For many low-income seniors and individuals with disabilities who are unable to live on their own, a nursing home may be the only option, even when they don’t need the intense level of care such facilities provide.

The National Church Residences and the Ohio Office of Health Transformation are developing a partnership to create new health care and housing options for Ohio residents who have long-term care needs. The goal is to invest in community-based options that will promote a better quality of life and save the state tax dollars spent on Medicaid costs.

Assisted living can provide services, supports and technology that allow those with disabilities to do well and enjoy greater independence and normalcy. Enabling a person to move from skilled nursing to affordable assisted living can also save the state $30,000 per person per year in Medicaid costs.

That saving is critical given the escalating costs of Medicaid and the increasing population of people who need care. Nationally, Medicaid expenditures were $380.6 billion in 2009 and are projected to grow an average 7.9 percent annually through 2019, according to the federal Centers for Medicare and Medicaid Services.

Why it matters

More than 1.8 million Americans are nursing home residents, according to the Centers for Medicare and Medicaid Services. It’s widely believed that many frail and disabled adults in skilled nursing homes could instead live more independently in assisted-living settings. Kresge partner National Church Residences estimates about 20 percent of these individuals could live in an assisted setting, if funding mechanisms permitted. A housing policy expert at the Washington-based group Leading Age suggests the number could be higher: All but the most seriously ill patients are potentially candidates for assisted living, says Nancy Libson. Medicare, the federal health program for all seniors, and Medicaid, the federal health program for low-income adults, accounts for 62 cents of every dollar spent on nursing homes, Centers for Medicare and Medicaid Services reports.  In Ohio, Medicaid’s cost was halved when a stroke patient was able to transfer from a skilled nursing home to an assisted-living facility.

“We’re focusing on hot spots where we spend lots of money, but are not seeing optimal outcomes in terms of quality or expenditure of public dollars,” says Tracy Plouck, director of the Ohio Department of Mental Health and chair of the Office of Health Transformation’s Housing Work Team.

“More assisted living and fewer skilled nursing placements are only one option among a spectrum of better investment strategies. We think our work with National Church Residences will be good from a policy information perspective and may help convince the federal government to allow states to use Medicaid funding to create more affordable and appropriate living units in communities.

“If we can free up dollars that are being spent to keep a person in a nursing facility and improve outcomes, that makes a lot of sense,” Plouck says. “A number of states are contemplating similar requests.”

About 20 percent of people in nursing homes are being ‘over housed’ and could be well served in assisted living, says Michelle Norris, National Church Residences senior vice president and chief development officer. Her organization is the nation’s largest not-for-profit developer and manager of affordable senior housing and services.

In 2009, National Church Residences used a $3.2 million grant from the U.S. Department of Housing and Urban Development to convert senior independent living units in Ohio to assisted living units. As a result, Ohio now has 32 affordable assisted living units, which Norris estimates will provide substantial savings for Ohio’s Medicaid system. She describes the funding model as a “blended subsidy” – the state pays for assisted living services, and the Department of Housing and Urban Development subsidizes the room with a rental subsidy.

Dave, 64, is typical of someone who is benefitting. After suffering a stroke, he lived in a nursing home for more than two and one-half years; Medicaid paid $172 per day for his skilled nursing care. When Dave moved in June 2011 to National Church Residences’ Portage Trail Village, Akron’s first affordable assisted living program, his Medicaid-covered costs decreased to $88 per day, Norris says.

Today, Dave goes on outings to the grocery store, works on the computer and attends a community Bible study. “I don’t belong in a nursing home,” Dave says. “I belong here (Portage Trail), where I am cared for when needed but still independent.”

Many more people who receive services in institutions would prefer to receive care at home, but community-based options are not available. A further challenge is that almost all assisted living facilities in Ohio are private pay and don’t accept Medicaid-eligible residents.   

The Kresge Foundation has awarded a $150,000 grant to National Church Residences and the Office of Health Transformation to research best practices and establish a plan for developing housing scenarios that provide a more appropriate level of care, thereby stretching Medicaid dollars.

The grant to the National Church Residences and Office of Health Transformation will produce:

• An agreement on how to blend Medicaid and housing funds to support the construction or renovation and operation of housing for people with long-term care needs.
• A plan for a demonstration project that will deliver new housing units for populations currently cared for in nursing or group home facilities.
• And a timeline for the project to be developed, with the expectation that construction/renovation start by in 2013.

Kresge Foundation Director of Social Investment Practice Kimberlee Cornett says the foundation’s investment is part of its ongoing commitment to improve health conditions for frail and vulnerable populations.

“We want to see if this is a business model that can be replicated. Our hope is that National Church Residences and the state of Ohio will be able to use multiple forms of capital, public and private, to build more affordable assisted living facilities,” Cornett says.

The time is ripe for new models, says Kresge Health Program Director David Fukuzawa: “One approach is to see if we can graft clinical, medical and other services to housing projects such as the National Church Residences’ affordable assisted living facilities.”

Naren Dhamodharan, president of GDA Assisted Living Consultants, works with National Church Residences and other nonprofits. Dhamodharan says the National Church Residences and Office of Health Transformation project is in step with the Money Follows the Person Rebalancing Demonstration Program, part of the Deficit Reduction Act of 2005. The legislation was designed to help states balance their long-term care costs and help Medicaid patients transition from institutions back to their communities.

The blended-subsidy model is attractive, he observes: It’s desirable from the patient’s perspective and it delivers significant cost savings for taxpayers.

Sandy, who had lived in an Ohio nursing home for seven years due to a disability, now lives in her own affordable assisted living apartment surrounded by treasures she collected over the years. “I felt there was no hope, but apparently I was wrong,” says Sandy. “At 63, I did not want to spend my life in a nursing home where I did not belong. Today I don’t have to.”