Projecting Cost Savings from the ADRC Network

Summary of FindingsGeneral fund savings to Medi-Cal for nursing facility

stays could cover the cost of the ADRC Network infrastructure and options counseling if options counseling diverts 4% of its participants from NFs

The Lewin calculator yields much higher savings, equivalent to $6.90 for every $1 invested

There is already some evidence of lower long-term care costs in ADRC counties.

However, all estimates are based on a series of strong assumptions.

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Focus on Costs to General Fund

Reducing costs is not an explicit purpose of ADRCs as envisioned in the Older Americans Act

However, the possibility of Medi-Cal savings offers a compelling incentive for the State of California to invest in the ADRC Network

Therefore, this cost analysis focuses on: Cost of the ADRC Network (not ongoing ILC

and AAA services) Potential Savings for Medi-Cal

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What does it take to fund the ADRC Network annually?

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ADRC Network ComponentCost

Estimate

State infrastructure  

Central office staffing and related costs $594,464

ADRC development/implementation contracts (5 @$100,000)

$500,000

CalCareNet annual website hosting & upkeep $50,000

Options counseling  

Training/TA $71,500

Reimbursements (3,000 people @$45/hr for 4 hrs)

$540,000

Estimated Total $1,755,964

Focus on Options Counseling Role in Preventing Institutional

Care

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Nursing facility

(Medicaid)

Nursing facility

(private-pay)

Increasing level of care need

Living at home (formal

or informal home care)

→ Spend down→ Acute illness or hospital stay→ Loss of primary caregiver→ Depleted funds

Depleting private resource

Extending the Ability of People to Live at Home Saves Medi-Cal Dollars

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Nursing facility

Medicaid

Nursing facility

(private-pay)

Living at home (formal or informal home care)

→ Spend down

Increasing level of care need

Depleting private resource

Typical Annual General Fund Cost for NF Care: $22,719

$5,679.85 per person per month in 2012-13

DHCS May 2013 Budget Estimate

Assume average 8 month stay

Eight month average is used by Lewin in the calculator

Consistent with people starting at different times a year or a mix of long-term and short-term stays

Total $45,439, 50% paid by federal match

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Savings are substantial even if Medi-Cal pays for HCBS

CareFor example: Multipurpose Senior Services

Program (MSSP): $3,781 annual costs for waiver participants

-$45,439 + $3,781 = -$41,658

Per person who receives MSSP instead of NF

-$20,829 annually for federal costs

-$20,829 annually for general fund

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However, estimated savings are very sensitive to

assumptionsHow much will community-based services

cost? If costs are similar to waiver costs, which waiver?

IHSS averages $12,530 per person per year, which would lower general fund savings to $16,454

Who will use community-based services that would never use Medi-Cal NF care? “Woodwork” effect

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Assume $16,454 annual savings per person not

entering NF

Assumes each person not entering a NF due to ADRC options counseling has costs equal to IHSS costs

The $12,530 per person ($6,265 GF) is probably too high but can help account for woodwork effect

Same net cost would occur if each person received $4,176 in HCBS services, but two more people used community services for every person that avoided a nursing facility 10

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

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Where does 4% come from?

$16,454 savings per person not entering a NF

$1,755,964 divided by $16,454 = ~107

Savings for diverting 107 people is $1,760,578

If 3,000 people receive options counseling and 107 avoid NF care, this means 3.6% avoid NF (107/3000)

So, if 4% (120) avoid NF, Medi-Cal GF saves $1,974,480 or $218,516 more than the network costs

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ADRC Network ComponentCost

Estimate

State infrastructure  

Central office staffing and related costs $594,464

ADRC development/implementation contracts (5 @$100,000)

$500,000

CalCareNet annual website hosting & upkeep $50,000

Options counseling  

Training/TA $71,500

Reimbursements (3,000 people @$45/hr for 4 hrs)

$540,000

Estimated Total $1,755,964

Is it plausible that options counseling will divert 120

people?

Two ways of checking:

1.Lewin ADRC Cost Offsets Calculator

2.Medi-Cal NF use in existing ADRC counties

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Calculating Diversion Population in the Lewin ADRC Cost Offsets

Calculator

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Lewin ADRC Cost Offsets Calculator Applied to California

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844 diverted would yield $6.90 for each $1 invested in

ADRCs

$16,454 times 844 = $13,887,176 saved

Minus $1,755,964 costs = $12,131,212 saved net

$12,131,212 divided by $1,755,764 in cost = 6.9

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Long-term care days are falling in California; falling faster in ADRC

counties

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Fall in LTC Days

2008-2012*

Fall in Medi-Cal LTC Days 2008-2012*

ADRC Counties

15% 10%

Non-ADRC Counties

9% 9%

*Adjusting for change in population aged 65+

Cost to Medi-Cal for LTC in ADRC counties is $4,461,474 less than it would have been if LTC

days had matched the rest of the state

Summary of FindingsGeneral fund savings to Medi-Cal for nursing facility

stays could cover the cost of the ADRC Network infrastructure and options counseling if options counseling diverts 4% of its participants from NFs

The Lewin calculator yields much higher savings, equivalent to $6.90 for every $1 invested

There is already some evidence of lower long-term care costs in ADRC counties.

However, all estimates are based on a series of strong assumptions.

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Discussion QuestionsIs there a better basis to estimate the costs (to the

State) of services for those receiving options counseling?

Is it plausible that 4% of people who receive options counseling avoid Medi-Cal NF care? Is options counseling well targeted to this group?

How comparable are options counseling and other ADRC activities to functional assessment for Medi-Cal level of need?

What network costs are left out (that aren’t otherwise ILC or AAA costs)?

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