AltaMed: Quality Care Without Exception

California Adult Day Health Care Economic Impact Report

June 9, 2010 - Publication

Executive Summary

Responding to a projected two-year budget shortfall of nearly $20 billion, the 2010-11 California State budget proposed by the Governor on January 8th, 2010 included significant cuts to health and human services programs for older Californians. The proposed cuts include completely eliminating the State’s Medi-Cal Adult Day Health Care (ADHC) program that the State claims will save $135 million in 2010-11.1

In 2009, the ADHC program provided health, therapeutic, and social services to approximately 39,000 Medi-Cal beneficiaries at-risk of institutional care (nursing facility, emergency room and hospitalization) as determined by a multidisciplinary team.2 ADHC participants consist primarily of frail older adults, many of whom have multiple chronic medical, cognitive and mental health needs such as Alzheimer’s disease and dementia, but also include individuals with developmental disabilities and severe and persistent mental illness. ADHC services include skilled nursing; mental health services; social work; physical, occupational, and speech therapy; medication management; dietary services and transportation services, among other essential services.

This study by The Lewin Group (Lewin) estimates the potential State revenue impacts associated with the proposed elimination of the Medi-Cal ADHC program.

While the proposed elimination of the Medi-Cal ADHC program would save direct expenses on the program, policymakers should also consider the potential negative impacts of the elimination on cost-shifting to other more expensive care settings, loss of jobs among ADHC employees, reductions in family caregivers’ ability to work, loss of State tax revenue, forfeiting $164 million annually in federal Medicaid matching funds and economic impact on local businesses and other entities that would lose revenue from the elimination of adult day health care providers.

Our analysis indicates that the savings associated with eliminating this program would be more than offset by cost-shifting to other services and reductions to State revenue resulting from the program elimination, as shown in Figure 1. In total, we estimate the State would lose $51 million in 2010-11 over and above the estimated savings that would come from eliminating the program (excluding the loss of federal matching funds). Annual losses to the State are projected to increase to $72 million in 2020-21, $198 million in 2030-31 and over $412 million in 2040-41.

These costs are primarily driven by rapid growth in California’s aging population (see Appendix B, Table B.10)3. We based our analysis on a literature review (see Appendix A for literature review methodology) and data analysis (see Appendices B-E for data analysis methodology).

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