One local group home director is relying on state officials to reach a solution on new Medicaid regulations that could push thousands of persons with developmental disabilities and severe mental illness out of group and adult care homes.

“I am counting on the fact that there’s going to be a fix, somehow, some way,” said Michael Maybee, director of Watauga Opportunities. Among other services, the nonprofit agency operates two six-person group homes for adults with developmental disabilities.

Effective Jan. 1, 2013, changes to Medicaid enacted by the General Assembly this year increase the eligibility requirements for persons receiving the Medicaid personal care services subsidy — a significant funding source for residential facilities in which persons with developmental disabilities and mental illnesses are placed.

Recently the federal government said North Carolina cannot have different eligibility requirements for individuals who receive personal care services in community-based homes versus those in adult residential facilities.

For years, the state has required persons living in community-based homes to need assistance with two or more daily living activities to receive the Medicaid subsidy; persons in adult care or group homes were only required to need assistance with one activity.

To address this, the General Assembly enacted new rules in House Bill 950 requiring persons to need limited hands-on assistance with three qualifying daily living activities — including eating, dressing, bathing, toileting and mobility — or two daily living activities in which one requires extensive assistance to receive Medicaid personal care services reimbursement, no matter where they receive the services.

But developmentally disabled adults “don’t need that kind of intense assistance,” Maybee said.

“They don’t need help eating, but they can’t plan a nutritious meal. They can’t shop for food, but maybe they can make a sandwich. They don’t need help getting dressed, but they need to be reminded, ‘it’s cold, get a jacket.’

“They don’t need hand-over-hand assistance with these things,” he said.

Yet, without the personal care services reimbursement, many group homes may be forced to close.

“It ends up being one-third of a group home budget. Large providers, they basically said, ‘We can’t run our homes with a 35 percent budget cut. We’ll have to close them down,’” said Maybee.

The General Assembly allocated $39 million to adult care homes to assist in the transition and mitigate the loss of income from residents who no longer qualify for Medicaid personal care services reimbursement, but group homes received no transitional funding.

The state has had years to plan for this, Maybee said.

Until 1995, group homes were primarily funded through the state’s domiciliary care rate of about $1,200 per person per month, he said. The state then shifted some funding — about $350 per month — to Medicaid through the personal care services reimbursement. But for years, the federal Centers for Medicare & Medicaid Services have warned against inequitable eligibility requirements for personal care services, Maybee noted.

“I’ve been working with a group for a couple of years now trying to get the state to come up with options,” he said.

The matter is amounting to a crisis at the same time the state and the U.S. Department of Justice have reached an agreement to provide more community-based housing choices for persons with serious mental illness in North Carolina.

Under the agreement, North Carolina is required to provide 3,000 community-based housing slots for citizens with serious mental illness by 2020.

But only between 100 and 300 housing slots are required by July 2013 — not enough to cover the thousands who may lose their placements in residential facilities because of the new Medicaid requirements.

“It is possible that there would not be enough housing slots at any one time to serve all the persons who are eligible or who wish to move out of an adult care home. Housing slots are being created over time, and a limited number will be available each year,” said Christina Carter, chief operating officer for Smoky Mountain Center, the local management entity that supervises mental health services for Watauga and 14 other counties.

“Persons leaving an adult care home because of loss of personal care services eligibility would be eligible for a housing slot as long as he/she retains Medicaid or income is within the limits set by the federal government,” Carter said.

But unlike the placement of mentally ill individuals in adult care homes, group home placement is an ideal living scenario for adults with developmental disabilities, Maybee said.

“That’s the one part of our system that has been working. We are tearing apart the capacity we have for developmental disability issues,” he said. “(The housing issues are) just coinciding for the perfect storm.”

Currently, independent assessments are being conducted to evaluate Medicaid recipients’ degree of functional disability and level of unmet needs for personal care services. If enough people deemed ineligible for Medicaid personal care services reimbursement appeal those findings, it could buy some time via the court system until the legislature convenes in January, Maybee noted.

Lynne Mason — executive director of Hospitality House, the Boone-based homeless shelter serving seven counties — noted that 90 percent of the population the agency serves has a mental health or substance abuse disorder.

“It’s something we deal with almost on a daily basis,” she said. “I think the general public does not understand how debilitating mental illness can be; it’s so much more than being a little down, or a pill will fix it. It’s a real struggle for individuals; it’s not an easy illness to manage.”

A lack of housing alternatives for persons with mental disorders means that they often end up in homeless shelters, but shelters are not equipped to provide all of the services these individuals need, Mason said.

“We cannot provide the level of care that some need,” she said. “If we can’t serve them, they end up back on the streets.”

Carter said Smoky Mountain Center is closely communicating with state health officials on the Medicaid eligibility issue.

“No one has all the information at this point, including not having a definitive number of persons who will be affected,” she said. “We are monitoring the developments closely and are prepared to do all we can to assist residents who may be affected.”