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California Community-Based Alternative to Institutional Care Saved

By Elizabeth Zirker

A groundbreaking settlement between Esther Darlingadvocates and the state of California in November 2011 halted the elimination of an essential Medicaid-funded service, adult day health care (Settlement Agreement, Darling v. Douglas, No. C-09-03798 (N.D. Cal. Nov. 30, 2011). The Darling settlement resolved the third and final preliminary injunction motion that advocates had filed on cuts in adult day health care (see Cota v. Maxwell-Jolly, 688 F. Supp. 2d 980 (N.D. Cal. 2010); Brantley v. Maxwell-Jolly, 656 F. Supp. 2d 1161 (N.D. Cal. 2009); see also Elizabeth Zirker et al., Federal Court Says California, Despite Budget Problems, Must Comply with Disability Laws, 44 Clearinghouse Review 81 (May–June 2010)). The case is now called Darling v. Douglas after the deaths of two lead plaintiffs and a change in the defendant director of the Department of Health Care Services.

The agreement ends more than two years of hard-fought litigation in the U.S. District Court for the Northern District of California and the Ninth Circuit. The settlement requires a transition from the adult day health care program to a new program, community-based adult services, which will offer similar benefits at former adult day health care centers by former adult day health care providers who are approved to offer community-based adult services.

In approving the final settlement agreement at the January 24, 2012, fairness hearing, Judge Saundra Brown Armstrong praised the result and noted that the settlement is a “win-win” for class members and California.

Factual Framework

By the time of the settlement agreement, the adult day health care Medicaid benefit, extant for more than thirty years, had faced a number of cuts from the California legislature.

History of the Adult Day Health Care Program. In 1978 the California legislature authorized the adult day health care program as a benefit under California’s Medicaid program, Medi-Cal. The program was a viable alternative to institutionalization for elderly persons and adults with disabilities and offered a respite for caregivers and family members. Over the next thirty years, what began as a pilot program at a few sites expanded to hundreds across the state and became an integral component of California’s long-term care system.

By 2011 some 37,000 low-income seniors and younger adults with significant disabilities resulting from conditions such as Alzheimer’s disease, unstable diabetes, and poststroke were receiving adult day health care from one to five days per week in centers across the state. Through the program, for one all-inclusive rate, participants received skilled nursing services, physical therapy, occupational therapy, speech therapy, nutrition services, and transportation between centers and their homes in the community.

Proposed Reductions in the Adult Day Health Care Program (2009–2010). In the summer of 2009 California proposed a number of draconian cuts in essential programs for seniors and people with disabilities. These cuts included a complex two-part refashioning of the adult day health care benefit, set forth in Assembly Bill x4 5 and signed into law by Gov. Arnold Schwarzenegger on July 28, 2009 (A.B. 5, 2009-10 4th Extraordinary Sess. (Cal. 2009)). The first cut that advocates challenged (in Brantley v. Maxwell-Jolly) reduced the maximum number of days per week of Medi-Cal payment from five to three, regardless of approved treatment plans or individual need for the service. The second cut that advocates challenged (in Cota v. Maxwell-Jolly) was prospective and contained new, restrictive eligibility criteria based on diagnosis or disability and shrank the list of qualifying areas of need. This cut would have terminated services entirely for up to 15,000 participants.

In two separate preliminary injunctions, the first in Brantley in September 2009 and the second in Cota in February 2010, the district court held that, budget problems notwithstanding, California could not abdicate its duty to ensure continuing compliance with the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act. Cota further held that new, restrictive eligibility standards would likely violate Medicaid’s comparability and reasonable standards requirements.

Wholesale Elimination of Adult Day Health Care as a Medi-Cal Benefit (2011). On March 24, 2011, Gov. Jerry Brown signed Assembly Bill 97, which eliminated adult day health care as a Medi-Cal optional benefit as of July 1, 2011 (A.B. 97, 2011-12 Reg. Sess. (Cal. 2011)). Assembly Bill 97 authorized a “short-term program” to transition adult day health care participants to other Medi-Cal or non-Medi-Cal services and included an uncodified intent to develop a new program, Keeping Adults Free from Institutions, which was to be pursued through a federal Medicaid waiver. The funding for the new program was no more than 50 percent of the appropriation for adult day health care for fiscal year 2010–2011. Assembly Bill 97 contained no assurances that the replacement services needed to avoid institutionalization would be in place upon the elimination of adult day health care or that any alternative services would be adequate to meet recipients’ needs. As a result of fierce lobbying by providers and participants of adult day health care, protesting the elimination of the program and asking for a concrete solution, the legislature passed Assembly Bill 96 in June 2011, to direct California to apply for a federal waiver to implement the Keeping Adults Free from Institutions program (A.B. 96, 2011-12 Reg. Sess. (Cal. 2011)). Governor Brown, however, vetoed Assembly Bill 96 on July 25, 2011.

On May 12, 2011, California submitted a Medicaid state plan amendment to eliminate adult day health care as of September 1, 2011. The federal government approved this state plan amendment on July 1, 2011. California then submitted an amended state plan amendment on July 22, 2011, to postpone the elimination date to December 1, 2011.

Litigation

Given the related but distinct ways that the adult day health care Medicaid benefit was first reduced for some participants, then terminated for some participants, and finally terminated for all participants, the claims in the three preliminary injunction motions developed differently.

First and Second Preliminary Injunctions. The Brantley plaintiffs challenged the reduction of days from five to three on behalf of all Medi-Cal recipients of adult day health care whose benefits would be affected by Assembly Bill x4 5. The district court granted the plaintiffs’ motion for preliminary injunction on September 10, 2009, and noted: “Defendants… have taken an arguably cavalier approach to ensuring their continuing compliance with the ADA and Rehabilitation Act by placing full responsibility for identifying and securing alternative services to replace those eliminated by [Assembly Bill x4 5] on the individual [adult day health care] programs” (Brantley, 656 F. Supp. 2d at 1174). The court ruled that reduction or elimination of public medical benefits was sufficient to establish irreparable harm to those likely to be affected by the program cuts and that the defendants could not reduce the number of days available to the plaintiffs and putative class members until the defendants ensured the seamless provision of alternative services.

The Cota plaintiffs, relying on the findings of the first preliminary injunction order, again argued that complete termination of adult day health care (for those named plaintiffs and putative class members who would lose adult day health care because of the restrictive eligibility criteria) would place the plaintiffs at risk of institutionalization. The district court granted the plaintiffs’ motion for preliminary injunction on February 24, 2010, and noted:

Given the purpose of the new law, it is axiomatic that in order to have any significant impact on the State’s budget, the curtailment of [adult day health care] services arguably will be dramatic. As such, it is somewhat disingenuous for Defendants to downplay the impact of the proposed changes by suggesting that only ‘some’ individuals will lose their [adult day health care] services…. As this Court recognized previously, Plaintiffs need not wait until the harm is actually suffered before seeking injunctive relief [(Cota, 688 F. Supp. 2d at 998)].

The defendants appealed to the Ninth Circuit (Cota v. Maxwell-Jolly, No. 10-15635 (9th Cir. filed March 24, 2010)). That appeal was deferred pending the Ninth Circuit’s final disposition in another case, Oster v. Wagner (No. 09-17581 (9th Cir. filed Nov. 18, 2009)). The Cota parties stipulated to a stay, which the court issued on November 22, 2010 (Stipulation and Order to Stay Litigation Pending Appeal, Cota v. Maxwell-Jolly, No. C-09-03798 (N.D. Cal. Nov. 22, 2010)).

Third Preliminary Injunction. As a result of the stay in Cota, when Governor Brown signed Assembly Bill 97, the plaintiffs had to seek leave of court to lift the stay to supplement their complaint and add claims on the total elimination of adult day health care. The parties stipulated to a partial lift of the stay on April 25, 2011, and the plaintiffs filed their third motion for preliminary injunction on June 9, 2011. On July 12, 2011, the U.S. Department of Justice filed a statement of interest in support of granting the plaintiffs’ third motion for preliminary injunction. On July 22, 2011, the defendants requested and were granted a continuance of the preliminary injunction hearing until November 2011 due to their postponement of the elimination date to December 2, 2011.

In their third preliminary injunction motion, the plaintiffs, relying on the findings of the previous preliminary injunction orders, argued that the elimination of Medicaid-funded adult day health care for all class members would place the plaintiffs at risk of institutionalization. The plaintiffs again alleged violations of the ADA, Section 504, Medicaid, and California Government Code Section 11135 (which states that the ADA’s antidiscrimination principles apply to California). Because elimination of the program in its entirety for all class members did not raise reasonable standards and comparability under the Medicaid Act, the plaintiffs’ Medicaid allegations were limited to procedural due process claims. The plaintiffs focused on the violation of the integration mandate and the methods-of-administrations requirements of the ADA if the adult day health care Medicaid benefit were eliminated wholesale without adequate replacement services in place to maintain class members in the least restrictive environment.

As in the previous injunctions, the network of adult day health care providers served as a critical resource for factual development. These providers have a robust lobby, linking together through a nonprofit, the California Association of Adult Day Services. Many providers have strong connections to their local legislators and used these connections to express their outrage at the elimination of adult day health care and the failure to implement Keeping Adults Free from Institutions. In fact, many legislators were primed to listen to this outrage since the compromise involving Keeping Adults Free from Institutions had given them “permission” to pass Assembly Bill 97 in the first place.

Moreover, the elimination of adult day health care was garnering considerable press attention, which bolstered the plaintiffs’ case. From Los Angeles County to Humboldt County, commencing even before the March passage of Assembly Bill 97, stories ran more than weekly on how the loss of adult day health care would be a personal devastation for some 35,000 participants and their families and the 7,600 employees facing job loss. The poignancy of this loss was made all the more palpable by the defendants’ public failure to offer realistic replacement services ensuring that class members would not be unnecessarily institutionalized—a requirement of the ADA, as interpreted by Judge Armstrong in her previous two rulings.

Beginning in May 2011, after submitting their state plan amendment, the defendants proffered a variety of alternative programs and services in a twenty-two-page document constituting their “transition plan” as they moved forward with the elimination of adult day health care. In court papers and in public, the defendants represented that they could and would secure alternative services for the 35,000 adult day health care Medicaid recipients who would lose the benefit upon elimination. The defendants’ transition plan lacked specificity, however, and by July 1, 2011, the original date of elimination, the plan contained elements that had been significantly changed or abandoned. Critically the defendants failed to resolve whether or when recipients would receive services to replace adult day health care.

A cornerstone of the defendants’ transition plan was to shift responsibility for securing alternative services, or care coordination, from the defendants to Medi-Cal managed care plans. This shift was significant because at the time these plans did not have the legal obligation, appropriate funding, time, or financial incentives to replace the comprehensive services provided by adult day health care or to keep people from entering nursing facilities—publicly pointed out to the defendants by Medi-Cal managed care organizations themselves.

Furthermore, the plaintiffs again argued that the array of community-based services, without additional modification, was simply inadequate or unavailable to meet the needs of adult day health care recipients. Enrollment into managed care would not expand the array of home-based and community-based services available to former adult day health care patients; in fact, the care coordination that the defendants asserted would meet their needs was simply inadequate to secure or to authorize needed services, nor would it replace adult day health care’s unique combination of skilled and comprehensive services to class members.

The plaintiffs were able to show, besides the human cost of the loss of adult day health care, the financial costs to California that elimination would cause even under the most cautious estimates. As one of the plaintiffs’ experts noted, the loss of services that maintain persons in the community increases the probability that some of these individuals will require nursing facility placement. He went on to estimate, conservatively, that if only 10 percent of this population were institutionalized as a result of the elimination of adult day health care, California would exceed its budgeted amount to serve this population and be spending, not saving, money.

The plaintiffs found themselves navigating a continuously changing landscape—both of the experiences of participants and providers and of the defendants’ transition plan. Because of the uncertainty of the outcome, many providers contemplated closing their doors despite the plaintiffs’ preliminary injunction motion. When, on July 22, 2011, the Centers for Medicare and Medicaid Services approved extending the elimination date until December 1, 2011, the plaintiffs argued that the scheduled hearing date of July 26, 2011 should go forward nonetheless because providers were already closing their doors in anticipation of the elimination and postponing a decision would further harm class members. The plaintiffs asserted, in light of the gross inaccuracies and confusion about the transition plan, that the defendants would not improve the transition beforeDecember 1, 2011, despite the additional time. The court ruled against the plaintiffs, and the parties proceeded with supplemental briefing until mid-November, when they reached a settlement agreement.

U.S. Department of Justice. Although the U.S. Department of Justice had entered the case as an amicus for the plaintiffs in the defendants’ appeal to the Ninth Circuit from the Cota preliminary injunction order, the Justice Department’s role expanded considerably when Assembly Bill 97 eliminated Medicaid-funded adult day health care. After the plaintiffs filed their third preliminary injunction motion, the Justice Department filed a statement of interest in support of the plaintiffs’ position and subsequently joined the settlement negotiations, bringing the interests of the United States to bear on the resolution of the case. The Justice Department’s participation was a boon to both the plaintiffs and the defendants and served to move the parties toward the settlement.

Settlement Agreement. While preparing for a November 15, 2011, hearing date on the third preliminary injunction, the parties met at the end of September to discuss settlement. For both sides, the risk of litigation was high, although the plaintiffs had the weight of the previous injunctions and public opinion to bolster their position. While Judge Armstrong had indicated that California might not be required to maintain an optional Medi-Cal benefit, she had been clear that the state was responsible for ensuring that its programs were in compliance with the ADA. With this background, the overwhelming evidence that the defendants’ proposed transition plan could not meet the needs of the 35,000 class members, and that the elimination as proposed would not realize a cost savings for the state, both parties were interested in settling. The parties met repeatedlyfor the next six weeks, in person and with the assistance of a magistrate judge, to develop a settlement agreement.

By November 17, 2011, after intensive negotiations, the parties reached a settlement agreement whereby as of March 1, 2012, the adult day health care program would transition into—community-based adult services through a Medi-Cal 1115 waiver program.

A cornerstone of the agreement ensures that California will not cap enrollment on the number of individuals who can be served under community-based adult services, virtually identical to those of adult day health care. Community-based adult services are for both current adult day health care participants and future applicants who meet eligibility criteria. Current adult day health care participants who are eligible for community-based adult services will have a seamless transition from one program into the other. Selected adult day health care providers and state nurses developed the community-based adult services assessment, including tools, instructions, and training materials for state assessors. Community-based adult services will be offered through Medi-Cal managed care plans in most parts of the state. In counties where managed care is not available and for people who are not eligible for managed care, community-based adult services will remain a fee-for-service Medi-Cal benefit. Current adult day health care providers can apply to become community-based adult services providers as well. Adult day health care participants found not to be eligible for community-based adult services will receive “enhanced case management” to assist their transition to other community-based services. Due process protections are in place for those participants who are dissatisfied with an eligibility determination.

Monitoring the implementation of the agreement was, for the plaintiffs, an important requirement; as a result, the agreement provides for payment of attorney fees and the plaintiffs’ ongoing monitoring.

Implications for the Future—Managed Care and Integrating Long-Term Care

The settlement agreement’s integration of Medi-Cal managed care as a component of the delivery system for community-based adult services reflects a larger movement toward managed care in Medicaid services both in California and at the federal level. In fact, community-based adult services were folded into an existing California 1115 Medicaid waiver entitled “A Bridge to Reform,” which was approved by the Centers for Medicare and Medicaid Services in November 2010. This waiver already included the mandatory enrollment of seniors and persons with disabilities into managed care. Thus, for Medi-Cal-only class members who receive adult day health care, enrollment into managed care was a preexisting requirement. Those who qualify for both Medi-Cal and Medicare (also known as “Medi-Medi”) must decide whether to enroll in Medi-Cal managed care to receive community-based adult services. The future of state-funded health care in California increasingly involves managed care, as reflected not only by the Bridge to Reform waiver but also by California’s implementation of the Patient Protection and Affordable Care Act, which involves the integration of Medi-Cal and Medicare services in a four-county demonstration pilot project.

The settlement is a potential model for other states where budget cuts are reducing Medicaid services and demonstrates that a state can realize savings without sacrificing services to seniors and people with disabilities.

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