Deinstitutionalization: Community Support Systems
are More Cost Effective Than Institutional Systems
All studies published thus far are consistent (Ashbaugh, 1984; Conroy & Bradley, 1985; Jones, Conroy, & Lemanowicz, 1984; Nerney & Conley, 1982). Community service models are less costly than institutional models. It must be recognized, however, that this is because staff salaries and benefits are significantly lower in community service systems than in institutional ones. Hence, the most appropriate conclusion is that community services do cost less, but they should not.
Moreover, community services are able to obtain Federal reimbursement at the same rate as STS, primarily through the so called Medicaid Waiver program. California is an active participant in the Waiver program, and hence community supports can receive the same rate of Federal support as the institution.
The Medicaid Waiver regulations required that each state that was granted a Waiver must cause to be conducted an Independent Assessment every three years. The regulations specified that the assessment must cover quality of care, access to care, and cost-effectiveness. This is the same type of Medicaid Waiver which has been used to fund movement of persons to the community in California.
To date, more than 100 Independent Assessments of Home and Community Based Waivers have been performed in the area of developmental disabilities. Perhaps the most telling point about the costs of community living is this: not a single Independent Assessment has yet concluded that institutional care has been more cost-effective than community care. This holds true across the more than 45 states that have been granted waivers, and California is included. The formal reports of these Independent Assessments are filed at the headquarters of the Health Care Financing Administration. These Independent Assessments comprise a formidable body of knowledge about the quality and cost-effectiveness of Waiver services.
Nationally, the average cost of an institutional setting is about $98,000 per person per year (NASDDDS). The average inclusive cost of community supports, usually group homes plus day programs plus transportation plus case management and administration, is less than $60,000.
In the Mansfield study, the cost of the institution grew to double the cost of community care toward the end. During the majority of the downsizing process, community costs averaged between 75% to 85% of institution costs. In Pennsylvania, the community cost was approximately 85% of institution costs. In New Hampshire, the figure was 86%. In California, the ratio is about 55% (which I have characterized as an “underfunded” community service system).
There can no longer be any serious doubt that community services are more cost effective than institutional systems. The reasons for this are well understood. Staff salaries and benefits are at the heart of the difference in costs. Moreover, it is often noted that larger settings should enjoy “economies of scale,” but anyone who has studied economics will know that there are also inevitable “diseconomies of scale” that arise in organizations that are too large. My opinion is that, when we are in the business of creating homes for people, those diseconomies begin to set in at about size 4.