Funding Supported Employment: Are There Better Ways?

This article describes different methods used by state Vocational Rehabilitation agencies to fund time limited supported employment services. Findings are reported from a survey of 385 vendored supported employment provider agencies regarding types of reimbursement method used, the influence of different types of methods on key consumer outcomes, and recommendations for improving funding systems. The findings consistently pointed to significantly more positive response of vendors to funding methods that incorporate negotiated rates at the individual provider level as compared to statewide fixed rates for all vendors. Statewide fixed hourly rates were found to discourage both conversion to community integrated employment opportunities and the reopening of supported employment cases after job loss. The same response pattern held true for respondents' perceptions of reimbursements covering the costs of services. Statewide rates for specified outcomes or for daily, weekly or monthly service units were found to cover the cost of services at levels significantly lower than the other funding methods. Few Vocational Rehabilitation (VR) programs have grown as rapidly as supported employment, from fewer than 10,000 participants at the program's inception in 1986 to over 135,000 in 1995 (Wehman, Revell, & Kregel, 1997). To a substantial degree, this growth has been spurred by state systems change grants funded by the Rehabilitation Services Administration (RSA) under Title III of the Rehabilitation Act. The pur-pose of these grants was to modify existing service delivery systems for persons with severe disabilities to promote supported employment as an alternative to sheltered employment, work activity, and other segregated day programs (Wehman, 1989). States typically used these grants to build system capacities by increasing the number and competencies of vendored service providers, providing regional consultation services, and developing data management and program evaluation systems (West, Revell, & Wehman, 1992). Supported employment is a VR service option designed for individuals who historically have not been given the opportunity to work competitively, or who have only worked inter-mittently in competitive settings, due to the severity of their disabilities (Federal Register, August 14, 1987). Supported employment com-bines time-limited training and adjustment services funded through the VR system, followed by ex-tended support services funded through another source (Wehman & Kregel, 1985). This collabora-tive support differentiates this option from other types of VR programs. Identification of the most effective funding strategies for supported employment has long been an important issue for program administrators and advocates. Previous research on supported em-ployment funding has focused on two areas: funding amounts and sources (McGaughey, Kiernan, McNally, Gilmore, & Kieth, 1994; Revell, Wehman, Kregel, West, & Rayfield, 1994; Sale, Revell, West, & Kregel, 1992; Wehman & Revell, in press), and cost-benefit analyses of supported employment in relation to alternative programs (Baer, Simmons, Flexer, & Smith, 1995; Hill et al., 1987; Lewis, Johnson, Bruininks, & Kallsen, 1993; McCaughrin, Ellis, Rusch, & Heal, 1993). With regard to the first area of research, funding for the program has increased dramatically since the program’s inception in 1986. For example, in 1986 federal and state VR agencies devoted approximately $1.3 million to supported employment agencies and consumers. In 1995, the total was over $133 million (Wehman et al., 1997). Perhaps most indicative of the program's impact on the vocational service system, funding from ex-tended services agencies has grown from $18 million in 1986 to over $366 million in 1995 (Wehman et al., 1997). Thus, each VR dollar leveraged an additional $2.75 from extended service funding agencies to provide ongoing support. Benefit-cost studies, the second predomi-nant area of funding research, have tended to find that these expenditures are cost-beneficial to con-sumers and taxpayers in comparison to alternative programs (Baer et al., 1995; Lewis et al., 1993; McCaughrin et al., 1993; Thompson, Powers, & Houchard, 1992). The results of these analyses have generally shown that supported employment programs that focus on individual, as opposed to group, placement models improve consumer employment outcomes, cost less than other adult day programs, and generate savings for taxpayers. Steps Involved in Developing Funding Mechanisms for Supported Employment Funding agencies use a variety of approaches to purchase services. In the "time-limited" phase of supported employment, job development, place-ment, the arrangement of natural supports, and initial skill acquisition are generally funded through the VR system. After the individual has adjusted to the job setting, "extended services" are arranged and delivered through funds provided by another source, such as state mental health, mental retardation, and developmental disability agencies (Wehman & Kregel, 1985). All approaches to funding time-limited services have three common elements. These com-ponents include: (1) defining the specific services, (2) defining the unit of service, and (3) establishing a cost for the defined service unit. Defining services. Supported employment programs frequently provide community-based assessments; job development and placement services; job site training and support services necessary to assist the consumer to become stable in employment; related skill training and support that is integral to the individual’s employment success (e.g., transportation, money management, etc.); the identification and arrangement of natural supports both on and away from the work setting; and extended supports services for long-term job maintenance. Defining service units. Once the services are identified, funding agencies can then define service units which subsequently form the basis for reimbursement. Service units are generally based on time, such as an hourly or daily unit of service, or based on a desired service outcome. For example, when conducting community based assessments for supported employment candidates, a local vendor of supported employment services can be reimbursed for the time involved in completing the assessment (time-based) or paid a flat fee based on the completed assessment (outcome-based). Establishing a service unit cost. Once the unit of service is established, the final step is assigning a cost to the service unit. In funding approaches based on the amount of time the service is provided, costs are usually assigned on a fixed or negotiated basis. In a fixed rate system, the funding agency establishes a non-negotiable statewide fee level for all vendors of a specified service. In a negotiated rate system, the funding agency negotiates the fee rate for specified services with each vendor. Negotiated rates may be based on a specific cost formula established by the funding agency, or alternatively, through formal or informal discussions at a local/regional level between the prospective vendor and the funding agency. In purchase of service systems using an outcome-based unit, the funding agency sets a fee for a series of services. For example, typical ser-vices and fees within the employment arena might include a community based assessment ($1,000), job development and placement ($1,500), and successful employment for a minimum of 90 days ($2,500). The vendor receives payment only if the service recipient successfully achieves a positive outcome from the service. These fee levels can be based on historical cost patterns or projected vendor budgets and can be heavily influenced by cost control efforts of the funding agency. The previous section described the general process used by funding agencies to establish rates for services. This section will document how these principles have been applied in the funding of sup-ported employment services. Funding methods currently used by state agencies to fund time-limited services fall into three broad categories: fee for service agreements; contract or slot-based funding; and performance or outcome-based ap-proaches. Each of these will be briefly summarized below. Fee for service agreements. In a fee for service agreement, the vendor receives payment of an agreed upon fee amount for the specific intervention time during which an employment specialist is engaged in providing services to a specified individual with a disability. This method breaks down the unit of service into small incre-ments, typically an hour, and tracks the length/ intensity of service provided to each participant. Three fee for service alternatives are used by VR agencies. In the first, a statewide fixed hourly rate, the funding agency assigns a rate for a service to all vendors. The recent mean average fixed hourly rate, calculated from rates reported by 17 VR agencies nationwide, was $24.12 (Wehman et al., 1997). The second alternative, a negotiated hourly rate based on overall program costs, establishes a vendor specific rate with probable variations in the assigned rate from vendor to vendor based on differences in program costs and/or community level cost standards. The recent mean average negotiated hourly rate, calculated from rates reported by 25 VR agencies nationwide, was $31.47 (Wehman et al., 1997). The third alternative, negotiated hourly rates based on need and complexity of services, usually involves an effort by the funding agency to encourage vendors to respond to the needs of underserved persons by negotiating a higher hourly fee rate for the provision of comparatively more complex services. The same core service might carry different rates for persons with a severe and persistent mental illness or for persons who are considered severely mentally retarded. Contract or slot based funding. Contract or slot-based agreements define a unit of service on a daily, weekly, monthly, or annual basis and make payments to the vendor based on participation by the individual with a disability in the service for that defined unit. In contrast to the hourly fee for service agreements, units of service in contract/slot based funding are not designed to specifically track intensity of services provided at an individual participant level. The contract/slot based approach funds services through agreements for services to a specified number of individuals in contrast to the individual participant service authorizations used with the hourly fee method. Three types of contract/slot-based methods are used by VR agencies. The first, statewide fixed rate established for a daily, weekly or monthly unit of service, involves the funding agency establishing set rates used by all vendors of the same service. The second is negotiated rates where rates estab-lished with different vendors for the same service vary based on vendor costs and/or community level rate standards. The third is yearly contracts for a specified number of units of service or slots where the funding agency sets a contracted annual target service level with the vendor. For example, the funding agency might contract for ten supported employment slots with a vendor, and it is the vendor's responsibility to keep those slots filled with appropriate service recipients during the con-tract year. A second example involves the funding agency contracting for a specific number of successful supported employment placements. The vendor agency is then responsible for organizing its resources during the contract year for achieving these placements. Monthly payments are usually made to the vendor at 1/12th the annual contract amount, and this payment is not based on the specific levels of service or outcomes achieved for any one month. Performance or outcome-based ap-proaches. In performance or outcome-based approaches, key service milestones are set with a payment level identified for each achieved mile-stone. Payments are made to the service vendor when the participant achieves each milestone. When a statewide fixed outcome rate is used, the funding agency defines the service outcomes and sets a specific fee for each outcome. In a nego-tiated outcome based approach, the funding agency might consider cost information from a vendor before finalizing a rate agreement. For example, a funding agency might establish a series of payment steps starting with assessment and goal setting and continuing through job placement, job retention for specified time periods, and finally successful movement to extended supported employment services for purposes of long term job maintenance. The funding agency would negotiate an overall reimbursement amount per individual who successfully completes the full series of out-comes. A series of payments would then be made to the vendor as the individual with a disability completes each of the defined outcome steps. These payments might be a set percentage of the overall amount, such as 15% for a successful assessment outcome or 20% for a successful job placement. The type of funding mechanism used by state agencies to reimburse local provider organiza-tions for the delivery of supported employment services has more than just esoteric administrative implications. Wehman and Kregel (1995) have described a number of ways in which funding mechanisms can have a dramatic effect on the quality of supported employment services. For example, funding mechanisms may create in-equities in reimbursement rates between supported employment and facility-based vocational pro-grams such as activity centers and sheltered workshops, making it less likely that agencies will convert segregated employment programs into inte-grated, communitybased employment alternatives. Funding approaches that limit pre-placement activities such as person-centered planning and job development may unintentionally restrict consumer choice and self-determination. Similarly, funding mechanisms that fail to take into consideration the varying levels of support needed by individuals with disabilities may tend to exclude individuals with the most significant disabilities from partici-pation in the program. Finally, funding approaches that fail to take into consideration the post-place-ment support needs of individuals may unneces-sarily limit job mobility and career advancement. The purpose of this article is to investigate current approaches used by state agencies to fund time-limited supported employment services from the perspective of local supported employment pro-vider agencies. Specifically, the results of in-depth telephone interviews with 386 local provider agencies in 40 states will be reported in terms of: (1) the types of funding arrangement most fre-quently used; (2) the relationship of various funding approaches to issues such as conversion, inclusion of individuals with the most significant disabilities, consumer choice and self-determina-tion, and career advancement, and (3) implications of findings for future efforts to improve supported employment time limited funding arrangements.