF per person, with no federal match.

 

 

A Proposed Cost-Effective Plan

To Begin Olmstead Implementation for Persons with Mental Illness

 

Illinois can and should begin the process of Olmstead implementation for persons with mental illness while reducing the state burden for institutional care.  It is proposed that the State develop a strategic plan that begins with deinstitutionalization of some of the 4,000-plus persons with mental illness residents of IMDs.  The strategic plan should include:

 

·        Case-by-case assessments in order to prioritize those adults with mental illness currently residing in IMDs who desire to and are able to move to their homes or community-based facilities, with appropriate community supports (using procedures that would not require assessments for the entire population);

 

·        Creation of a continuum of residential and supportive services in community settings, funded through Medicaid and SSI payments where possible; and

 

·        A financial plan that maximizes federal financial participation by submitting all possible costs of residential and ancillary health services to the Medicaid program, and also maximizes consumer financial participation by enrolling all eligible disabled persons in the SSI and SSDI programs. 

 

A comparison of State costs for IMD care v. community-based care demonstrates this strategic plan to be a cost-effective approach, yielding substantial savings to the State while also implementing the policy of Olmstead.  The following cost comparisons are based on a realistic appraisal of costs for caring for persons with mentally ill adults transitioning directly from IMDs to community settings (not based on actual funding of these services today).

 

 

	AVERAGE ANNUAL RESIDENTIAL COSTS			AVERAGE ANNUAL ANCILLARY HEALTH SERVICES COSTS
	Cost per person	FFP	Net State	Cost per person	FFP	Net State
IMD	$25,303	$0	$25,303	$13,633	$0	$13,633
Community	$35,600   average supported/ supervised	$13,050   average 37 % matched	$22,550	$13,633   assuming same costs	$6,816   average. 50% matched	$6,817
Net saving to State = $9,569 per person			$2,753 per person saved			$6,816 per person saved

 

 

Accordingly, the impact on the state budget would be substantial if Illinois transitioned 400 residents per year for the next 5 years from IMDs to community settings – or about 10% of the IMD population per year.  

·        The State would generate sufficient FFP that the net cost to the State would be reduced by $9,569 per person.  This assumes the same level of ancillary health service costs for adults with mental illness in the community.  [NOTE: There are additional savings, not computed here, in providing for persons with mental illness in the community, since a percentage could move from supervised to less restrictive, less expensive supportive residences over time.]  For each group of 400 residents, $3,827,600 in GRF would be saved – while moving toward deinstitutionalization pursuant to Olmstead.

·        Transitioning 400 residents per year from IMDs would mean a cost saving of $57,414,000 in GRF during a 5-year period, not including start-up and transitional costs.

 

·        By reducing the population of persons with mental illness in IMDs, some IMDs could be consolidated and/or converted to non-IMD nursing homes (i.e. with fewer than 50% residents with mental illness). The State could then use the $38,000+ cost per resident to match additional federal Medicaid funds to further implement Olmstead in community settings.

For more information, contact Rep. Julie Hamos at 847.424.9898 or julie@juliehamos.org

1)  Supported Residential2