Fact Sheet
States Using the TEFRA Option for Children with Serious Mental Disorders
TEFRA Option for Children with Serious Mental Disorders
Issue
Twenty state Medicaid programs use the eligibility option known as
TEFRA or Katie Beckett to expand eligibility to certain children with
physical and mental disabilities.
In other states, policymakers have indicated that more information on
TEFRA implementation would help them make a decision about whether to
adopt this option.
TEFRA
The TEFRA option permits children with physical or mental disabilities
(as defined in SSI regulations) to be offered home-based services instead
of placement in an institution. Under current law, these children are
covered under Medicaid while in the institution after the first 30 days;
at that time their family’s income and resources are no longer counted
and so the child becomes financially eligible. If these children meet
the federal definition of disability, they then become Medicaid-eligible.
State Concerns
A 2002 survey of states without the TEFRA option by the Bazelon Center
for Mental Health Law identified the following as the major reasons why
the state had not considered or had not adopted this option:
- lack of information on implementation of TEFRA by states with the
option;
- concern over raising funds for the state match;
- overall costs, concern over budget-neutrality and ability to control
the number of children who would become eligible; and
- mistaken belief that other Medicaid options will address this need.
TEFRA Implementation
The Bazelon Center for Mental Health Law recently conducted a study
of the implementation of TEFRA in the 20 states with the option. Data
from this study show:
- The overall number of children who qualify is low.
- The costs per child on TEFRA are low. A Minnesota study of TEFRA found
that TEFRA only pays 23% of total health care costs for the children
(private health insurance, families and schools pay the rest).
- Half the states with the option have rules that enable children with
serious mental and emotional disorders to qualify; the other 10 states
have rules or practices that create barriers for these children.
Other Medicaid Options
Other Medicaid options that state officials believe may meet the needs
of these children do not, in fact, address the same issues. The Medicaid
options cited by state officials as alternatives to TEFRA were:
- Medically needy option: This requires a family to spend down
into poverty for their child to be eligible. But these families are
seeking home- and community-based services only available through the
public sector—services that cannot be purchased—and so they
will not be able to “spend down” by accessing community care.
Instead, the families are forced into paying for residential services
in order to meet medically needy standards. In addition, families must
frequently re-establish eligibility under the medically needy option.
For these reasons the medically needy option is impractical as a means
of covering the community care these children need.
- Home- and community-based waivers: A home- and community-based
waiver could be an alternative to TEFRA for these children. However,
only three states have home- and community-based waivers for children
with mental and emotional disorders; in no other state does this alternative
Medicaid eligibility approach exist.
Costs
States had concerns over both the cost of the TEFRA option and the
budget-neutrality of its implementation. These concerns were heightened
by a fear that the state could not control the number of children who
might be eligible (as it can with a home- and community-based waiver),
and that this too would drive up overall costs to the state.
- Data from Minnesota (the only state that has studied this issue) show
that the actual costs of providing home- and community-based services
to TEFRA children are not high. Moreover, the costs for children with
mental disorders were less than for other children.
- Budget-neutrality is a federal requirement for TEFRA, and states make
the essential calculations themselves. Concern over budget-neutrality
can be addressed by states by ensuring accurate assessments of the costs
of institutional care and accurate assessments of whether the child
truly needs the level of care provided in an institution. These are
state decisions, controlled by the Medicaid agencies.
- Overall, few children qualify. First, all children must meet the stringent
SSI definition of disability and second, they must need the level of
care furnished in an institution. This greatly reduces the total number
of potential eligibles, and the data confirm this.
State Match
Mental health officials were concerned about the need for state matching
funds for services to these children. In most states, mental health authorities
provide the Medicaid match for community-based mental health services.
Accordingly, this is of concern. However, when parents of these children
are forced into giving up custody to the state, the costs of their care
will still fall on the state and the Medicaid match must still be paid.
In these situations, the child becomes the responsibility of child welfare
(not mental health), but the service furnished will be residential care
that is far more expensive for the state than the TEFRA community-based
services. Thus, while the mental health system “saves” the match,
the state itself pays an even higher match.
State policymakers need to examine the full impact of policies designed
to “save” the match. More effective would be to offer these
families family-friendly community-based services that are available through
the public mental health system by ensuring that the child becomes Medicaid-eligible
through TEFRA.
The advantage of TEFRA for the child is obvious. Families on TEFRA in
Minnesota (the only state with data) have incomes that are average for
the state. If they have private insurance, mental health coverage is limited
and the intensive community services their children need are typically
not part of an insurance policy benefit package. The options facing these
families are to place their child in an institution (Medicaid will pay
after 30 days), give up custody to child welfare (child welfare will pay
the Medicaid match and the costs of residential care), or continue to
struggle along until their child will, most likely, enter the juvenile
justice system and become a state responsibility. Families want their
children to have access to services before such dire outcomes occur. TEFRA
is an obvious policy option for states that wish to address these families’
needs.
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