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State Long-term Care Programs: Balancing Cost, Quality, and Access

Budgeting for Home Care


William G. Weissert, Ph.D., Professor and Chair, Department of Health Management and Policy, School of Public Health, University of Michigan, Ann Arbor, MI.

States set eligibility criteria and often cap the amount that may be spent on home and community based services. Care plans and spending are determined by case managers. Frequently individuals with varying functional limitations and unmet needs have similar care plans.

William Weissert recommends using cost benefit analysis, "quality adjusted life years," and an "effectiveness, risk, value" budget model to determine appropriate amounts of funding for care plans. Cost effectiveness takes the following factors into consideration:

  • The intervention (expanded home care benefits).
  • The marginal cost or additional spending.
  • The marginal benefit compared to the outcome without intervention.

Quality adjusted life years sets a value of "1" for a year of full health and adjusting the value based on the presence of disabilities, such as activities of daily living (ADL) dependency. For example, a person with one out of five ADL impairments may have a reduced value of life of 20 percent. Preventing the dependency caused by the impairment increases the value of life. These somewhat arbitrary values can be used to weigh the cost effectiveness of an intervention.

William Weissert described a methodology for allocating services to consumers based on their characteristics that predicted outcomes such as:

  • Death.
  • Hospitalization.
  • Nursing home admission.
  • Functional decline.

This method examines the strength of factors associated with the outcomes and allocates funds to address them. The result should be more funds allocated to patients likely to benefit, and strong incentives for case managers to focus on their specific risks and outcomes. Together these should produce better outcomes from home care.

Additional Resource

Weissert W, Chernew M, Hirth R. Beyond managed long-term care: paying for home care based on risk of adverse outcomes. Health Affairs 20(1):172-80.

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