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reimbursement. To limit ICF beds, a state must demonstrate that the limit (1) does not discriminate against patients requiring ICF care; (2) does not interfere with patients' right to freely choose providers; (3) does not violate statewideness requirements, including the requirement that patients be afforded reasonable access on a geographical basis; and (4) does not prevent, by virtue of fee structures, participation of a sufficient number of intermediate care providers in the program so that eligible persons can receive the care included in the plan, at least to the extent it is available to the general population. 13

It appears that, if a facility challenged a state's denial of certification, assuming the facility met federal and state regulatory standards, HCFA would force the state to demonstrate that each of these criteria had been met. However, many states have nursing home bed shortages, especially of Medicaid-certified beds, and it is unlikely that these states, at least, could satisfy these criteria.


At least two states, Connecticut and Illinois, have tried to restrict Medicaid eligibility for people with continuing care contracts. Connecticut's statute14 was found unconstitutional in Rowland v. Maher, 15 which held that applicants for Medicaid are entitled to assistance under federal law unless the contract is an asset actually available to them. Illinois's statute16 and implementing regulations were upheld by the Illinois Supreme Court in a decision that does not consider federal law. The Connecticut result appears to be the correct one. In addition, states might restrict Medicaid eligibility for residents by claiming that payment of a large entrance fee is a transfer of assets for less than full consideration, which is prohibited by the Medicaid statute.18 However, it seems unlikely that a resident would transfer his or her assets to a CCRC simply for the purpose of becoming eligible for the Medicaid program.

Apparently, CCRCs increasingly are limiting their promises to provide health care. If entrance fees are paid from the liquidation of home equity, as is generally suggested, and if monthly fees are below the monthly cost of nursing home care, it certainly is possible that CCRC residents could become eligible for Medicaid when they enter a nursing facility.

Several state laws provide that a CCRC must include a statement in its application for a certificate of authority that the CCRC is able to fully perform obligations under its contracts. 19 It is no longer common, however, for CCRCs to guarantee the provision of health care regardless of ability to pay. Thus, such

13. Id.

14. CONN. GEN. STAT. ANN. § 17-116 (West 1975 & Supp. 1986). Connecticut's statute permits medical assistance for people with life care contracts entered into prior to 1957 with a charitable institution in which they reside, if the consideration would have been used up at the rate of $75 per month and the facility is unable to perform on the contract.

15. Rowland v. Maher, 404 A.2d 894, 176 Conn. 57 (1978) (Clearinghouse No. 25,577). See also Buckner v. Maher, 424 F. Supp. 366 (D. Conn. 1976) (three-judge court), aff'd, 434 U.S. 898 (1977) (Clearinghouse No. 17,344).

16. ILL. ANN. STAT. ch. 23, para. 3-1.5 (Smith-Hurd 1968, Supp. 1986).

17. Cornue v. Department of Pub. Aid, 354 N.E.2d 359, 64 III. 2d 78 (1976).

18. 42 U.S.C. §§ 1396p(c) and 1382b(c).

19. See, e.g., ARIZ. REV. STAT. ANN. §§ 20-1801 to -1812; Cal. HEALTH & SAFETY CODE §§ 1770-1791; COLO. REV. STAT. §§ 12-13-101 to -119; MINN. STAT. ANN. §§ 80D.01-.20; Mo. ANN. STAT. §§ 376.900-.950.

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The essence of the continuing care agreement is the resident contract. States do not generally regulate the content of the contract, except to require disclosure of certain policies of the CCRC. Therefore, the resident contract has greater legal significance than a nursing home contract, provisions of which must be read in conjunction with federal and state law.21 Although one could argue that a CCRC contract is less adhesive than a nursing home contract because a CCRC contract is entered into voluntarily, it is still unlikely that individuals bargain for specific terms of their agreements with CCRCs.

Although one could argue that a CCRC contract is less adhesive than a nursing home contract... it is still unlikely that individuals bargain for specific terms of their agreements with CCRCs.

Troubling issues that arise in resident contracts include: Provisions allowing a resident to be moved from an independent living unit to the health center, both temporarily and permanently. Such a move has financial implications for the resident and the facility, as well as implications for the resident's autonomy and right to participate in medical decisions. Resident contracts commonly provide that the facility is the ultimate decisionmaker.

Provisions allowing the facility to terminate the agreement under certain circumstances. Resident contracts use such terms as "disruptive," "dangerously ill," or "disturbed" to describe conditions permitting termination of the agreement. Again, the facility may be the ultimate decisionmaker. Provisions allowing the facility to terminate the agreement for inability to pay.

A New Jersey law that became effective March 2, 1987, addresses some of these issues. 22 One section provides that a

20. A former staff person of New Jersey's Public Advocate, Ed Tetelman, said that that office pressed for a provision in the recently effective New Jersey law that would have required CCRCs to establish a fund to pay for the health care of residents who could no longer pay. That effort was defeated. Telephone conservation with Ed Tetelman, Former Staff Member of New Jersey's Public Advocate, (Mar. 3, 1987).

21. See, e.g., Glengariff v. Snook, 1984-1 Medicare & Medicaid Guide (CCH)¶33,605 (N. Y. Sup. Ct. Jan. 4, 1984). Protections of the Social Security Act cannot be waived by contract.

22. Continuing Care Retirement Community Regulation and Financial Disclosure Act, ch. 103, § 1, 1986 N.J. SESS. LAW SERV. 105 (West 1986).


CCRC cannot dismiss a resident without "just cause."'23 If a dismissal is due to a resident being a danger to him or herself or others, certain protections apply.24 The written determination, signed by the medical director and administrator, must state (1) that it is made in good faith, (2) the reasons the resident is a danger, (3) the reasons no alternative to dismissal exists, and (4) the reasons that notice of less than 60 days is appropriate. 25 The New Jersey law further states that inability to pay cannot be "just cause" for dismissal unless the entire unearned entrance fee (defined in the law) plus third-party insurance benefits are "earned" by the facility.26 A resident dismissed for inability to pay is given 90 days from the date of his or her failure to pay before the resident must move. Finally, a

23. Id. at § 15d. 24. Id.


25. Id. In general, the agreement may be cancelled upon giving 60 days' notice. Id. at § 15a7.

26. Id. at § 15e.

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CCRCS raise consumer protection and resident rights issues that can have a significant impact on a state's long-term care policies. To date, state regulation has focused on ensuring the solvency of the facilities and disclosure of information needed by potential residents to make informed choices. Such regulation may go a long way to protect CCRC residents' substantial investment. However, issues of individual rights, such as protecting the due process rights of CCRC residents and ensuring that CCRCs are able to assist residents who cannot continue to pay for monthly charges, remain largely unaddressed.

Patricia Nemore

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Materials submitted for this section, or inquiries concerning items appearing herein, should be directed to Michael Leonard, Management Department
Editor, National Clearinghouse for Legal Services, Inc., 407 S. Dearborn, Suite 400, Chicago, IL 60605, (312) 939-3830.


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Seven years ago, Gerry Singsen wrote about the difficulties of coping with reduced Legal Services Corporation (LSC) support.' He likened the situation to the fable of the ant and the grasshopper, with their opposite reactions to the coming of winter's scarcity. To update that fable to represent the legal services situation in 1987, one would situate the ant and the grasshopper in a field ravaged by drought. In this way, the grasshopper would still be punished for his lack of foresight, and the industrious ant would no longer be guaranteed to survive the winter despite his most valiant efforts.

By now the legal services community has already been through a number of funding cutbacks, most recently as a result of the Gramm-Rudman budget-balancing initiative. In order to survive over the past few years, legal services programs have had to experiment with any number of responses to fund scarcity, with varying degrees of success. Initial reductions in support prompted programs to cut away any "fat" in their budgets and then some, and the following years of uncertainty and further reductions, followed by the Gramm-Rudman cut, have taxed even the most imaginative budgeters. Fund balance limitations have guaranteed that a program cannot maintain what in the profitmaking sector would be considered a conservative cushion against adversity, making the effort to creatively approach the situation a matter of faith winning out over fear.

This article will touch on a variety of cost-containment mechanisms the National Consumer Law Center (NCLC) has had some experience with over the past few years, in the hope that other programs can benefit. As NCLC is a national support center, some of the alternatives will be inapplicable to local programs. It is hoped, however, that at least one of the following ideas will bear fruit for the reader.

It is absolutely essential to have the cooperation of the staff, which means that they must be involved in the planning

Nina Coil was the Business Manager at the National Consumer Law Center, from 1981 until 1987.

process. Most of the staff will have had little or no experience in budgeting, although nearly everyone will assume (erroneously or not) that they are as competent as the professional budget manager to propose cutbacks, especially if they have dealt with the issue in prior years. This means that the staff member who has responsibility for fiscal matters, and the manager who has the ultimate decisionmaking authority, must be prepared to go through an extremely difficult and often frustrating education process.

The following analysis of expense reduction possibilities is divided into the familiar personnel and non-personnel categories. It should be noted, however, that reductions in personnel have an effect on the non-personnel portion of any budget, although that effect is hardly proportionate, and the budget manager will have to be ready to calculate the relationship of personnel cuts on non-personnel budget items, a topic addressed in greater detail in the discussion of layoffs.

II. Personnel

The first place anyone looks for budget reductions is in personnel costs. This is sensible, in that most legal services programs devote some 70 percent of their budgets to personnel,2 and that therefore one can assume that material savings can be effected by reduction in this category. Personnel also happens to be the most emotionally charged budget area, and most of the non-fiscal staff will have some very firmly held although not necessarily rational reactions to budget cuts here. There are a number of ways to go about reducing personnel costs, ranging from the drastic and immediately excruciating to the less extreme but demoralizing over a long period of time. The most extreme, of course, is the layoff.

Many people assume that by reducing personnel costs through layoffs the organization will also effect a proportionate reduction in its non-personnel and other shared costs. In frightening times of budget crunches, simple, round numbers will be favored, despite their potential for inaccuracy, because of the erroneous sense of security they offer the inexperienced analyst. Unfortunately, laying people off is costly both in the short and long term (in dollars as well as morale), and layoffs do not necessarily result in clear-cut, proportionate reductions in other


For example, those without a great deal of budget experience will tend to assume that a 10-percent reduction in

1. Singsen, Management of Scarce Resources (Or How to Be a Better Ant), 13 CLEAringhouse Rev. 550 (Nov. 1979).

2. In 1985, legal services programs nationally budgeted 71.1 percent of funds for personnel salaries and benefits. LEGAL SERVS. CORP., 1985 FIELD PROGRAM DATA 18.

advocacy staff means a 10-percent reduction in every other budget line as well. The budget manager may have to explain line by line the possible effects of such cutbacks and where they will and will not apply. For instance, having 10 percent fewer attorneys does not mean equipment maintenance costs are going to go down by 10 percent, although if the reduction in staff is large enough the program may be able to get rid of some equipment, or to have other organizations share its use and


As another example, if you have 10 attorneys and 3 secretaries sharing the office workload, and you lay off one attorney, that does not mean you can reduce your secretarial expense by 10 percent. On the other hand, it may be possible to reduce the secretarial staff proportionately if you have had to lay off enough attorneys (in this case, say three of them). Or, staying with the 10-percent reduction in advocacy staff, it may be possible to reduce the need for hiring temporary support personnel, which does to some degree, though not necessarily a proportionate one, reduce the support staff expense line.

As you continue with this exercise through the various budget line items you will find that there are no magic formulas, although some patterns will emerge. Cutting back expenses necessitates combining various mechanisms and requires a willingness to try a series of "what ifs." The extra work that results from the absence of a direct correlation or a simplistic computation method can, however, be used as a spur to creativity. If you look at each expense line and attempt to apply every method possible to reducing it, you may be able to be more effective for your program than if you could reassure the staff with an easily understood, formulaic solution.

To return to the idea of layoffs, in computing the budget savings from a conscious reduction in staff, it is important not to lose sight of the cost of laying people off. NCLC, for instance, has a policy stipulating significant advance notice of an impending layoff to the staff person involved, which means that there are delays in implementation that must be calculated into the net effect to the program. Another potential expense to be worked into the calculation is that a humane layoff approach might include offering the soon-to-be-terminated employee the facilities of the office for the purposes of finding a new job, as well as an offer to pay for some limited job training. And even after termination, the program may have to pay a one-time cost for unemployment benefits, either directly out of its coffers to pay for the claim as a reimbursable account (if your program is insured through the National Legal Aid and Defender Association insurance policy), or through an increase in the state unemployment tax rate the following year.

These are just the fiscal effects. There is significant trauma involved in both partial and full layoffs, to the terminated employee as well as to those whose jobs have not been cut, which has an enormous impact on the productivity of the program, both short and long term. Terminating an employee results in a loss to both parties, which has a significant emotional effect likened by some to the stages of dealing with death as described by Elizabeth Kubler-Ross.3

3. Lieberman, Some Notes on Managing a Major Change in a Legal Services Program (June 1981).


Not only is it disheartening to have been involved in a decision that casts someone out of the program, but the effect on morale does not end with the departure of the laid-off employee. Those whose jobs have not been cut can hardly relax, knowing that if it happened once it could happen again. Even worse, layoffs always cause the workload of those left behind to increase, despite good intentions and attempts to control such increases (except for the rare case in which a layoff eliminates an entire function). Employees often experience a decrease in overall productivity resulting from the emotional strain of insecurity combined with pressure to do more work than ever before.

Layoffs also make programs choose between the equally valid priorities of seniority and experience, as opposed to affirmative action, and the greater dollar savings of laying off a higher paid staff member as compared with the effect on the program of the loss of experienced personnel. And no matter how sensitively a layoff is handled, resentment is inevitable, as is the confusion over the distinction between a cost-containment measure vs. cutting dead wood. Despite all the downside risk from layoffs, however, they may be the best way to maintain a program's existence. But the cost savings and morale effects must be examined carefully to make sure that the organization will maximize its ability to survive.

Short of layoffs, one of the first methods that comes to mind when trying to contain costs is cutting salaries, whether by adjustments to salary scales or by reducing hours. The idea of a salary cut often seems appealing both because the dollar effect can be easily computed and because it puts off staff reductions (although attrition is often inadvertently encouraged by this approach). It should be noted, however, that the implications for morale of taking this step are significant.

Salary cuts have a deleterious effect on staff for a long period (even years) beyond the period during which such cuts are endured, and unless an organization in fact wants to encourage attrition, this move should not be taken lightly. Some will view salary cuts as the result of management's unwillingness to take the more immediately painful step of staff reductions. This perception can decrease respect for management at a time when it is more crucial than ever for the staff to be able to rely on management's ability to direct the course of the program.

Once staff reductions have been accepted as a necessary step, management should begin with an examination of whether or not existing staff is being fully utilized. In other words, are there tasks that can reasonably be redistributed, and staff members able to handle the addition to their workload, in such a way as to eliminate the need for someone's position? This examination should begin at the level of advocacy staff. Reductions at that level are far more material by themselves, as well as having some effect on other costs.

The savings from advocacy staff reductions may have to be offset by expenses for part-time or seasonal personnel if the workload cannot be reduced without negatively affecting the program, and if redistribution of the workload is not fully possible. Recent law school graduates, in addition to law school students, are a source of potential temporary and part-time staff, although the advocacy staff must plan to invest supervision time in order to make this help effective.


The possibility of having to supplement staffing with temporary help will also hold true for any support staff cuts. The cost of this type of help, if hired directly by the program, consists of hourly charges, FICA tax, plus the possibility of unemployment benefits or an increased employment tax rate, whereas the alternative of using temporary agencies as a source carries a higher hourly price tag. It may be that relying on slightly higher cost agency personnel, at least in support staff supplementation, keeps costs down overall, in that the expense is more immediately obvious. It is far too easy for non-fiscal staff members to forget the hidden costs of direct hires, and the result may be a willingness to let someone put in more hours than might otherwise be deemed necessary to the completion of a task.

One of the advantages of part-time or seasonal hires is that reductions in this type of expense can be made in future years without the same sort of emotional upheaval as is associated with laying off permanent staff. But such cutbacks must be closely examined, especially in light of any other advocacy staff cuts, in terms of fulfillment of work plan requirements.

For many programs, excellent (and therefore expensive) fringe benefits help to make up for salaries. This area of the budget merits close scrutiny, although by far the largest single component is social security tax, which is not under management's control. Employee insurance policies should be put out for bid as a matter of course, to ensure that the program is paying the lowest possible premium for a given set of coverages.

Making cuts in the coverages themselves, or forcing employees with families to pay an increased percentage of their dependents' coverage, tends to be regressive, and effects morale nearly as much as salary cuts. Eliminating "frills" such as coffee supplies, while hardly as difficult for staff to live with as decreasing health coverages, has the danger of appearing excessive and of worsening a grim work environment.

Managing Support Staff

The American Bar Association, Section of Economics of Law Practice, recently published The Art of Managing Your Support Staff, a 353-page manual offering practical ideas for the solo practitioner to the large, multi-office firm on how to manage support staff. The manual is divided into four sections: Recruiting, Hiring and Staffing; Training and Utilization of Law Office Support Staff; Evaluating and Compensating; and Managing Law Office Support Staff. Chapter topics include group interviewing, in-house training programs, labor relations in the law office, dealing with absenteeism, flex time in the law office, and stress and productivity in the law office. The Art of Managing Your Support Staff is available for $52.95, plus $2.00 postage and handling, from the American Bar Association, Order Fulfillment 511, 750 N. Lake Shore Dr., Chicago, IL 60611. When ordering, refer to product code no. 5110202.

As a rule of thumb, those cuts that seem the most benign also tend to result in small expense reductions and disproportionate resentment. As much as staff may think that staff reductions are painful to undergo, anything less drastic often seems to be an unnecessary hardship for the amount of savings achieved.

III. Non-Personnel

Staff reductions result in some degree of cost savings in non-personnel expense categories. Each budget manager will have to examine the interrelationships between personnel and non-personnel expenses to determine the extent to which cuts in the first will result in savings in the second. Beyond this, there are some categories of expense that merit special attention.

One of the largest budget items in many programs is space. With or without staff reductions, the organization should attempt to cut back on unused office space and to make that space income-producing if at all possible. Dead files may be more cheaply stored elsewhere, and excess furniture, which tends to go along with unused space, can be sold for a one-time income source to the program.

Another large budget item for a national organization is telephone expense. In this era of the AT&T divestiture, there are a staggering number of different vendors and products available, such that determining the most cost-effective combination can be a daunting task.

Having chosen the most cost-effective long-distance company or combination thereof, any further savings are up to the staff. Some measures that help in this regard are making sure your vendor(s) provide accounting codes, so that staff can easily reimburse personal telephone usage, and encouraging the staff to keep local as well as long-distance calls as short as possible. In addition, incoming long-distance calls should be accepted when they come in and not returned at the program's expense.

Another traditionally large line item for national organizations and some other programs with large service areas is travel. Staff travel can be controlled through a serious examination of the need for the expense before any trip is approved. In addition, making sure that clear limits on expense reimbursements are understood before a staff member travels can help prevent resentment and misunderstandings that could become expensive, either to the program or the staff member or both.

The organization's travel business can also be put out for bid among local travel agencies. Some agencies are more willing than others to make the extra effort to come up with the least expensive reasonable alternative. It will be necessary to repeat this process every few years or so. Having won your program's business, the travel agency staff may be less diligent over time about finding low-cost alternatives, as the profit motive wins out over service to your program.

4. For those organizations that have a large volume of long-distance calls, I recommend contacting the Telecommunications Cooperative Network (TCN), 505 Eighth Ave., New York, NY 10018. TCN is a nonprofit organization, begun in part with funds from the Ford Foundation, that offers discounted long-distance rates to its nonprofit members for a small fee.

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