Money Follows the Person

States are facing major budget shortfalls. Major Medicaid cuts are being proposed at the federal level and are in the cards for most, if not all, states. One of the major barriers to Freeing Our People and complying with the Supreme Court’s Olmstead decision is funding. As states look to deal with their budget crises and restrict their spending, they are limited by funds that must be spent. Since nursing homes are entitlement, states must fund these services – and with scarce dollars states will look to community services to remain at the same funding level if not take all the cuts.

The President’s New Freedom Initiatives proposals for this year included a Money Follows the Person demonstration project, to try and get states to try the idea of letting the money follow the person. Discussions of the President’s FY 2005 Budget and New Freedom initiatives sometimes confuse the Medicaid reforms that involve grants to the states and the Money Following the Individsting funds more flexible.


  • The Money Follows the Person is an initiative that is part of the President Bush’s proposal for a Money Follows the Person Program. It is included in the President 2005 budget request a s a major component of the President’s New Freedom Initiative to integrate people with disabilities into the community.
  • Gives people the freedom to choose where they want to live. It would allow us to take advantage of opportunities that other Americans take for granted – to take a walk when we want to, to choose what we want to eat, when we want to go to bed, to have a job, visit family and friends and be part of our communities.
  • It is a win-win. People with disabilities get the choice to live in the community and states get the needed resources to rebalance their long term service systems to increase the availability of community based services.
  • The Administration’s proposal provides 350 million dollars to states per year for five years for a total of 1.75 billion dollars. It provides 100% of the cost for the first year that a person moves from an institutional setting into the community. After that, the federal government pays its regular Medicaid rate.
  • This initiative will help states comply with the ADA and the Olmstead decision. The Supreme Court said in Olmstead that needless institutionalization was discrimination under the Americans With Disabilities Act.

MFP has many benefits

  • Cost in community is 2/3 on average cost of nursing homes or other equivalent institution. (compares nursing home costs to their waivers, and ICF-MR costs to their waivers.)
  • There won’t be backfill or woodwork because nursing homes are an entitlement and there are no waiting lists for nursing homes. ICFs-MR can close the beds when people leave.
  • Doesn’t bump people on waiting lists because uses funds paying for person in the nursing home or other institution, not waiver funds.