Myth of a Medicaid Institutional Bias

The allegation of a Medicaid institutional bias for people with mental retardation and developmental disabilities (MR/DD) is simply not true. It is based on two false premises:  (1) that all institutional services are mandatory and all home and community-based services (HCBS) are optional, and (2) that more dollars are spent on institutional services than on HCBS services.

First, all Medicaid programs for people with MR/DD are optional – whether provided through Intermediate Care Facilities for Person with Mental Retardation (ICFs/MR) or the HCBS program. Second, as detailed below, far more Medicaid dollars are spent on HCBS than on ICFs/MR services for people with MR/DD.

How, then, did this myth come into being?  The answer is by mixing the funding sources for very different populations, (1) the elderly and physically disabled who are served through the nursing facilities (NF) program, a mandatory Medicaid program, and (2) people with MR/DD, who receive funding through optional ICF/MR and HCBS programs.  By combining the dollars spent on the NF and ICF/MR programs as “institutional” funds, proponents of community funding represent that there is an institutional bias. 

When only programs for people with MR/DD are separated out, it is absolutely clear that there is neither a bias in the nature of the program nor in the amounts spent for institutions. 

A) ICFs/MR comprise only 20% of total Medicaid “institutional” spending; nursing facilities account for 80% of total Medicaid “institutional” spending.  

B) Only 25.8% of total Medicaid dollars for persons receiving MR/DD services goes to ICFs/MR while 74.2% is spent for community-based services.