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Health Policy for Medically Fragile Children: An Analysis of Factors Impacting Care in Texas

Publication Date

U.S. Department of Health and Human Services

Health Policy for Medically Fragile Children: An Analysis of Factors Impacting Care in Texas

Executive Summary

Dottie J. Carmichael, Texas A&M University

Dena Stoner, Texas Health and Human Services Commission

Cheryl B. Silver, Texas Department of Health

March 1996

This report was prepared under a grant between the U.S. Department of Health and Human Services (HHS), Office of Disability, Aging and Long-Term Care Policy (DALTCP) and Texas A&M University. For additional information about the study, you may visit the DALTCP home page at or contact the office at HHS/ASPE/DALTCP, Room 424E, H.H. Humphrey Building, 200 Independence Avenue, SW, Washington, DC 20201. The e-mail address is: The DALTCP Project Officer was Kathleen Bond.


Increasing rights for people with disabilities, expanded definitions of eligibility for government assistance, growing impetus for health care reform, and an overall climate of fiscal retrenchment in state and federal legislatures have combined to create new and challenging questions concerning the delivery of services for medically fragile children. These converging policy currents will determine the nature of the service system for medically fragile children in the future. This study seeks to provide a clearer understanding of the issues.


Expanding Rights for People with Disabilities. Recent legislation has increased awareness of the rights of all people with disabilities. During the last decade, a series of court decisions have re-defined service eligibility and significantly expanded benefits. The recent passage of the Americans with Disabilities legislation, the US Department of Education's Individuals with Disabilities Education Act, and state and federal health care reform initiatives have created a growing sensitivity to quality-of-life issues, empowerment, and the right to self-determination among individuals at all levels of disability. These social and legal trends place greater responsibility on state and local governments to provide more high quality services capable of meeting the unique needs of children with disabilities as well as other groups.

Barriers in the Current Service System. Unfortunately, traditional public service systems in the US are largely comprised of disincentives and barriers which discourage decentralized, client-focused delivery models and inhibit self-determination among service recipients and their families. Though incremental change is beginning to occur, individuals with disabilities continue to be constrained by an outmoded service philosophy based on restricted options.

For example, the current eligibility structure for most Medicaid programs actually encourages institutional or other out-of-home placements. Many families earn too much money to meet criteria for assistance, yet cannot afford to purchase equipment and services needed to keep severely disabled family members at home. Before a medically fragile child can receive financial assistance for home-based care, the family must first deplete their personal resources, creating powerful incentives favoring institutionalization. In Texas, it is possible to avoid this outcome through the Medically Dependent Children Program (MDCP)--a Medicaid waiver program described in Chapter 2 of this report. However, enrollment has been limited by state policymakers who fear the potential of uncontrolled costs associated with making noninstitutional care alternatives an entitlement.

Though families with private insurance may have a somewhat broader range of choices, they also typically face pressures toward institutional care from insurers who limit or refuse reimbursement of services necessary for high-quality in-home care. These costs are pushed back on the family who, again, may not be able to afford to keep their child at home. To the extent that private insurers can encourage institutional care, they are able to defer costs to Medicaid.

Targets for Reform. With the current impetus toward restructuring the health care system and increasing rights for individuals with disabilities, new incentives for reform are building. Long-standing policies of prescriptive services for medically fragile children are being challenged by a new emphasis on (a) increasing state and federal supports for community-based care and (b) providing greater flexibility in client choice of services. At the same time, these client-oriented policy reforms must be balanced by an acknowledgment that government fiscal resources are limited.

While many of the restrictive regulatory guidelines for Medicaid services to individuals were developed with cost containment in mind, through careful policy construction it should be possible to make current services more responsive to program participants while at the same time reducing costs. This is a particularly important objective for children with severe disabilities because of the relatively high cost of care and the rising numbers now eligible for public programs.


In order to inform discussion pertaining to health care reform and expanding services for people with disabilities, the Public Policy Research Institute (PPRI) at Texas A&M University, in collaboration with the Texas Health and Human Services Commission (HHSC) was funded by the US Department of Health and Human Services to conduct a state-level research. Other project partners included the Texas Department of Health (TDH), the Texas Department of Human Services (TDHS) and the Texas Department of Mental Health and Mental Retardation (MHMR). During Summer 1995, a telephone survey was conducted with the parents of medically fragile children in Texas. Questions focused on the costs, incentives, and outcomes for families, communities, and government associated with current Medicaid policy.

Organization of the Report. This report summarizes the purposes, methods, and findings of the study. Following this introduction, the research methodology is set forth in Chapter 2. A detailed description of the three study groups is provided in Chapter 3. The remaining chapters present substantive findings.

Attention initially focuses on the impact of insurance status on care. Chapter 4 demonstrates how the kind of insurance children have, if any, can effect the amount and quality of health services received. Chapter 5 examines the ways in which costs for the care of uninsured children can be shifted to other service systems including hospitals, states, schools, and families.

The next sections consider the advantages and disadvantages of community-based care relative to traditional institutional alternatives. Chapter 6 describes the "value-added" features of community care, including analysis of the contributions made by families, community sources, and private insurers. Differences in health care quality and access, as well as social opportunity, among children in institutional and community care placements are discussed in Chapter 7.

Chapter 8 evaluates the factors that influence the decision whether to place a child in institutional care or keep him or her at home, while Chapter 9 examines the kinds of supports families would choose if they could select the support services they most want and need. Chapter 10 concludes with a summary of the major findings. Results highlight the importance of insurance coverage for improving health care while controlling costs. They also suggest a number of ways to make the health care system more responsive to the needs of medically fragile children.