Dispelling Medicaid Myths:

There is No Medicaid “Institutional Bias” for Persons with

Mental Retardation and Developmental Disabilities (MR/DD)

The allegation of a Medicaid institutional bias for people with 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.

From 1977 to 2004, overall fiscal commitment (“fiscal effort”) to community programs, as measured by the total amount spent from state and federal sources for MR/DD services per $1,000 of citizens’ personal income, increased by 486%. In contrast, institutional spending declined by 51%.  The ICF/MR program is not the cause of rising Medicaid costs. It is a tiny and falling percentage of all Medicaid funding and a good investment for both the federal government and the states to care for some of their most needy citizens.

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