By David Goldfarb, Esq.
One of NAELA’s top public policy priorities is to end Medicaid’s institutional bias.
Like many of our legal traditions, the bias towards providing long-term services and supports in institutions begins with the laws of old England.
In this case, the bias dates back to the Elizabethan Poor Law of 1601, which mandated care for “the lame, impotent, old, [and] blind” in an almshouse or a poorhouse.
The end of feudalism brought the rise of crowded cities and the Poor Law. Institutions were developed as punishment and to protect society from “the poor and enfeebled” according to Prof. Sidney Watson in his must-read article, “From Almshouses to Nursing Homes and Community Care: Lessons from Medicaid’s History,” Georgia State Law Review (2009).
Americans first became exposed to the realities of these public institutions on our shores in 1887 when a journalist named Nellie Bly faked insanity to get admitted to a municipal asylum on today’s Roosevelt Island, a narrow strip on the East river between Manhattan and Brooklyn.
There she described a “human rat-trap” of “choked, beat and harassed” patients and enforced isolation.
At the turn of the century, “less unsavory” institutions developed over time, such as hospitals, mental asylums, and schools for the blind and deaf. In addition, the great depression overwhelmed the “poor houses” and caused opinions to shift on the nature of poverty, according to Watson.
Still, early 20th century was the era of the Eugenics movement when the renowned Oliver Wendell Holmes, Jr. wrote the Supreme Court’s opinion in Buck v. Bell, 274 U.S. 200 (1927), upholding the state’s right to sterilize “mental defectives.”
Social Security: The Start of the Private System
The Social Security Act of 1935, while perhaps intending to limit America’s institutional bias, laid the basis for a new system based on private institutions.
The 1935 Act created a series of programs, including basic retirement income and unemployment insurance for workers. But the legislation also laid out a series of means-tested cash benefits for the “deserving poor.” These means-tested programs were optional federal-state partnerships that became the basis for Medicaid’s financing structure.
Importantly, the Social Security Act forbid payments to those in public institutions. While an admirable attempt to limit the institutional bias of the day, most of the frailest seniors and persons with disabilities never left. Instead, the Social Security cash benefits spurred the creation of “rest homes and convalescent homes” for the elderly, according to Watson.
After WWII: From Cash Assistance to Provider Payments
The post-war era brought about a number of amendments (1950, 1956, 1960) to the Social Security program that moved support for persons with disabilities and those with a chronic illness from cash assistance to direct payments to providers.
Perhaps the most influential was the 1960 Kerr-Mills Act, which “was an effort to stave off attempts to enact universal health insurance for [the] elderly,” according to Watson.
The Kerr-Mills Act expanded the direct payment provider model in the previous amendments. It did so by adding a “medically needy” provision, “no ceiling on federal matching funds and creating a federal matching formula that favored poor states,” according to Watson.
Few states took up the Kerr-Mills program, but those that did saw a large expansion of their private nursing home industries.
Former Healthcare Financing Administration (now CMS) head Bruce Vladek has put forward several theories for why: 1) for-profit ventures were likely more aggressive in seeking Kerr-Mills reimbursement; 2) nursing homes made it an easy place to discharge patients from hospitals with patients then charged to the Kerr-Mills program; and 3) the “medically needy” spend-down provisions greatly widened the pool of people who could qualify.
By 1965, private nursing homes had replaced the almshouse of yore and depended on government to cover 60 percent of their patients.
These institutions, while not as bad as those described by Nellie Bly 80 years prior, were still considered “substandard, had poorly trained or untrained staff, and provided few services,” according to Watson.
The Advent of Medicaid and Medicare
In 1965, President Johnson brought, for the first time, universal health insurance for seniors through Medicare and a means-tested system, Medicaid, which included long-term services and supports, to provide health care to the poor.
The Medicaid statute required that states receiving federal Medicaid funds must provide “nursing facility services” that “can only be provided in a nursing facility on an inpatient basis.” This has largely ingrained the institutional bias of our system to date.
With these new programs, the nursing home industry exploded in growth. By 1967, payments to the nursing home industry doubled sixfold from $449 million to $3.5 billion, thereby securing this nation’s institutional bias for another half century to the present.
About the Author
David Goldfarb, Esq., is NAELA’s Public Policy Manager.