The Woodwork Effect in Medicaid Long-Term Services and Supports

This paper examines annual real per capita Medicaid long-term services and supports (LTSS) expenditures (in 2010 $) over the period 1995 to 2010. Medicaid community LTSS expenditures increased substantially. If that trend constituted a woodwork effect, expenditures on institutional services should have declined more slowly than community expenditures increased, resulting in total expenditures increasing over time. Such a woodwork effect is observed for the population with intellectual and developmental disabilities (IDD) but not for the non-IDD population, composed of persons with disabilities other than IDD, including older persons. During this time period, the goals for serving people with IDD changed; institutional and community cost-neutrality rules were relaxed (and with that concerns over a woodwork effect), and instead goals of community involvement and participation were emphasized for all eligible persons. For the non-IDD population, tighter adherence to cost-neutrality rules and controls over nursing home reimbursements may have helped avoid a woodwork effect as community expenditures increased. With the passage of the Americans with Disabilities Act in 1990, goals have changed for people with disabilities of all ages, and the notion of a simple trade-off between institutional and community service costs that constitutes the woodwork effect must be complemented with a much broader idea of cost analysis that values independence and community participation for people with disabilities of all ages.