Jennifer Mathis
Senior Staff Attorney, Bazelon Center for Mental Health Law

This article is designed as a follow up to an article published by the author in the November-December 2001 issue of Clearinghouse Review.1 That article discussed the development of caselaw following the Supreme Court’s landmark disability rights decision, Olmstead v. L.C.,2 and states’ progress in implementing that decision.  Olmstead held that unnecessary institutionalization of individuals with disabilities is a form of discrimination prohibited by Title II of the Americans with Disabilities Act (“ADA”).3 The decision affirmed that states have an obligation to move individuals with disabilities from institutional settings into more integrated settings in the community if moving them would not fundamentally alter the states’ service systems.4 This article examines how the law has developed over the five years since the decision was issued and what progress has been made by states in effectuating the ADA’s integration mandate.

Introduction

Five years after the Olmstead decision and fourteen years after the passage of the ADA, progress in implementing the ADA’s integration mandate remains disappointingly slow. State planning efforts have continued and more states have created plans to address unnecessary institutionalization. Funding for most of these initiatives has been scant, however, due to ongoing budget woes. States have typically been resistant to tie development of new community services with the closure of institutional beds. Accordingly, the expansion of community services has been viewed as a cost drain rather than an endeavor carrying the potential to realize cost savings. Thus, actual implementation of Olmstead plan components has remained extremely modest.

In addition to these state planning processes, significant federal efforts have been undertaken to facilitate the development of community-based services for individuals with disabilities. Like the state-based Olmstead planning efforts, however, these federal efforts have resulted in few individuals actually moving into more integrated settings. Federal Olmstead implementation efforts have made important strides in identifying many barriers to integration and making recommendations that will affect long-term ability to serve people with disabilities effectively in the community. Additionally, the federal government has provided funding to support states’ planning efforts and development of new programs to promote integration. These measures were not designed to create large-scale development of community services and movement of institutional residents into more integrated settings, but rather to help states get their planning efforts off the ground.

Because of the limitations of state and federal Olmstead planning efforts, in many areas, litigation has proved to be the most effective means of achieving meaningful reform promptly. While Olmstead litigation is almost always a complex and costly endeavor with many uncertainties, it has enabled large numbers of individuals with disabilities to obtain the home- and community-based services that state planning efforts failed to deliver. Part I of this article examines significant caselaw developments in this area. Part II highlights some of the successes that litigation efforts under the ADA have brought for individuals who remained institutionalized despite Olmstead planning efforts. Parts III and IV briefly discuss progress on federal and state fronts in facilitating compliance with the ADA’s integration mandate.

I.  Caselaw Developments
           
Early caselaw interpreting Olmstead focused primarily on elements of the plaintiff’s prima facie case – such as when an individual is “qualified” for community placement, when he is understood as not opposing community placement, whether he is covered by Olmstead if he is at risk of institutionalization, and whether he may assert a right under Olmstead to remain in an institution and prevent his discharge. The more recent caselaw described in this article, however, focuses primarily on the states’ “fundamental alteration” defense, fleshing out to some degree when providing community services will or will not fundamentally alter a state’s service system.

            A.  Are individuals “at risk” of unnecessary institutionalization protected by the
            ADA’s integration mandate?

Before exploring the caselaw on the “fundamental alteration” defense, it is worth noting some new developments on the issue of whether Olmstead’s requirements apply to individuals who are at risk of institutionalization, but who are not currently institutionalized. The federal government has interpreted Olmstead to cover these individuals,5 and courts have followed suit, although they have sometimes required plaintiffs to demonstrate that they are truly at risk of institutionalization. In Makin v. Hawaii,6 plaintiffs on a waiting list for institutional services for developmental disabilities were permitted to proceed with an Olmstead claim seeking community-based services. Even though they were not currently institutionalized, the only alternative available to them, if they sought Medicaid services, was institutional services.7

In Sanchez v. Johnson, another district court agreed that demonstrating a “threat of institutionalization” was sufficient to support an Olmstead lawsuit,8 but went on to conclude that plaintiffs who lived in the community did not show that they were at risk of institutionalization. In Sanchez, a plaintiff class challenged the disparities in wages for institutional workers and community service workers, which resulted in unnecessary institutionalization of clients. With respect to the five named plaintiffs living in the community, the court observed that “[w]hile the future of those living with their parents may be uncertain, Plaintiffs have failed to show that there is more than a hypothetical risk that these individuals may be institutionalized.”9 

One district court concluded that plaintiffs who are not presently living in an institution simply could not bring a claim under Olmstead.10  The Tenth Circuit reversed this decision, concluding that nothing in the plain language of the ADA regulations nor in the Olmstead decision suggests that institutionalization must be a prerequisite to an integration mandate challenge.11 Indeed, the protections of the integration mandate “would be meaningless if plaintiffs were required to segregate themselves by entering an institution before they could challenge an allegedly discriminatory law or policy that threatens to force them into segregated isolation.”12

It is important to understand that while “at risk” plaintiffs will likely be permitted to proceed with Olmstead litigation, cases on behalf of such individuals may present difficulties in overcoming the fundamental alteration defense. If the individuals are currently on waiting lists for services and the state is not paying for their residential (and perhaps other) services, the state may be able to demonstrate that providing community-based services would be very expensive in comparison with the little or no cost that it is presently incurring to serve these individuals. If the plaintiffs can show that their institutionalization is imminent, however, the appropriate cost for the court to consider should be the cost that it will soon be paying to serve the individuals in an institutional setting. In Fisher, for example, the court noted the “inescapable irony” that if plaintiffs were forced to enter a nursing home due to the state’s failure to provide full prescription coverage in the community, the costs of the institutional care would be approximately twice as high as the cost of their care in the community.13

            B.  What Constitutes a Fundamental Alteration?

Much of the recent caselaw interpreting Olmstead has grappled with how to determine whether providing community-based services for plaintiffs would amount to a “fundamental alteration” of a state or local government defendant’s service system. Olmstead advised that courts must consider the cost of the community placement and the state’s need to serve other individuals with disabilities in an evenhanded manner, in light of the resources available to the state.14 The Court also noted that a state could meet the fundamental alteration defense by demonstrating “that it had a comprehensive, effectively working plan for placing qualified persons with mental disabilities in less restrictive settings, and a waiting list that moved at a reasonable pace not controlled by the State’s endeavors to keep its institutions fully populated.”15 More recent cases have shed some light on how courts are likely to analyze the fundamental alteration defense, although it remains to be seen how the caselaw will develop in this area.

            1.  Are the short-term costs of placing individuals in the community
            sufficient to establish a fundamental alteration defense?

Most courts have agreed that the mere existence of costs that are not immediately offset does not create a fundamental alteration. Congress envisioned in passing the ADA that reasonable accommodations may cost money, and some amount of cost does not automatically render an accommodation unreasonable. In the most recent case to analyze the fundamental alteration defense, Frederick L. v. Department of Public Welfare,16 the Third Circuit held that the short-term costs of community placement are not, without more, sufficient to establish a fundamental alteration. 

In Frederick L., a class of 300 residents of a Pennsylvania state hospital claimed that the Department of Public Welfare (DPW) failed to administer its services in the most integrated setting appropriate and failed to do appropriate assessments to determine whether plaintiffs could be served in a more integrated setting. Plaintiffs sought to have defendants move 60 class members into community-based services each year. After a trial, the district court ruled for the defendants, concluding that plaintiffs’ requested relief would be a fundamental alteration in light of the immediate extra cost of moving them into the community and concomitant lack of immediate aggregate cost savings, even if cost savings would eventually be achieved as hospital beds were closed.17

The Third Circuit, vacating the decision and remanding, agreed with plaintiffs “that states cannot sustain a fundamental-alteration defense based solely upon the conclusory invocation of vaguely-defined fiscal constraints.”18 The court observed that Olmstead lists several factors aside from the cost of community placement as relevant to the fundamental alteration defense, including the state’s ability to meet the needs of other institutionalized individuals with mental illness for whom community placement is not appropriate, whether the state has a waiting list for community services, and whether the state has a comprehensive plan to move individuals into community settings.19

The Third Circuit did not, however, read the district court’s opinion to rely solely on the short-term costs of placing the plaintiffs in community settings. Instead, it understood the district court to have undertaken a more comprehensive analysis that also considered DPW’s unsuccessful attempts to obtain additional funds through the Governor’s budget, DPW’s responsible spending of its budgetary allocation, DPW’s reallocation of overtime savings to increase funding for community services, DPW’s favorable closure rate in comparison with other areas, the difficulties that community opposition creates for developing community services,20 and the argument that increasing community placements will eventually lead to a diminution of services for institutionalized individuals.21

Other courts have shared the view that the short-term costs of community placement, or the short-term fiscal constraints on a state, are not sufficient by themselves to establish that community placement would be a fundamental alteration. In Fisher, the Tenth Circuit held that “the fact that Oklahoma has a fiscal problem, by itself, does not lead to an automatic conclusion” that providing the community services sought by plaintiffs would be a fundamental alteration.22 The Tenth Circuit went on to note that:

In passing the ADA, Congress was clearly aware that ‘[w]hile the integration of people with disabilities will sometimes involve substantial short-term burdens, both financial and administrative, the long-range effects of integration will benefit society as a whole.’ . . . If every alteration in a program or service that required the outlay of funds were tantamount to a fundamental alteration, the ADA’s integration mandate would be hollow indeed.23

In Fisher, the plaintiffs challenged the state’s decision to stop providing unlimited prescription drug coverage in a community-based Medicaid nursing home waiver program, while continuing to provide unlimited prescription coverage to nursing home residents. This policy put the program participants at risk of placement in a nursing home. The Tenth Circuit rejected the state’s argument that changing its policy would have required a fundamental alteration simply because it was in the midst of a fiscal crisis. 

In Townsend v. Quasim,24 the Ninth Circuit also rejected the argument that additional costs of community placement would necessarily result in a fundamental alteration. In Townsend, plaintiffs had challenged the state of Washington’s refusal to extend its community-based Medicaid waiver services to cover Medicaid recipients who were “medically needy” (that is, recipients with slightly higher incomes who were eligible for Medicaid through spending down their incomes on medical services). The state argued that extending community-based services to medically needy individuals might require it to apply for additional Medicaid waivers, burdening the state’s fisc and compelling significant cuts in Medicaid services for other individuals.25 The court refused to accept these generalized concerns as sufficient evidence to establish a fundamental alteration and held that “even if extension of community-based long term care services to the medically needy were to generate greater expenses for the state’s Medicaid program, it is unclear whether these extra costs would, in fact, compel cutbacks in services to other Medicaid recipients.”26 The court remanded for consideration of whether the costs of providing community services to the plaintiffs would in fact result in cutbacks for others.

Similarly, in Makin, the court refused to accept the state’s generalized concerns about additional costs of services. Plaintiffs, individuals with mental retardation who were on the state’s waiting list for mental retardation waiver services, challenged the state’s failure to expand its waiver to provide community-based services for more individuals. The state argued that the relief plaintiffs sought would require it to create an unlimited community-based program for individuals with retardation and also that the relief would cause it to exceed the waiver cap and force it to forego federal funds for the additional waiver services.27 The court rejected this defense, stating that “[t]hese arguments fail to show how the modification would fundamentally alter the program, since it merely argues that the State would potentially have a problem funding it.”28

In one early case decided before the law in this area had begun to develop, Williams v. Wasserman,29 the court accepted the state’s fundamental alteration defense based in part on the immediate costs of providing the plaintiffs with community services and the lack of concomitant cost savings to offset those costs immediately.  Assuming incorrectly that plaintiffs were demanding “immediate” services, the court noted that it would take 3-5 years to realize the savings from moving individuals from institutional to community settings, and in the meantime the state would be required to “double fund” institutional and community beds.30 Even in this case, however, the court did not consider the immediate cost of placement sufficient by itself to constitute a fundamental alteration. The conclusion that providing community services for the plaintiffs would be a fundamental alteration was based on the 3-5 year time period it would take before the state recouped the costs of community placement, the progress Maryland had made in developing community services for others, and the state’s need to maintain a minimum number of hospital beds. Moreover, the court did not explain why it would be unreasonable for the state to spend money on community services that would not be immediately offset by cost savings.

All of these cases suggest that the mere fact that community placement may require an outlay of funds is not sufficient to establish that it would constitute a fundamental alteration. The question of how much community placement may cost before becoming a fundamental alteration, however, has not been addressed in detail by the caselaw. In Frederick L., plaintiffs’ requested relief would have cost DPW only one million dollars – an extremely small amount in relation to the entire mental health budget. Yet, for reasons discussed below, the court did not require DPW to provide this relief. In short, the cases to date have offered little guidance on how much is too much.
            2.  What is the relevant budget to be considered for the fundamental
            alteration defense?

In determining whether it would be too costly for a state to shift funds from other sources to develop more community-based services, it is important to establish what “available resources” must be taken into account.  Olmstead does not place any limitation on “available resources.” Accordingly, all resources that the state could use, including federal Medicaid funds for a variety of services, federal housing funds such as Section 8 money, federal Ticket to Work funds, and other federal and state resources, may be considered. 

In Frederick L., however, the Third Circuit held that, when determining whether other funds could be used for community services for individuals with mental illness, the relevant funds to consider are those with a nexus to mental health services.31 The court rejected the plaintiffs’ argument that the appropriate budget was the entire budget of DPW rather than merely the mental health portion of that budget, concluding that “DPW’s myriad non-mental health responsibilities, which include cash welfare distribution, medical assistance, food stamps provision, youth centers, forestry camps, and chaplaincies, have no nexus to the ‘care and treatment’ of the mentally ill described in Olmstead.”32 This reading of Olmstead is clearly more limiting than what the Supreme Court intended.  Nonetheless, some other courts have ruled similarly. See Pennsylvania Protection & Advocacy, Inc. v. Department of Public Welfare33(noting that Olmstead spoke of “available resources” only in the context of services for individuals with mental disabilities); Sanchez v. Johnson34 (only the state’s already existing budget for individuals with developmental disabilities should be considered).

In many states, the mental health, developmental disabilities, or other health service agency may not have the broad range of responsibilities of Pennsylvania’s DPW. However, even under the Third Circuit’s narrow reading of the fundamental alteration analysis, resources beyond the agency budget must be considered in the fundamental alteration analysis as long as they have a nexus to the provision of community services. For example, resources allocated for housing, general health services, and meal programs may all be said to have a nexus to the provision of community-based services for individuals with disabilities. Accordingly, even under the Third Circuit’s narrow reading of “available resources,” funding for these services should be considered as an “available resource” for purposes of the fundamental alteration defense, even if it is outside the scope of the disability service agency budget at issue.

            3.  How is cost-shifting from institutional to community settings
            considered in the fundamental alteration analysis?

In order to demonstrate that state or local governments may serve people with disabilities in more integrated settings without fundamentally altering their service systems, Olmstead plaintiffs typically show that institutional beds may be closed and funds used for those beds may be shifted to develop services in the community. Funds for developing community-based services may come from other sources as well, but plaintiffs are in a stronger position when they can demonstrate that defendants can simply shift funds currently used in an institutional setting to serve the same individuals in the community, which is typically less expensive. This type of analysis does not require the court to decide whether it is appropriate to require government agencies to remove funds from other projects in order to develop community services. Typically, defendants cannot demonstrate how shifting funds to serve the same individuals in community settings instead of institutions would harm others.

Both Fisher and Townsend make clear that states cannot resist shifting funds to the development of community-based services to achieve compliance with Olmstead unless they demonstrate that shifting resources would compel cutbacks in services to other individuals. As described above, the Tenth and Ninth Circuits did not accept generalized statements about state budget woes or about the negative impact that developing community services for the plaintiffs would have on other individuals, without specific proof that other individuals would lose services. If community services can be provided at the same or lower cost than institutional services, integration mandate plaintiffs should readily be able to show that funds can be shifted from institutional to community services without a fundamental alteration.

Nonetheless, this argument has sometimes proved more difficult for plaintiffs than anticipated. The Frederick L. plaintiffs argued that DPW could have shifted money from institutional settings and other programs in order to fund community-based services.  The court found that, given the facts in that case, “[a]ny effort to institute fund-shifting that would disadvantage other segments of the mentally disabled population would fail under Olmstead.”35 In fact, there was little or no evidence to this effect; the court relied solely on a generalized statement by a state official. The blanket acceptance of such generalized assumptions contradicts the approach in Fisher and Townsend of requiring the state to establish affirmatively how the relief plaintiffs seek would result in harm to others.

To the extent that the Third Circuit  was concerned that providing community services to the plaintiffs would result in their placement before individuals in other hospitals who did not sue, clearly the fact that other individuals remain unnecessarily institutionalized elsewhere in the state cannot be the basis for determining that placing plaintiffs would be a fundamental alteration. Otherwise, it would be impossible for any plaintiff group to win an Olmstead case. Olmstead’s concern about line-jumping was merely that if a state had a comprehensive plan to move institutionalized individuals into community settings that was moving at a reasonable pace – something the Frederick L. court found Pennsylvania had failed to do – then it would not be appropriate to allow those at the end of the waiting list to jump ahead of those in front of them simply by suing first. 
                       
Perhaps the most troubling part of the Frederick L. decision is the court’s rejection of the plaintiffs’ basic cost analysis – that the cost of community placements for the plaintiffs ($6 million) would be offset by the cost savings to the state of closing hospital beds for those plaintiffs who were moved into the community ($5 million, including the consideration of the fixed costs of the closed beds, according to the state’s own expert), with a resulting net cost of $1 million. The court held that “Appellants’ cost comparisons . . . are precisely the sort of reductive cost comparisons proscribed by the Olmstead plurality. . . .”36  That statement is simply incorrect. Olmstead did not preclude this type of cost-shifting analysis. What Olmstead did preclude, as the Third Circuit noted earlier in its decision,37 is a comparison of the cost of providing community services for the plaintiffs against the entire budget, or a simple comparison of the cost of institutional care with the cost of community services, since the latter would not account for the fixed overhead costs of operating partially full institutions.38 The Frederick L. plaintiffs’ analysis, however, did not do either of the things precluded by Olmstead. Instead, it took into consideration the larger picture of the entire hospital and the fixed costs associated with closed beds, as required by Olmstead. 

The only logical way to read this portion of the Frederick L. decision is to assume that the court did not realize (particularly in light of the scant factual evidence recited in the opinion) that the cost-shifting analysis already took into account the fixed costs of operating a partially full institution. The decision cannot mean that plaintiffs are not permitted to demonstrate that the state could shift costs from institutional to community settings and take into account the cost savings achieved from closing institutional beds. Such an interpretation would flatly contradict the Olmstead decision and would make it impossible for plaintiffs to prevail in integration mandate cases.

The Frederick L. court also constrained the plaintiffs’ ability to overcome the fundamental alteration defense in that case by considering the state’s ability to use funds from sources other than institutional care. Plaintiffs had argued DPW could have requested more money for community-based services in the budget negotiation process. The Third Circuit held, however, that decisions made in the pre-budgetary process were beyond judicial scrutiny given  “a recognition of the realities of the budgetary process.”39 This holding appeared to be based specifically on Governor’s Guidelines that limited the percentage increase that DPW could request for community services.40 There is no reason why the pre-budgetary process should ordinarily be beyond judicial scrutiny, and federal courts have routinely scrutinized state executive actions in civil rights cases.

Finally, the Frederick L. court rejected the argument that DPW could have shifted funds from budget items not associated with community or institutional care – such as $9.5 million spent on general salary increases for state psychiatric services personnel, $2.5 million for contracted repairs, and $372,000 for travel. The court observed that “the judiciary is not well-suited to superintend the internal budgetary decisions of DPW or evaluate its physical plant needs,” and therefore declined to decide which costs were essential and which were not.41 Such decisions are, however, not unlike decisions that courts are asked to make every day. Courts may also use expert testimony, of course, to guide decisionmaking. Thus, it would be surprising if other courts adopted this approach and refused to review states’ decisions not to reallocate funds being used for purposes other than the direct provision of services to individuals with disabilities.

            4.  Are States Required to Have a Plan?

The Court in Olmstead held that a state could establish a fundamental alteration defense if “the State were to demonstrate that it had a comprehensive, effectively working plan for placing qualified persons with mental disabilities in less restrictive settings, and a waiting list that moved at a reasonable pace not controlled by the State’s endeavors to keep its institutions fully populated.”42 Olmstead explained the plan requirement in the context of a defense to integration claims. But it is difficult to imagine how a state could establish a fundamental alteration defense without having undertaken a detailed planning process to identify individuals with disabilities who are unnecessarily institutionalized, and determine what their needs are and how much it would cost to serve them in more integrated settings. In order to demonstrate that providing community services for plaintiffs would be so costly as to prevent the state from serving other people with disabilities evenhandedly, the state would need to know how many individuals are unnecessarily institutionalized, what services are needed in order for those individuals to live in the community, how much those services would cost, and how much money could be saved by closing institutional beds as community services are developed. As Fisher and Townsend demonstrate, a state cannot simply rely on generalized statements that it would be costly to develop community services or would interfere with the state’s ability to serve others, but must provide specific justifications for those conclusions.

Indeed, the Frederick L. decision affirmatively requires the state to submit a detailed plan to the court in order to establish a fundamental alteration defense. Like the district court in Williams v. Wasserman, the court acknowledged Pennsylvania’s past progress in deinstitutionalizing individuals with disabilities. Frederick L., however, declined to assume that such past progress was probative of future plans to continue deinstitutionalizing. The court rejected the state’s argument that its policies and procedures at Norristown State Hospital requiring ongoing review of patients and individualized discharge planning constituted a comprehensive plan as contemplated by Olmstead. The court stated that Pennsylvania’s articulation of its plan “falls far short of the type of plan that we believe the Court referred to in Olmstead.” It noted that what Olmstead requires “at the very least is a plan that is communicated in some manner . . . requiring a commitment . . . to take all reasonable steps to continue that progress.”43  The court went on to observe:

It is a gross injustice to keep these disabled persons in an institution notwithstanding the agreement of all relevant parties that they no longer require institutionalization. We must reflect on that for more than a passing moment. It is not enough for DPW to give passing acknowledgment of that fact. It must be prepared to make a commitment to action in a manner for which it can be held accountable by the courts.44

            5.  How must states change their Medicaid programs to comply with Olmstead?

Because Medicaid is such an important funding source for community-based services for individuals with disabilities, and states receive federal reimbursement for a substantial share of the cost of Medicaid services, expansion of community-based Medicaid programs is often a key element in Olmstead cases. The Medicaid program affords states substantial flexibility in determining the amount, duration and scope of services covered under their Medicaid plans, but the ADA’s integration mandate requires states to expand services in ways that the Medicaid statute itself does not require. Indeed, the plaintiffs in Olmstead sought community-based waiver services, to which they were not entitled under Medicaid as long as the state was providing the number of waiver slots it had agreed to provide. Nothing in Olmstead suggests that the ADA’s integration mandate must be read to exempt states from doing anything that the Medicaid statute does not already require them to do. Yet states have argued that altering the flexibility given to states under Medicaid would be a fundamental alteration.45 However, courts have required states to make various types of changes to their Medicaid programs in order to comply with Olmstead.

In Townsend, for example, the Ninth Circuit rejected the argument that the ADA cannot compel states to alter their Medicaid programs in ways not required by Medicaid, and held that Washington was required to expand its community-based nursing home waiver program to include another population (“medically needy” Medicaid recipients) unless it could demonstrate that doing so would compel cutbacks to other Medicaid recipients.46  In Fisher, the Tenth Circuit held that Oklahoma was required to provide additional services in its community-based nursing home waiver program (prescription coverage above five prescriptions per month) unless it could demonstrate that providing such coverage would compel service cutbacks to others or otherwise be inequitable.47 In Makin, the court required Hawaii to expand its community-based waiver for individuals with developmental disabilities to serve more people unless it could demonstrate that doing so would be a fundamental alteration.48

One limitation that some courts have imposed is to read Olmstead not to require states to provide “new” services. This limitation was first articulated in Rodriguez v. City of New York,49 where the Second Circuit held that the ADA did not require a state to offer a new type of Medicaid service in order to comply with the integration mandate. Thus, the plaintiffs could not prevail on their Olmstead claim challenging the elimination of New York City’s “safety monitoring” services under Medicaid, as a result of which plaintiffs would be forced into nursing homes. Rodriguez based its conclusion about new services on a footnote in Olmstead noting that states “must adhere to the nondiscrimination requirement with regard to the services they in fact provide.”50  This footnote merely reflected the Court’s clarification that the ADA does not create an entitlement to a specific “standard of care” but instead requires that, once a state chooses to provide services, it must not discriminate by providing those services in an unnecessarily segregated setting.
 
The Ninth Circuit clarified, however, that a state cannot characterize services as “new” if it already provides them to others, even if it provides them only in an institutional setting.51 The court observed that:

Characterizing community-based provision of services as a new program of services not currently provided by the state fails to account for the fact that the state is already providing those very same services. If services were determined to constitute distinct programs based solely on the location in which they were provided, Olmstead and the integration regulation would be effectively gutted. States could avoid compliance with the ADA simply by characterizing services offered in one isolated location as a program distinct from the provision of the same services in an integrated location.52

Under the Ninth Circuit’s reading, the only services that would be considered “new” are those that are not provided in the institutional setting, such as the safety monitoring services that would not be necessary in an institution. Any service that is provided in an institution, such as meals, housing, mental health services, and personal assistance services, would not be a “new”service. The Tenth Circuit took a similar position in Fisher: “Given that Oklahoma has, until recently, provided unlimited prescriptions to participants in the Advantage program, and continues to do so for those living in nursing homes, receiving medically necessary prescriptions is clearly in the nature of Oklahoma’s HCBS program.”53

II.  Litigation Successes

In this section, I highlight some of the significant successes achieved in Olmstead litigation.54 Despite much talk about state and federal efforts to promote community integration after Olmstead, many individuals with disabilities have found that the only means of securing an opportunity to move to more integrated settings in the foreseeable future is through litigation. While Olmstead litigation is complex and difficult to undertake, it has brought some significant movement toward integration, as detailed below.55

1. Rolland v. Cellucci, Civ. Action No. 98-30208-KPN (W.D. Mass): This class action litigation was filed in1998 on behalf of over 1600 individuals with mental retardation and other developmental disabilities, who challenged their unnecessary confinement in Massachusetts nursing homes and also challenged the state’s failure to provide specialized services (such as independent living skills and day habilitation) to individuals determined to need them.  Plaintiffs survived a motion to dismiss, which was decided less than three weeks before the Supreme Court issued its decision in Olmstead.56
   
   
2. The parties entered into a settlement agreement at the end of 1999.  Under the agreement, the state is required to develop community-based services for up to 1175 people over a period of seven years, to provide specialized services to all class members who need them (inside and outside nursing facilities), and establish a diversion plan to prevent unnecessary admissions to nursing homes and divert at least 225 individuals through new residential programs and supports. The settlement was approved on January 10, 2000, following a fairness hearing.57 To date, approximately 500 class members have moved to community settings.
   
   
3. Townsend v. Quasim, No. C00-0944Z (W.D. Wa.): This class action lawsuit was filed in 2000 on behalf of “medically needy” Medicaid recipients (that is, who met Medicaid income eligibility requirements after spending down their income on medical services) who would be forced into nursing homes in Washington unless the state provided community-based services to them, as it provided to “categorically needy” Medicaid recipients (who met Medicaid income eligibility requirements without having to spend down income).  The state had created a home and community-based waiver for categorically needy recipients who would otherwise be served in nursing homes, but offered only nursing home services for medically needy recipients with similar needs.  The district court granted summary judgment for defendants on the ground that the plaintiffs were requesting new services that the state did not currently provide.58 
   
   
4. The Ninth Circuit reversed, concluding that the services sought by plaintiffs were not a new benefit, and requiring the state to demonstrate how providing these services would compel cutbacks in services to other Medicaid recipients.59
   
   
5. On January 16, 2004, the parties entered a stipulated agreement whereby the proceedings would be stayed until June of 2006, and the defendants would serve 600 individuals at any given time in a community-based nursing home waiver for medically needy Medicaid recipients, apply to reactive their in-home services nursing home waiver for medically needy recipients (which has now been reactivated), and serve 200 individuals at any given time in the in-home waiver.
6.  
7. Fisher v. Oklahoma Health Care Authority, No. 02-5192 (D. Okla.): In this case, discussed in Part I of this article, three individuals with disabilities who were in Oklahoma’s Advantage Program, a community-based waiver program for Medicaid recipients who would otherwise be served in nursing homes, challenged the state’s decision to limit coverage of prescription medications for individuals in the Advantage Program to five per month, while continuing to provide unlimited prescription medication coverage to Medicaid recipients in nursing homes.  As a result of the state’s decision to stop unlimited prescription coverage in the waiver program, plaintiffs would be forced to move into nursing homes.
    
   
8. The district court dismissed plaintiffs’ Olmstead claim on the ground that Olmstead did not apply to individuals who were not currently institutionalized.60 The Tenth Circuit reversed and remanded, holding that plaintiffs could proceed with their Olmstead claim and that the state was required to restore unlimited prescription coverage in the waiver program unless it could demonstrate that doing so would be a fundamental alteration.  The case settled following the Tenth Circuit’s decision, and the state agreed to provide unlimited prescription coverage in the waiver program, with prior authorization required for any prescriptions over five.61

1. Miranda B. v. Kitzhaber, Civ. Action No. CV00-1753-HU (D. Or.): This class action litigation was filed in 2000 on behalf of over 100 individuals with mental illness, who challenged their unnecessary confinement in the state psychiatric hospital and defendants' failure to provide adequate placements in the community. Each of the plaintiffs had been found to be ready for discharge, but were still at the hospital because there were insufficient numbers of community facilities.  Plaintiffs prevailed on a motion to dismiss, which was appealed to the 9th Circuit Court of Appeals.  The Circuit Court upheld the plaintiffs’ claims and remanded for trial.62
   
   
2. The parties entered into a settlement agreement in December of 2003, and the court approved the agreement on March 8, 2004.  Under the agreement, the defendants agreed to create 75 new community placements in 2003-2005, to create a fund of $1.5 million to assist in placing those who had “exceptional barriers to placement,” including those with significant medical conditions, traumatic brain injury, or a history of significant substance abuse, assaultive behavior or sexual offense. Defendants also agreed to implement a special review process for anyone who had been ready to place more than 180 days yet remained in the hospital, and to discharge at least 31 class members (of a total of 69) during the 2003-2005 biennium.


3. Staley v. Kulongoski, No. CV-00-0078 (D. Or.): Filed in January, 2000 on behalf of five individuals with developmental disabilities and the ARC of Oregon, and later expanded to a class action, this lawsuit challenged Oregon’s failure to provide home and community-based services to eligible individuals with developmental disabilities. The parties entered into a settlement agreement, approved in December 2000 by the court following a fairness hearing. The settlement, which initially was to terminate in 2007, provided that the defendants would furnish non-crisis “comprehensive services” (including 24-hour residential services) to 50 people per year, for a total of 300 during the life of the agreement.  It also provided that all eligible people on the state’s waiting list would receive support services (defined as “in-home and personal supports costing up to $20,000 per year”). These services were to be phased in over approximately four years.
   
   
4. Due to the state’s severe budget crisis, the parties obtained court approval to modify the agreement in January, 2004.  Under the modified agreement, the same number of people will be served, but the services will be phased in over a longer period of time.  The state is required to fully implement the modified agreement by 2009.  To date, approximately 3500 people have received support services under the agreement and fewer than 20 have received comprehensive services, which have a longer phase-in period.
   
   
5. Makin v. Hawaii: This class action litigation was filed in 1998 on behalf of approximately 700 individuals with developmental disabilities on waiting lists for community-based waiver services in Hawaii.  After the district court denied summary judgment for the state on plaintiffs’ Olmstead claims,63 the case settled in April, 2000.  The defendants agreed, among other things, to provide waiver services to 700 people by the end of June of 2003, use best efforts to obtain appropriations from the legislature and approval from the federal government to expand the waiver, and develop a comprehensive plan to move the waitlist at a reasonable pace after June of 2003. 
   
   
6. In September, 2003, the plaintiffs’ counsel compiled a report stating that the defendants had failed to comply with the Makin settlement agreement in a number of ways, including the failure to use Medicaid funds that had been appropriated for waiver services, failure to provide services to all of the initial 700 class members, improper persuasion of individuals to “defer” their waiver services, and failure to provide services at a reasonable pace.64  A new class action lawsuit was filed on behalf of over 300 individuals challenging those practices and seeking to have the state eliminate the practice of deferral and reinstate deferred individuals to the waiting list, stop returning or misusing funds allocated for waiver services, and ensure that individuals are not waitlisted for more than six months.65 The parties are currently in settlement negotiations.
   
   
7. Davis v. California Health & Human Services Agency, No. C00-2532 SBA (N.D. Cal): In this class action litigation filed in 2000, plaintiffs with mental illness, developmental disabilities and physical disabilities sued the city of San Francisco and the state of California for violating the integration mandate by unnecessarily institutionalizing them in Laguna Honda Hospital and Rehabilitation Center, a nursing home that houses more than 1000 individuals.  Plaintiffs survived a motion to dismiss their claims under the ADA and Section 504, although the court struck allegations of the complaint suggesting that the defendants were required to create new services in the community.66 On March 30, 2004, the court approved settlements between the plaintiffs and the city and state defendants.  The state defendants agreed to modify the preadmission screening process for nursing home residents with mental disabilities to ensure that it identifies community resources for which these individuals are qualified and specific reasons why nursing facility services are needed, the specific reasons why those services could not be provided in the community. The city defendants agreed to set up a targeted case management unit that will conduct screenings and comprehensive assessments of the needs of Laguna Honda residents, individuals on waiting lists for admission to Laguna Honda, and individuals in San Francisco hospitals eligible for discharge to Laguna Honda, and assist with service and discharge planning and linking these individuals with community-based services. Assessments and discharge plans for approximately 500 residents should be completed by early 2005.


8. The plaintiffs’ claims that the city and state failed to develop sufficient community capacity to serve class members in more integrated settings were dismissed without prejudice but plaintiffs expect to refile them in 2005, when the assessments of Laguna Honda residents should be completed.  The United States Department of Justice did its own investigation of the city and state for violations of the integration mandate, and concluded that both the city and the state violated Olmstead by unnecessarily institutionalizing a large number of Laguna Honda residents, who were willing and able to live in the community.67

1. Travis D. v. Eastmont Human Services Center, No. CV-96-63-H-CSO (D. Mont.): This class action lawsuit was filed on behalf of individuals with mental retardation and other developmental disabilities in 1996, long before the Supreme Court’s Olmstead decision.  The plaintiffs challenged their unnecessary confinement in Montana’s developmental centers.  In 2003, the state closed one of its developmental centers, transferring some individuals to the community and others to the remaining developmental center, Montana Developmental Center (MDC).  In 2004, the case finally settled.  At the time of settlement, the class approved by the court included 200 individuals who had been institutionalized at any time between August, 1996 and February, 2004.
   
   

The settlement provides, among other things, for the development of community services for 45 residents of MDC (approximately half of the class members who remained institutionalized), the closure of two MDC units, a legislative proposal by the defendants to eliminate a statutory provision that allows individuals to be committed to MDC too easily, the provision of community services to class members who moved out of MDC but have not been receiving community services, crisis prevention funding to prevent future unnecessary institutionalization, and various measures to facilitate the discharge of additional MDC residents in the future.

III.  Federal Efforts to Facilitate Olmstead Compliance

In addition to providing interpretations of the ADA’s integration mandate,68 the federal government has provided various sources of funding designed to facilitate states’ efforts to comply with Olmstead. The primary federal grant program that has allowed states to take action on community integration initiatives for people with disabilities is the Center for Medicare and Medicaid Services’ Systems Change grant program.69 These grants are designed to help states develop infrastructure that will promote their ability to transition individuals from institutional to community settings. They are not intended to support the movement of large numbers of individuals from institutional to community settings. While it is encouraging that the federal government has offered financial support to assist states to accomplish the critical task of planning and developing necessary infrastructure to support change, much of this money has gone to support planning meetings and small pilot projects. Notably, the National Council on Disability (NCD) has recommended refocusing the Real Choice Systems Change program “as a true systems-change project by shifting from funding demonstration projects to funding change that affects entire service systems.”70

Other federal measures to promote Olmstead compliance include a comprehensive effort on the part of federal agencies, pursuant to President Bush’s Executive Order 13217,71 to identify federal laws, regulations, policies and practices that impede community participation by people with disabilities. A compilation of the reports of the various agencies was published in a large volume entitled Delivering on the Promise.72 The reports identified many systemic problems, including Medicaid’s “institutional bias,” a huge unmet need for affordable and accessible housing, and the lack of trained staff to provide services to individuals with disabilities. While Delivering on the Promise was an enormously important undertaking that holds a great deal of potential for long-range planning to promote community integration, it did not offer many immediate solutions that would result in significant movement of individuals with disabilities into more integrated settings. NCD offered this criticism:
 

. . . most of the proposed agency actions consisted of technical assistance, training, research, demonstration, policy review, public awareness campaigns, outreach, enforcement of existing regulations, information dissemination, convening of advisory committees, and interagency coordination and collaboration. Systemic solutions, measurable goals, timelines, deliverables, and outcomes were lacking.73

In 2003, the President’s New Freedom Commission on Mental Health published a set of goals and recommendations to improve the broken mental health systems across the country.  Among the many integration-focused recommendations in this report, entitled Achieving the Promise,74 were demonstration programs that would provide community-based services to children now served in residential treatment centers, that would allow funding to follow an individual from an institutional setting to the community, and that would enhance supported employment opportunities for individuals with disabilities. Additionally, the report states:

The Commission calls for swiftly eliminating unnecessary and inappropriate institutionalization that severely limits integrating adults with serious mental illnesses and children with serious emotional disturbances into their communities. Federal, State, and local entities must continue to implement Olmstead and ensure full community integration for all individuals with psychiatric disabilities. The Commission urges the HHS Office for Civil Rights (OCR) to follow through on the current Olmstead voluntary compliance initiatives, including widely disseminating information about Olmstead compliance and promoting community care, technical assistance for States, and clarifying Medicaid policies that affect individuals with serious mental illnesses.75 

While there is a widespread recognition among federal agencies and federally convened bodies that much work remains to be done to ensure that individuals with disabilities are served in the most integrated settings appropriate to their needs, federal efforts have been focused primarily on identifying barriers and creating infrastructure necessary to achieve and sustain change in the long term. In the meantime, more immediate efforts are needed in order to ensure that, for many people with disabilities, the “promise” of community living comes within their lifetimes.                                                                                                        

IV.  State Olmstead Compliance Efforts

What is most striking about efforts to implement Olmstead is how much time has been spent by state-based coalitions to develop plans designed to facilitate community integration of individuals with disabilities and how little actual movement has been accomplished through most states’ planning processes. These planning processes were undertaken primarily as a response to Olmstead’s holding that states would have a defense to the integration mandate if they could demonstrate that they had a comprehensive, effectively working plan that moves individuals from institutional to community settings at a reasonable pace and is not driven by a desire to keep institutional beds full.76 

As detailed in the author’s previous Clearinghouse Review article in 2001, states’ Olmstead planning processes have typically yielded few meaningful results because they have lacked specificity in terms of time frames for identifying individuals who are unnecessarily institutionalized, assessing their needs, and moving them into more integrated settings, lacked requirements for appropriate assessment of individuals’ needs, and lacked commitments to fund plan recommendations.77 Additionally, no doubt because part of the purpose of these plans is to create a defense that states have done enough to avoid liability, many of the plans contain more recitations of past efforts than specific steps to be taken in the future.

As state-based Olmstead planning processes have continued to develop over the past several years, more has been accomplished. The latest report of the National Conference of State Legislatures (NCSL) on this topic indicates that 29 states have now issued Olmstead-related plans or reports.78 The report goes on to state, however, that budget shortfalls and declining revenues have continued to delay Olmstead implementation, and states were primarily able to implement low-cost or cost-neutral solutions. Those included: (1) efforts in 10 states to promote consumer-directed care, by allowing consumers to use government funds to manage care workers of their choosing (using existing community-based waiver funds and “Independence Plus” waivers), (2) efforts in 25 states to move more residents of nursing homes and institutions for individuals with developmental disabilities into the community or divert people from unnecessary institutional placements during hospital discharge planning (through pilot nursing home waiver or transition projects and “money follows the person” programs allowing funds to follow institutional residents into the community), and (3) consumer information and outreach efforts in 12 states.79 Little information is provided about the numbers of individuals who moved from institutional to community settings in each state.

 It is apparent that states have viewed plans to expand community-based services as a drain on resources rather than a cost saving measure, either because they have been unwilling to close institutional beds or they have considered the savings from closing institutional beds to be too remote to offset immediately the costs of increasing community services. The NCSL report notes that states cited the “dismal fiscal situation” as the most significant barrier to Olmstead implementation, and that new state appropriations would be needed to accomplish plan recommendations to increase the number of waiver slots or residential settings available in the community.80 Adopting a slightly less short-term financial view and a willingness to close more institutional beds, however, would make it possible for states to view compliance with Olmstead as a cost savings measure.81  As long as it is viewed instead as a depletion of needed resources, it is unlikely that Olmstead compliance will ever be made a significant priority.

The NCSL report also acknowledges that, during the past several years, “new initiatives to better serve people with mental illness have been minimal,” although 18 states described efforts to improve the quality of mental health services in NCSL’s most recent survey.82  However, most of these described initiatives do not contain discrete action plans and funding to move individuals from institutional to community-based settings. Moreover, some of the efforts highlighted have demonstrated something less than a strong commitment to Olmstead compliance. The report cites New York’s attempts to address the problem of substandard care for individuals with mental illness in adult homes.83 Indeed, after decades of abuse, neglect, and squalid conditions chronicled repeatedly in government investigation reports, and most recently in a series of front page New York Times articles,84 the state considered measures to expand community services and to improve conditions in the adult homes. Because of the inadequacy of these measures,85 an Olmstead lawsuit was brought challenging the state’s use of these large, institutional facilities to serve people with mental illness. The suit seeks to have the state develop community services for adult home residents in New York City who can and want to live in more integrated settings.86

The NCSL report also highlights Washington’s closure of 178 psychiatric state hospital beds. At least in Pierce County, where litigation is proceeding against the state concerning the closure of state hospital beds without concomitant development of community services, it appears that the bed closures were undertaken without adequate consideration of community service needs. Thus, the closures appear to have been more cost saving measures than genuine integration efforts. As a result, many residents of Western State Hospital have been discharged without appropriate services, only to be readmitted to the hospital within a short period of time.87

Another limitation of states’ Olmstead planning processes is that most of these processes do not address the placement of large number of individuals with disabilities in privately operated institutions that are funded, licensed, regulated, and used by states as part of their mental health or other disability service systems. The failure to consider privately operated facilities in Olmstead planning processes has permitted the transinstitutionalization of people from psychiatric hospitals, developmental centers, and other facilities to privately operated institutions, such as nursing homes and board and care homes. In some states, such as Connecticut, Ohio and Illinois, some privately operated nursing homes have even created locked units for individuals with mental illness or “privilege” systems that restrict mentally ill residents’ freedom to leave the facility.

The National Council on Disability, in its report on Olmstead implementation, observed that huge numbers of individuals with disabilities remain unnecessarily institutionalized in nursing homes, institutions for individuals with developmental disabilities, psychiatric hospitals, and board and care homes.88 NCD had little confidence in the Olmstead planning processes undertaken by states, observing that:

1. Plans do not consistently provide for opportunities for life in the most integrated setting as people with disabilities define “the most integrated setting”
2.  
3. The majority of states have not planned to identify or provide community placement to all institutionalized persons who do not oppose community placement.
4.  
5. Few plans identify systemic barriers to community placement or state action steps to remove them and few plans contain timelines and targets for community placement.
6.  
7. State budgets often do not reflect Olmstead planning goals.89
   
    

Conclusion

 It is encouraging that the overuse of institutional settings to serve people with disabilities and the inadequacy of community-based service systems across the nation have been recognized at both federal and state levels.  Despite recognition of and attention given to this issue, however, startlingly little movement has occurred. As documented by the National Council on Disability, the number of individuals with disabilities who remain unnecessarily institutionalized is staggering. The federal government’s efforts are a helpful start in planning for long term integration efforts, but they have been geared toward identifying barriers and helping states take initial steps to create the infrastructure needed for change. They have not promoted large-scale movement of individuals into community settings. State Olmstead planning efforts have been repeatedly stalled by budget crises and, as long as Olmstead compliance is viewed as a drain on resources, such efforts are unlikely to promote the development of sufficient community services to serve widespread unmet needs. While litigation in this area has proved complex and difficult, it has yielded fruitful results in many cases, and has been the most viable avenue for many people with disabilities to obtain desperately desired liberation from institutional environments and receive needed community services.