For instance, a person receives Medicare coverage at age 65 (or sooner with some specific medical conditions) and regardless of income. However, Medi-Cal coverage kicks in when a person's assets and income fall below a certain level -- although partial coverage called "share-of-cost" can be obtained by people with slightly higher incomes. Medicaid nationwide provides long-term care for about 12 percent of the elderly and 15 percent of the working-aged disabled.⁽³⁵⁾ Each program covers different services under different payment schemes.

Yet a separate program is the Supplemental Security Income/State Supplementary Payment program, which provides a monthly stipend to the impoverished aged, blind and disabled population and provides automatic eligibility for Medi-Cal and for In-Home Supportive Services (IHSS). People can receive IHSS services, however, even if they are not SSI/SSP recipients.

The Department of Aging provides case management for low-income seniors through the Multipurpose Senior Services Program and for others through Linkages. Both programs are restricted in the number of people they serve because of limited resources -- and in some geographic areas they are not available at all despite the presence of people who meet the criteria for service. Similarly, many nutrition and hot meal programs have no income test but availability may be restricted because of resources.

In general, a person who needs multiple services will have to go through multiple application and in-take processes with different criteria determining eligibility.

These facts, combined with the point that neither government program is at total risk for patient outcome, allows the potential for cost-shifting and perverse incentives. A skilled nursing facility, for instance, receives a much higher daily rate for a Medi-Cal resident who has deteriorated to the point of being transferred to an acute-care hospital and then has returned to skilled nursing care under Medicare reimbursement. Some consumer advocates have argued that skilled nursing facilities would provide better bed-sore prevention, hydration and nourishment monitoring -- common problems that send residents to hospitals with acute conditions -- if the facility had to pay for the hospitalization. Instead, skilled nursing facilities receive a daily stipend to hold the bed open while the resident is in the hospital, and then receive a higher reimbursement rate for a time when the person returns from the hospital. At least one government report acknowledges this perverse incentive.⁽³⁷⁾

The built-in problems associated with the current system becomes particularly evident when the experience of On Lok is examined. A program that operates under federal and state waivers, On Lok collects a set amount of Medi-Cal and Medicare dollars for each patient and uses the funds to provide intensive preventive care and in-home services to stave off institutionalization as long as possible. Since the program must pay for any expensive hospitalization and skilled nursing facility care that is incurred, focused effort is devoted to maintaining the patient's health in their home environment and avoiding the institutional placements. The program shows substantial savings, its operators report, largely because of the infrequent use of hospitalization.

• Medi-Cal will cover the cost of skilled nursing facility care but not residential care facility occupancy. As a result, if people cannot come up with the $1,500 per month for residential care, they may remain in their homes until they have deteriorated to the point of needing to move to a skilled nursing facility at a much higher cost to the State. Many argue that earlier intervention with a lower level of assistance would stave off skilled nursing facility usage for a longer period.
  
  

• Medicare will cover the cost of medical services on an expensive fee-for-service basis at a doctor's office. But the same service delivered more cheaply and more conveniently in an Adult Day Health Care Center is not reimbursed.
  
  

• Medicare will cover the cost of prescription drugs for chronic illness and durable medical equipment in institutional settings, but will not do so if the person is able to obtain treatment in a home setting.⁽³⁸⁾
  
  

• A Medicare surgical patient can go to a skilled nursing facility after hospital treatment at Medicare expense -- but not if the surgery was performed in a less costly outpatient facility or if the hospital stay was less than three days.⁽³⁹⁾
  
  

• Architectural barriers, like the lack of a ramp for a wheelchair or bars in a bathroom, may make it unsafe for a person to remain in his or her home. Medi-Cal, the program that bears the cost if a person moves to a skilled nursing facility, cannot cover the cost of such modifications.
  
  

• For the past few years, Medi-Cal has provided coverage for in-home care, but only if the services are obtained through an agency. People who use relatives or friends -- typically at lower expense -- under the In-Home Supportive Services program are limited to the hours available under the county/state-funded portion of the program.
  
  

• Oral hygiene for people in skilled nursing facilities must be provided by dentists or under the direct supervision of dentists. Facilities have difficulty finding dentists that will come in, especially since rooms are not set up for this specialized service. Often residents are not easily moved out of facilities. Dental hygienists who might fill this gap in services cannot do so except under the direction of a dentist, an arrangement that is not usually made. As a result, skilled nursing facility residents often go without dental care, which in turn can affect their nourishment intake and other health aspects of their lives.

The problems outlined above -- consumer confusion and program constraints -- are not a surprising revelation. They are commonly recognized -- and have been for years -- by the people who need services and their families, researchers, bureaucrats, policy makers and advocates.

Common Concerns, Solutions

Many of the organizations and individuals involved with long-term care have similar complaints and wish lists for improvements. For instance, the federal Health Care Financing Administration (HCFA) -- the federal agency that oversees Medicare and Medicaid spending -- itself recognizes the problems with long-term care in a report titled "The Role of Medicare and Medicaid in Long-Term Care: Opportunities, Challenges and New Directions." The report finds that:

...the present Medicare and Medicaid service delivery systems consist of a number of self-contained benefits rather than a comprehensive system of care suited to meeting the complex needs of persons with disabilities. These systems are, moreover, professionally driven rather than beneficiary-centered and directed.⁽⁴⁰⁾

The report continues with observations about the problems of coordination "within and across" the two programs, especially relating to benefit coverage and eligibility criteria. The problems are often complicated by the fact that the two programs are created and amended by different legislative authorities and have fundamentally different administrative structures.⁽⁴¹⁾

The HCFA report also notes that the coverage guidelines for Medicare "complicate decisions regarding choice of the appropriate setting for care....Principally, they fail to acknowledge that persons with chronic illness may often make a number of transitions between community-based and institutional settings."⁽⁴²⁾

The HCFA report identifies the key principles of a beneficiary-centered system: integrated funding, case management that seeks consumer and family involvement and control, integrated data systems and interdisciplinary teams of caregivers.⁽⁴³⁾

Taking a broader perspective, the United States General Accounting Office told the U.S. Senate that long-term care:

...has been patched together from multiple funding streams, both federal and state. Literally dozens of categorical funding streams provide long-term care to specific populations such as chronically ill children, persons with AIDS, persons with developmental disabilities, persons with mental illness and the frail elderly....To negotiate services, an individual may need to contend with the myriad of federal and state long-term care programs that provide services, sometimes with different eligibility requirements.⁽⁴⁴⁾

The federal government is not alone in recognizing shortcomings. In testimony prepared for the Little Hoover Commission, the Director of California's Department of Aging summed up the problems with the State's system:

By lack of integration and fragmentation of social and medical services, we have frustrated consumers and their families. We are not "user-friendly." We ought to have one-stop accessibility to services; an elimination of multiple eligibility forms; and a shift to low-cost, low-tech services. And if you had been able to join us at any of our hearings, you would know that when staff uses the phrase "intake processes," the whole world of consumers and their families groan in lamentation.

Perhaps even more fundamental, the average consumer does not know what is covered by Medicare and/or by health insurance. Yet more basic, the consumers think their payments of income taxes entitles them to health and long-term care without regard to income or assets.⁽⁴⁵⁾

The Director called for reforms that remove barriers to service, establish uniform assessment processes and empower the consumer.

As part of the Little Hoover Commission study process, an advisory committee of more than 140 consumers, providers, advocates and other experts took part in multiple meetings to explore long-term care issues. One sub-group of the committee spent 12 hours identifying what consumers, providers and government want to achieve in long-term care and what barriers are stopping them. The group decided the key elements missing in an effective long-term care system for California were:

• A consumer-driven, consumer-focused policy that would ensure appropriate access to needed services. To address this concern, the group recommended consumer participation in the design, implementation and evaluation of programs. They also recommended that programs be outcome-oriented and canted toward social, rather than medical, models. Policies should emphasize consumer choice and full access for those with service needs, regardless of income or geography.
  
  

• A single source for information, assessment and referral. The group found that government is the best source for "objective" data, such as who owns facilities and what licensing requirements are, while the private sector is more credible with "subjective" information about quality of care and other issues. Key criteria for a single information source would be reliability, consumer-friendly, neutral and uncontrolled by providers, and funded by adequate resources.
  
  

• Funding at adequate levels. The group encouraged the use of foundation grants for project seed money and research and the use of incentives to increase purchases of private long-term care insurance. But government will continue to be the main source of funding. They advocated removing perversities in the system that drive up costs without increasing service, uniform eligibility standards, pooling of funding streams that are now restricted and increasing the priority of long-term care in the competition for government resources.
  
  

  

• Accountability that is both credible and responsive to consumer concerns. Government, providers and the private sector each have a role in ensuring accountability. Government needs to fully fund mandates, improve management information systems and remove duplication in systems. Providers should respond to incentives to improve care and be innovative. The private sector should focus on effective means of monitoring quality of care.

Many of the points made by the Commission's advisory committee have been previously embraced in other forums. A coalition of six advocacy organizations has signed a "call for the development and restructuring of California's long-term care system." Their statement of principles includes designing a system that has the flexibility to respond to the needs of individuals, families and caregivers; that provides for consumer choice and self-determination; that involves consumers in designing and monitoring the system; and that focuses on preventive services and home and community-based support.⁽⁴⁶⁾

One of the six organizations, the California Commission on Aging, spearheaded a series of more than 45 public hearings around the state in the first half of 1996. In testimony about those hearings, the Commission's Chairman reported:

We heard loud and clear that seniors in need, as well as their family caregivers and their friends and neighbors who voluntarily help them, are frustrated with the way they can learn about and get the services they need to remain in their homes and communities and out of expensive institutions.⁽⁴⁷⁾

The Chairman reported that people testified that they wanted a place in their community where they could meet with a competent individual to learn about an array of services that would allow them to remain home as long as possible. They also indicated a desire for a single point of entry where they could learn what services they are eligible for and coordination that would allow them to move between different programs without having to requalify.⁽⁴⁸⁾

In addition to supporting reforms that address the concerns identified in their statewide hearings, the Commission on Aging's Chairman told the Little Hoover Commission:

The Commission [on Aging] envisions a system -- something we have referred to as a continuum of care system -- which would assist those in need to move from one set of services to another set without having to be requalified, without having to visit new agencies to determine what is available, and without losing their dignity in having to ask for assistance over and over again. And we firmly believe that such a continuum of care system is achievable -- achievable if we can remove turf issues from the service provider community; turf issues from among the bureaucrats who seem to be entrenched in what is, not what can be; and even turf issues with our lawmakers who feel they must add new pieces to the puzzle for which they can take credit for creating, rather than looking at how they might enhance implementation and make operative what already exists.⁽⁴⁹⁾

California is not the only state that is seeking an effective long-term care system. The United States General Accounting Office surveyed states in September 1994 and reported these common conclusions about long-term care:

• A person's ability to perform activities of daily living (ADLs) is the best way to identify persons with the greatest need for services. Most states couple this with a measurement for cognitive disability and a factor for access to care from family to determine need.
  
  

  

• To determine what type of service is needed, most states believe that case management, a standard assessment instrument and active involvement in the process by the consumer are important.
  
  

• State agencies also believe that long-term care spending can be controlled by encouraging greater private-sector involvement. This includes incentives to purchase long-term care insurance and use of private residential care alternatives.⁽⁵⁰⁾

Agreement seems fairly broad-based about what needs to be accomplished -- and this consensus has existed for years, if not decades. Nonetheless, change in the long-term care arena tends to be incremental rather than on the scale required to make dramatic improvements. Many believe there are at least three factors that hold back the necessary reforms: California's state structure for overseeing long-term care, funding concerns and accountability issues.

State Structure

As cited in the Background, oversight of long-term care services is spread across several different departments. The Departments of Aging, Social Services and Health Services all house functions that serve the elderly. The Departments of Developmental Services, Rehabilitation and Mental Health provide services to the disabled and others who need long-term care. In the broader sense, the Departments of Transportation, Housing and others have a major impact on the elderly and the disabled when it comes to mobility, architectural accommodations and other issues.

While many of the departments with direct oversight of long-term care are in the same agency -- Health and Welfare Agency -- they historically have operated independently, and in some instances at odds with each other. In addition, some departments have been reluctant to embrace innovations. Some examples are:

• In the 1980s, consumer advocates pushed for the State to make use of Medi-Cal waivers and options -- as other states had successfully done -- to shift much of the In-Home Supportive Services (IHSS) program from a state General Fund base to a program funded 50-50 by the State and federal government. Many blamed the State's reluctance on the fact that money saved in the Department of Social Services, which oversees IHSS, was of little concern to the Department of Health Services, which would see its Medi-Cal costs rise and have to do the extensive work to achieve a federal go-ahead. The approach was eventually adopted in 1992 but not without significant help from the budgetary pressures caused by a statewide economic recession -- and not without procedural barriers that hampered the program's use during the first two years.
  
  

• Certified Nursing Assistants (CNAs) receive training, under the direction of the Department of Health Services, that heavily emphasizes that they have no role in distributing medications. Residential care facilities, however, may hire CNAs and expect them to assist residents with medications under Department of Social Services guidelines. The Department of Health Services sided with a CNA in a lawsuit who was fired for refusing to handle medications. The Department of Social Services' posture is that the residential care facility setting is different and CNAs should be able to play a different -- and appropriate -- role in that setting. As this report was being written, the two departments were working on an agreement in this area.
  
  

• Many have observed that the State has been reluctant to pursue waivers from the federal government. The On Lok program obtained its own waivers directly from the federal government because it could not get the State to respond. Advocates who have pushed for waiver programs over the years have been told there was no staff to do the paperwork. While the State now lists 26 Medicaid waivers, most of those have been developed in the last few years as the State has moved to place Medi-Cal recipients into managed care. There is general agreement in the consumer community that the State has lagged behind other states in obtaining federal permission to be innovative -- especially in light of the current receptiveness by the federal government to such requests.
  
  

  

• While the Department of Aging is the lead agency for issues affecting older Californians, its budget is tiny ($142 million) compared to both the Department of Social Services ($16 billion) and Department of Health Services ($19 billion). Consumer advocates have complained that it is difficult for the Department of Aging to get the attention of the other departments at high levels for interdepartmental meetings to coordinate services.

That last point has been particularly significant, according to the Chairman of the California Commission on Aging. While the State Plan on Aging and the State's statutes provide direction for a comprehensive and integrated system of long-term care, no one appears to be directly responsible -- and therefore accountable -- for reaching goals. The Chairman told the Little Hoover Commission that the Commission on Aging does not have the clout to provide the coordination and responsiveness to consumers that it believes are critical to an effective long-term care system.

The State Plan on Aging -- required by the federal government as a condition for receiving federal funding for elder care programs -- calls for a long-term care service system that serves a broad range of individuals, provides the broadest scope of services possible, focuses on the community, provides for interorganizational relationships among public and private entities and makes optimal use of resources. Doing this, the plan says, requires an articulation of the leadership role at the state level, defining responsibilities and naming specific participants, and delineating the organizational structure that will support the desired services system.⁽⁵¹⁾

In addition to the State Plan on Aging support for an integrated long-term care system, the State's statutes envision a unified approach to services. Welfare and Institutions Code Section 9016 defines long-term care:

Long-term care means a coordinated continuum of preventive, diagnostic, therapeutic, rehabilitative, supportive and maintenance services that address the health, social and personal needs of individuals who have restricted self-care capabilities. Services shall be designed to recognize the positive capabilities of the individual and maximize the potential for the optimum level of physical, social and mental well-being in the least restrictive environment. Emphasis shall be placed on seeking service alternatives to institutionalization. Services may be provided by formal or informal support systems and may be continuous or intermittent. Long-term care may include licensed nursing facility, adult residential care, residential facility for the elderly, or home- and community-based services.

Many in the long-term care arena believe that the State's fragmented management structure -- spread across turf-conscious departments -- is a significant barrier to an effective system that cannot be overcome by simply encouraging coordination or mandating annual meetings. A decade ago at a Senate hearing on long-term care, witnesses called for a streamlined bureaucracy. One witness specifically recommended a single state agency so that effective coordination would be possible:

A single state agency responsible for case management and pre-screening could eliminate duplication which presently exists between programs, including assessments performed by numerous local agencies. For example, one case manager could perform assessments for both In-Home Supportive Services and Adult Day Health Care. A single state agency could develop consistent regulations and guidelines across programs, reducing any overlap or conflict.⁽⁵²⁾

Another witness at the same hearing added, "It makes good sense for a distinctly defined continuum of care to be regulated by an agency that understands case management, appreciates the need for blending of social and medical models, and can focus on the client who may need an array of services."⁽⁵³⁾

More recently in mid-1996, when the California Commission on Aging made recommendations to the Governor for amendments to bills re-crafting the Older Californians Act, the Commission called for a single state entity with comprehensive responsibility for policy development and for the planning and administration of long-term care services. The Commission's letter said:

California can no longer afford the inefficiency and waste of its current system of having departments, such as the Department of Aging, Social Services, Health Services, Mental Health, etc., providing separate services to the same individual without a comprehensive plan of care. Nor should such an individual consumer have to qualify separately for each department providing services.⁽⁵⁴⁾

It was a message that fit in with the trend of the Administration's own pronouncements in this area. In early 1996, the Governor's California Competes policy paper directed the Health and Welfare Agency to examine departments and programs within its jurisdiction with an eye to consolidation, increased efficiency and improved effectiveness. While the Administration has kept its thoughts under wraps, many administration and long-term-care-advocate sources shared with the Little Hoover Commission the belief that a single department overseeing all long-term care is a logical recommendation that the Governor may embrace.

Not everyone views the single-department approach with approval. Dozens of residential care facilities wrote to the Little Hoover Commission objecting to any move that would place them under the same roof as those who license skilled nursing facilities. Many fear that the intensive medical model -- complete with elaborate licensing requirements and exhaustive inspection processes -- will overwhelm and redirect the current social model found in residential care facilities.

Others argue that placing all the same people under a single department will not accomplish anything new. Neither practices nor perspectives will change -- merely business card titles and addresses.

And still others argue that many of the problems stem not from how the State is structured but from the many constraints placed on programs by federal funding and dictates. Changing how the State operates will not infuse new flexibility into programs or unleash tightly controlled funds.

But many others see the potential for re-energized leadership and thinking outside of the box. A single department could set and pursue broad goals of obtaining federal waivers, integrating services and maximizing flexibility. A single department could have clear policy objectives that combine the best elements of existing operations, including the social model of programs under the Department of Social Services and the outcome-based criteria recently enacted by the federal government and followed by the Department of Health Services. A single department could ensure that the policy focus is on the consumer's needs rather than on bureaucratic convenience.

Funding Issues

There are two aspects of funding that concern long-term care advocates: how much, and how it can be used. Since the population of elderly Californians is expected to expand rapidly and since they constitute a majority of those requiring long-term care services, many worry that government is not setting aside enough funding to cope with the need. And with the majority of spending concentrated on institutional care when all data points to people preferring at-home or community-based care, there is general consensus that funding priorities need to be redirected by infusing flexibility into the use of government resources.

Providing more monetary support for long-term care services worries policy makers, who fear the number of people requiring care will rapidly expand when families and friends realize they no longer have to cope with the situation themselves. In reference to long-term care, this has been labeled the "out-of-the-woodwork" phenomena. Researchers, however, discounted this when an entitlement to skilled nursing facility care was floated as a concept. They found that consumers have no greater desire to live in institutions when they know the bill will be footed by the government. Most want to remain at home and with familiar caregivers as long as possible, regardless of who pays. This has proven true, for instance, in Canada, as one study indicated.⁽⁵⁵⁾

On the other hand, making more resources available for lower levels of long-term care has been found to expand the number of people seeking service. Increasing funding for in-home care is often talked about as a way of saving long-range costs by decreasing the number of skilled nursing facility residents. Researchers, however, have found that such increased resources tend to serve unmet needs that people have been coping with by remaining at home in discomfort or even danger rather than keeping people from entering skilled nursing facilities. Expanding such services neither keeps people from immediate institutionalization nor encourages family and friends to abandon their efforts. It simply improves the quality of life by taking care of needs that otherwise go unmet, researchers believe.⁽⁵⁶⁾

Recent academic research on the elderly in Massachusetts echoed these findings. The researchers drew several main conclusions:

• Informal care remained the predominant source of help even when formal, government-funded services were available.
  
  

• There was no evidence of a major or persistent trend of replacement of informal care by formal services.
  
  

• Formal services were most often used in conjunction with informal care.

The researchers found that when most consumers did switch to formal government programs for in-home care, they did so temporarily because of a disruption in their normal arrangements. They wrote:

It is important to restate that this study was conducted in a state with a well-established, publicly funded home care program, which would have made substitution of formal services for informal care easier. However, the fact that service substitution was temporary and related to the availability of the primary caregiver suggests that public funding for home care does not result in widespread and undesired (i.e. costly) service substitution. Publicly funded services appear to be doing what they are intended to do: supporting and sustaining the informal caregiving arrangement or providing care during the disruption (usually temporary) of the regular arrangement in order to keep the elderly in the community. It cannot be denied that this substitution of formal services for previously provided informal care incurs costs that would not have been required had the informal care not been interrupted. However, the probable benefits of these services to both the care recipient, who desires to remain living at home, and to society, in containing the number of institutionalizations, appear to justify the costs.⁽⁵⁷⁾

Increasing funding for long-term care services is a mixed bag, then. Making skilled nursing facility care an entitlement at no private cost will not cause consumers to rush to enroll. But without further policy changes, providing more support for in-home services will increase spending without necessarily reducing government costs for institutionalization. In Oregon, for instance, a carefully targeted policy of reducing nursing home residency has shifted the balance of funding. Whereas the ratio of public dollars spent on community-based care versus nursing home care is one to five across the nation, in Oregon it is one to 2.6.⁽⁵⁸⁾

Recognizing the fervent competition among many justifiable interests for public dollars, many believe it will be difficult to carve out a bigger piece of the pie for long-term care services. But public dollars can be stretched in several ways:

• One is to encourage the use of privately purchased long-term care insurance. Covering only a tiny two-tenths of a percent of all long-term care costs, such insurance is a rarity today. But recently enacted federal law allows income tax deductions for the premiums, employers like the State of California are beginning to offer it as an option to workers, and California is also encouraging its purchase by allowing buyers to avoid impoverishing themselves to get Medi-Cal coverage once their policy's limits are reached.
  
  

• Another is to eliminate perverse incentives that force decisions toward high-cost care and duplicative systems that increase administrative costs. As many have suggested, setting up a system of single-point access to information, referral and assessment would allow consumers to make choices that suit their needs at a lower processing cost for the State. Sixteen states have adopted a single entry point for long-term care services, including California's neighbors, Oregon and Nevada.⁽⁵⁹⁾
  
  

• Finally, many advocates believe a powerful way for the State to get the best value out of present allocations is to pursue vigorously waivers, options and other creative solutions, distancing California as much as possible from the constraining micro-management of the federal government. Taking steps to replicate On Lok's success, to experiment with "cash and counseling" as Wisconsin is doing, and to concentrate on keeping people out of nursing homes as Oregon has done would allow dollars from many programs to be combined and focused on consumer-centered options.

Accountability

When programs affect vulnerable citizens, the State has an interest in making sure they operate properly. In the case of long-term care services, several departments have oversight responsibilities. The Department of Social Services licenses and inspects residential care facilities and oversees the In-Home Supportive Services program. The Department of Health Services licenses and inspects skilled nursing facilities, as well as licensing or certifying other health facilities, home health agencies and certain types of health care workers. And the Department of Aging operates the Ombudsman program and oversees Adult Day Care centers. Specific issues in each of these areas will be examined in the remaining findings, but some concerns regarding accountability cross departmental lines and impact overall state policy.

Three strands of problems make accountability difficult: how to achieve flexibility and consistency simultaneously; how to balance individual choice against protecting people from themselves; and how to regulate effectively.

In the world of government oversight, the problem can be the same. Industries are forced to be accountable for process rather than outcome because regulators find it easier to measure, evaluate and examine process. An outcome may be difficult to describe precisely; a process is much easier to delineate and monitor. But as in the private-sector world, the prescribed process may not always yield a desirable outcome. In the worst case scenario, regulators may be proud that they have enforced a process and industry may feel safe from criticism because they followed the process -- but the end result may look like nothing that either side was trying to achieve.

It is tricky, however, to shift focus from process to outcome. Allowing people to meet overall goals in a variety of ways infuses flexibility into process, but also causes uncertainty. Many of the service providers who participated on the Little Hoover Commission's advisory committee complained in one breath that there is too much micro-management in the State's regulatory process -- and then in the next breath criticized the regulators for not adhering to clear, precise rules. Likewise, consumer advocates wanted tougher enforcement but recognized that layer upon layer of regulations often diverts attention from what is happening to the consumer and protects the provider from real accountability.

Most agreed that what they would like to see is outcome-based standards, flexible policies about how to meet those standards and statewide consistency on interpreting standards. Such consistency would be achieved by a high level of professionalism and training for front-line regulators so there is a clear understanding of overall goals and current knowledge about state-of-the-art techniques and options.

At least one potential glitch in any shift to such a system lies in the State's approach to regulations. The State requires precise regulations that are not subject to misinterpretation and has created a process to ensure that regulations are neither vague nor more burdensome than required to enact a law's provisions. The process includes review by the Office of Administrative Law, an office set up to ensure that regulations are specific and narrow.

While the Little Hoover Commission's long-term care study did not include a comprehensive review of the State's regulatory process, the Commission did gather some preliminary evidence that the process itself may hinder a shift in the regulatory paradigm. For instance, state Department of Health Services officials said the federal nursing home oversight regulations -- widely recognized as outcome-based and consumer-centered -- could never be adopted as state regulations because they are not precise enough. In another example, other officials said it is easier to achieve reform by placing specific language in statutes because the regulatory process takes too long and outcome is too uncertain.

The complexity is illustrated by different approaches in three different departments. At the Department of Health Services, which oversees skilled nursing facilities, the consumers are often among the frailest, most vulnerable citizens in the State. Many suffer from dementia and other disabling cognitive limitations. In addition to wanting to protect these people, the State has a further obligation as a direct purchaser of services. Since taxpayers' dollars are used to underwrite a large amount of nursing home care, the State wants to ensure it gets good value for its investment. While many advocates criticize the State's resolve and results, all would agree that a comprehensive structure for oversight and enforcement is in place, although its effectiveness can be questioned.

At the Department of Social Services, where residential care facilities are regulated, the philosophy is less clear. People live voluntarily and to a large degree independently in residential care facilities -- and the State does not directly purchase care in these facilities. Yet the State's licensing and inspection process requires state intervention when a person's needs exceed the level of care allowed in residential care facilities -- regardless of whether the facility wants to continue to provide care and the resident wants to continue to live there.

Because people want to "age in place" -- eventually die in familiar surroundings -- the Department of Social Services faces severe criticism whenever they force an individual to move. In fact, the Department even is taken to task when it closes places that it has judged are unsafe. In one instance where not one but two residents had wandered from a facility and been killed accidentally, relatives of other residents were outraged at the resulting state closure. They insisted the deaths were aberrations, that the facility had provided excellent care and that finding a replacement home as good would be almost impossible. On the other hand, the Department is just as often criticized for failing to close unlicensed facilities and for not shutting down operations that fail to provide good care.

A third philosophy is followed at the Department of Aging's ombudsman program. The ombudsmen, usually volunteers, act as advocates for people in residential care facilities and skilled nursing facilities. Their training emphasizes respecting the individual's wishes even when that is at variance with the individual's apparent best interests.

In the Commission's discussions with advocates and other experts, it became clear that many believe that a consumer should have freedom of choice -- but the comfort level with that standard rapidly diminishes if there is imminent danger to the consumer.

Yet most would agree that protecting those who require long-term care services is not something that can be left to the vagaries of market forces. One expert on regulatory theory has written that nursing homes are an excellent place to test new mechanisms for making regulations more effective:

Nursing home residents are arguably the least powerful individuals in modern societies. Most of them have been rendered indigent by extended illness. They are mostly unable to vote with their feet as consumers or to give political speeches; they are generally even afraid to complain. They enjoy less freedom of movement than slaves: in the United States, 38 percent of them are physically restrained, mostly by tying them to chairs, and many more are chemically restrained...even prisoners can riot. Dependent clients, and especially the frail, elderly poor, either fail to pursue or even conceptualize grievances; they develop a "culture of silence."⁽⁶⁰⁾

Experts have studied regulatory structure and effectiveness for decades. There generally are three academic theories of regulation, which is defined as authoritative intervention in private decision-making: public interest theory, regulatory capture theory and the theory of corporatism. Under public interest theory, it is presumed that restrictions on how individuals conduct their business are necessary because the marketplace will fail to force them to act properly. Regulatory capture theory involves how those who are regulated invest time and money in influencing the regulations rather than in complying with them. They "capture" the regulators through building long-term relationships, offering the hope for a future industry job and arguing that the economic viability of the industry as a whole is threatened if regulators are too firm. Corporatism theory refers to arrangements where private interest groups are given a direct role in the implementation of regulations in exchange for acceptance of constraints (such as licensing boards).⁽⁶¹⁾

As the then-president of the American Enterprise Institute for Public Policy Research testified to Congress in 1995, the pitfalls of regulation are well-known:

...the tendency of regulatory requirements to grow without limit in number and detail; the tendency of single-purpose agencies to be overzealous, extravagant and sometimes abusive in the pursuit of these purposes; and the tendency of policy to be manipulated and distorted by special interest groups -- [these problems] are predictable and routine rather than the product of crazed bureaucrats or the election of one or another party to control of the Executive Branch.⁽⁶²⁾

Mechanisms for coping with the flaws of regulation are less easy to agree on. Rotating regulators out of assignments assures that they do not become too aligned with those they are regulating -- but it also wastes the benefit of accumulated expertise. Limiting discretion of regulators ensures that they do not do "favors" but it also results in micromanagement and lack of focus on outcomes. Almost any mix of carrot-and-stick tools will be criticized by consumers as too wrapped up in incentives and by industry as too concerned with penalties.

Some research, however, points to two concepts that are useful when constructing regulatory frameworks: the involvement of public interest groups and "reintegrative shaming."

In both a book and articles, regulatory experts Ian Ayres and John Braithwaite argue that regulation can be flexible and outcome-based if a third party -- with equal clout -- is added to the usual players, government and industry. The two believe that regulation works best when there is the "evolution of cooperation" between regulator and regulatee; otherwise, too much energy and resources are wasted on avoiding detection and punishment. But, they say, "the very conditions that foster the evolution of cooperation are also the conditions that promote the evolution of capture and indeed corruption."⁽⁶³⁾

Ayres and Braithwaite call their solution tripartism, selecting a third party, such as a public interest or advocacy group, to join government regulators and industry at the table. The third party would have equal access to information, equal ability to negotiate and equal standing to sue or prosecute when regulations are violated.

While no one used the label tripartism, several advisory committee members told the Little Hoover Commission that regulation of long-term care services should be strengthened by giving more power to the private sector to access information, sue in court for substantial fines and, in general, serve as an outside-of-government "eye" on what is happening. At least one statewide organization, California Advocates for Nursing Home Reform, tracks the State's regulatory efforts, but the organization has no formal role other than as persistent gadfly.

The other tool for increasing regulatory effectiveness is a conscious effort to shame industry into doing a good job -- but only in a supportive fashion. In a study of Australian nursing home inspections, researchers Braithwaite and Toni Makkai identified three attitudes displayed by regulators: tolerant of lapses in hopes of winning cooperation, intolerant in a stigmatizing fashion that focused on punishment, and intolerant in a manner that firmly required correction but did not indicate disrespect. The researchers found that future compliance with regulations dropped significantly when nursing homes were made to feel guilty and not respected; it dropped slightly less when tolerance allowed the homes to "get away" with violations.

The best result came from "reintegrative shaming," combining criticism with respect and the prospect of "forgiveness":

The effective inspectors are those who believe in strong expressions of disapproval combined with strong commitments to burying the hatchet once such robust encounters are over, to terminating disapproval with approval once things are fixed, to tempering disapproval for poor performance on one standard with approval for good performance on other standards, to avoiding humiliation by communicating disapproval of poor performance within a framework of respect for the performer.⁽⁶⁴⁾

The researchers noted that reintegrative shaming is most successful when an ongoing relationship has been established and a baseline of respect exists.

Many long-term care service providers complained within the Commission's advisory committee forum that state regulators treat them arbitrarily and with disrespect. And consumer advocates told the Commission there is much too much tolerance by state regulators of violations. But in observations of inspections and discussions with state managers, the Commission noted that they strive to set a tone of respect and firmness and express both approval of and support for state employees who are professional in their approach to regulating care providers.

Nonetheless, there appears to be a mixture of roles in state government that undermines the credibility of efforts to provide effective oversight for long-term care. Many people have complained that having the same people providing both licensing activities and complaint investigation in the same operation affords too many opportunities for favoritism. Others are concerned that a department that is responsible for licensing and nurturing the economic viability of an industry cannot also effectively and aggressively protect the public. Examples of problems and perceptions that are specific to the skilled nursing facility and residential care facility industries will be discussed in Findings 3 and 4.

State officials recognize the duality of their roles. The Department of Social Services provides limited technical support to help licensees bring their operations into compliance with regulations, but the Department says it does not see its main function as helping businesses learn how to be successful. Similarly, the Department of Health Services runs seminars on select topics for providers when they find industry-wide compliance problems, and they host an annual recognition event for skilled nursing facilities that demonstrate "best practices." But the main focus of the licensing and certification unit is assuring quality of care through enforcing compliance with standards.

Another department's program that is engaged in accountability for long-term care faces similar criticism for conflicts. The State Long-Term Care Ombudsman program uses volunteers who are trained by the State to monitor conditions in skilled nursing facilities, residential care facilities and other care arrangements. Some consumers have complained that the volunteers are too cozy with the facilities; others have said that the volunteers are not effective at making complaints that will be followed up by state licensing officials. Industry has complaints about ombudsmen, as well. Some say the volunteers are poorly trained and do not know what they are doing, while others feel the ombudsmen act like they are another arm of licensing with the power to punish regulation violations.

While this study did not focus on the operation of the Long-Term Care Ombudsman program, there did appear to be general consensus on two problems with the program: There is neither enough funding nor enough volunteers to cover effectively all the institutions and populations that are supposed to be monitored.

Keeping actual conflicts and perceptions of mixed roles to a minimum is important for effective regulation. Some consumer advocates have suggested that stronger enforcement and more responsive reaction to complaints would result from separating licensing functions from complaint investigations. Alternatives to the current system include shifting performance oversight to the Attorney General's Office, where legal action can be taken, or to the Department of Consumer Affairs. Similarly, if the State moves to a single-department approach to long-term care programs, keeping the ombudsman program independent by placing it in a department like Consumer Affairs is an option worth exploring.

Regulating in a manner that will achieve a high quality of care for diverse individuals is not easy but it is a critically important goal. As one expert summarized:

The challenge is to create a regulatory climate that will fairly reward good outcomes and penalize poor ones in a context that will permit, even encourage, innovation. Focusing on outcomes will permit more opportunities to compare across modalities of care and will encourage approaches that integrate the efforts of both clinically and socially oriented care. It is both misleading and dangerous to suggest that medical care has little to offer those receiving long-term care. It is more realistic to portray medicine's role as necessary but not sufficient and to establish a climate in which collaborative efforts are directed to improving or at least preserving function for as long as possible.⁽⁶⁵⁾

Summary

With no single source of reliable information and an array of complicated programs that are often at odds with each other, long-term care services in California are neither well organized nor easy to access for consumers. Consensus is broad and longstanding on many of the attributes that make up an effective and equitable long-term care system. Despite repeated calls for reform, California has made little progress on molding a well-run system. At least part of the reason is an inhospitable state structure for long-term care oversight, funding concerns and accountability issues. But there are steps policy makers can take to begin reforming long-term care services.

Recommendations

Recommendation 1-A: The Governor and the Legislature should consolidate the multiple departments that provide or oversee long-term care services into a single department.

Interdepartmental cooperation is a hit-and-miss proposition that usually lacks mission unity and aggressive leadership. If the State is serious about creating an effective long-term care system -- and with looming demographics that promise an explosion of those who need such care, the State should be concerned about that goal -- then it must reorganize departments into a single entity to oversee all long-term care. The new department should take advantage of the opportunities presented to create a consumer-centered philosophy that maximizes choice, effectiveness and efficient use of multiple resources.

Recommendation 1-B: The Governor and the Legislature should mandate that the new state department establish an effective one-stop service for consumers to obtain information, preliminary assessment of needs and referral to appropriate options.

What consumers have identified repeatedly as their most pressing need is a reliable source of information so they may understand the choices that are available to them. While the State has the backbone for such a system in place, with the 33 regional Area Agencies on Aging and a special 1-800 number, the resources are not available for personalized, one-stop counseling. In particular, the ability is lacking to access information about programs and individuals by computer so taht counseling is person-specific. Over time, as the State makes progress on integrating programs, these referral centers should also serve as program entry points, with unified applications and common eligibility screening.

Recommendation 1-C: The Governor and the Legislature should require departments involved in long-term care to pursue federal waivers and options that will infuse flexibility into programs and funding.

The State has been slow to embrace opportunities to escape federal micromanagement, lagging behind other states in applying for and winning waivers. Although the process for securing waivers is lengthy, it is an investment the State must make if it is to create a long-term care system that focuses on consumer needs rather than one that is driven by artificial -- and often conflicting -- program constraints. Waivers are also a key tool for shifting long-term care services away from high-cost medical models to consumer-preferred, lower-cost community-based social models of care. Specific examples include Wisconsin's cash-and-counseling program, Oregon's targeted removal of people from skilled nursing facilities, and further replication of the On Lok and Social Health Maintenance Organization models.

Recommendation 1-D: The Governor and the Legislature should adopt a multi-pronged strategy for coping with the expected rising demand for and cost of long-term care services.

As the economy expands and state revenues increase, policy makers should give serious consideration to enlarging allocations for long-term care services. But there are other steps that would stretch resources, including further stimulation of the purchase of private long-term care insurance through tax credits; more effective educational outreach about people's financial options for the future; and elimination of program incentives that favor high-cost services.

Recommendation 1-E: The Governor and the Legislature should ensure that the State's policies are consumer-focused by establishing an advisory committee that can have a persuasive voice in policy formation, program implementation and quality assurance.

Consumers who actually use long-term care services can provide valuable input on what components are needed to make an effective system. They also can ensure that the focus of both policy and programs remains on the consumer and not on the convenience of bureaucracy. One option is to convert the existing California Commission on Aging to a body that includes consumers of long-term care services and to provide it with adequate resources to work closely with the restructured, single department in charge of long-term care services.

Recommendation 1-F: The Governor and the Legislature should develop a program for quality assurance and control that is outcome-based and consumer-oriented rather than prescriptive and process-oriented.

Policy makers should take several steps to shift oversight from a prescriptive system to an outcome-based system:

• The regulation-creating process and regulations themselves should be recrafted to emphasize outcome over process. This will lead to less rigid, less prescriptive regulations that may be more difficult for regulators to enforce and industry to understand but that should increase the opportunity for care that is centered on an individual's specific needs.
  
  

• More resources should be directed toward increasing training and professionalism of regulators so that less-prescriptive regulations can be enforced with flexibility regarding method but consistency regarding results.
  
  

• The check-and-balance structure for enforcement activities should be strengthened by creating a formalized, effective role for public interest and advocacy groups. This will include ensuring open access to information and records, a role for such groups in negotiations and the ability to seek effective legal redress for problems.

In addition, policy makers should focus on improving accountability and credibility for the State's oversight functions. Two possible steps:

• Any structural reform should be accompanied by efforts to minimize conflicting roles. Complaint investigations could be shifted to either the Attorney General's Office or the Department of Consumer Affairs. Similarly, the ombudsman program could be housed in these departments. Such change, if implemented, should be monitored for several years and then assessed for effectiveness.
  
  

• Increasing the resources available to the ombudsman program, which is stretched too thin over many important duties, would allow increased training and more effective outreach to identify a larger pool of volunteers. Added funding could be diverted from fines collected for violations of regulations.