In 1981, then-president Ronald Reagan highlighted the case of a young girl named Katie Beckett. Katie was on a ventilator and remained in the hospital because Medicaid would pay for her care while in the hospital but she became ineligible for Medicaid if she went home. As Reagan stated,
"Now, it would cost $1,000 a month for her particular ailment to send her home. Her parents have no way that they can afford that, and the regulations are such that Medicaid now cannot pay for that if she goes home. The alternative is Medicaid continues to pay $6,000 a month to keep her in a hospital, when the doctors say she would receive better treatment and be better off at home. But her parents can't afford to have her taken off Medicaid."
Recognizing that changing regulations would save the government money, Congress passed a provision in the 1982 TEFRA legislation that gave states the option of qualifying additional children for Medicaid if they met standard SSI criteria for disability. Around the same time, Congress passed Section 2176 of the Omnibus Budget Reconciliation Act (OBRA) of 1981 (PL 97-35), which permitted Home and Community Based Services (HCBS) waivers, also called 1915(c) waivers for the first time. This legislation allowed certain Medicaid rules to be waived, permitting states to offer Medicaid coverage targeted to individuals in certain parts of the state, of specific economic levels, or in specific types of groups, such as children who are medically fragile.
View Katie Beckett's story in her mom's own words:
The primary goal of both of these pieces of legislation was to remove people with disabilities from institutional care by providing less costly home care services in a community setting.
Since this time, additional legislation has further supported the right of individuals with disabilities to remain in community settings. The Americans with Disabilities Act, passed in 1990, specifies that individuals must receive services, "in the most integrated setting appropriate." The Supreme Court decision Olmstead vs. L.C. (1999) clarified that people with disabilities should be placed in community settings when appropriate, if this can be accomplished with available resources. It also mandates that states provide community services to any individuals on waiting lists in a reasonably expeditious manner. Finally, as of October 1, 2011, a provision of the Affordable Care Act put into effect the Community First Choice Option, which provides increased support and funding for moving individuals out of institutions and into the community. This legislation is designed to fund the mandate of community care created by the Americans with Disabilities Act and clarified by the Olmstead decision.
Originally, TEFRA programs, which are often called Katie Beckett programs, were intended for children with extreme medical complexity and catastrophic medical costs, while HCBS waivers focused on individuals with cognitive impairment or developmental disabilities. Over time, approximately half of the states continued to use TEFRA or TEFRA-like programs for children with medical complexity, while the other half developed new HCBS waivers targeting this population. TEFRA programs, when implemented by the states, are required to serve all children who meet medical eligibility criteria, and only extend regular Medicaid services to this population. HCBS waivers, on the other hand, are not entitlements and can restrict the number of children served, but they may also provide additional services not covered by Medicaid, such as home modification and respite. Currently, almost all states have some type of program for this population, with about 40% of states offering Medicaid through TEFRA, about 60% offering HCBS waivers, and a few offering TEFRA-like or other unique programs.