Key Considerations in the Development of a Medicaid Home- and Community-Based Services Benefit

The Medicaid program is the primary source of paid long-term services and supports (LTSS). They are provided in institutional settings, including nursing homes, intermediate care facilities for individuals with intellectual disabilities, and at home and in the community. While not defined in the Medicaid statute as HCBS, they include mandatory and optional Medicaid services including home health, rehabilitation, physical and occupational therapy, personal care, targeted case management, and one or more of a group of services defined as part of the HCBS waiver authority.ⁱ Finally, Early and Periodic Screening Diagnosis and Treatment, required services for children under the age of 21, includes coverage of medically necessary HCBS, such as: personal care; private duty nursing; and physical, occupational, and speech-language therapy.¹

Spending on Medicaid LTSS has shifted dramatically from institutional care to HCBS over the last 30 years. In 1988, 90% of the $23 billion in Medicaid LTSS spending was for institutional services, with only 10% of LTSS spent at home or in the community.³ Despite the significant increase in the availability for HCBS, in some areas of the country, there is still a strong preference for institutional care. Estimates of the percentage of LTSS spending on HCBS range from more than 70% in some states to as low as 3% in others, demonstrating that HCBS are not available to everyone who needs care.⁴

Most HCBS are offered through Medicaid waivers under 1915(c) of the Social Security Act (SSA). Under 1915(c) states may provide HCBS to those who require a nursing home level of care. States have also used broader waiver authority permitted under 1115 of the SSA. Both waiver authorities require states to demonstrate that these expansions would not increase federal Medicaid expenditures. While generally states must offer Medicaid benefits throughout the state (a requirement referred to as statewideness) and to every eligible individual (referred to as comparability) under waivers, states may offer services in certain areas and may limit the number of people served. States often limit services to make expenditures more predictable. In 2005 and 2010, Congress passed, and Presidents Bush and Obama signed into law, respectively, two state plan options, allowing states to expand HCBS without obtaining waivers, including 1915(i) and 1915(k).^5,6 However, because state plan options for HCBS do not require budget neutrality, states still lean heavily on waivers.

President Biden and Democratic congressional leaders have committed to expanding Medicaid HCBS. The American Rescue Plan included a provision to increase Medicaid matching dollars to states by 10% for one year beginning March 1, 2021.⁷ In addition, the president’s infrastructure proposal included $400 billion to expand the availability of HCBS and jobs for caregivers.v⁸ The proposal did not include policy details, so developing specific proposals would fall to Congress should they choose to advance the initiative. Democratic members of the House and Senate have introduced legislation to require states to provide HCBS.⁹ The requirement would be phased in over a 5-year period and include 100% federal matching payments to states.

Without question, the biggest opportunity associated with HCBS expansion is the potential for $400 billion in new federal spending. For the first time, Congress has considered allocating resources at a level that has the potential to make the Supreme Court holding in Olmstead v. L.C. a reality for those with mental illness and other disabilities. In the 1999 Olmstead opinion written by the late Justice Ginsburg, the court held that states must provide community-based services to those with mental illness: 1) when state professionals have determined that community placement is appropriate; 2) the individual prefers a community-based setting; and 3) community-based care can be reasonably accommodated, considering the state resources and the needs of others with mental disabilities.¹⁰

Workforce – The challenge most often cited as a barrier to significant expansion of HCBS is the need for qualified caregivers. Between 2019 and 2029, the Bureau of Labor Statistics estimates a 1.9 million increase in jobs for family caregivers, a 37% increase over 10 years.¹¹ They also stressed the need for investment in resources at the state level to implement the expansion, including an increase in personnel and resources for caregiver training.

Quality Measures – States are looking for ways to ensure quality and accountability in the delivery of HCBS through Medicaid and other state waiver programs. State-specific measures exist, but they are imprecise or have not been thoroughly tested, and do not allow cross-state comparison. Existing national measures are clinically oriented and leave gaps in addressing what is often more important to people who need HCBS. Many of the Healthcare Effectiveness Data and Information Set (HEDIS) Medicare Advantage measures were never designed for people with complex health status who are generally the users of HCBS, and these patients are excluded from many measures. While some HEDIS measures are relevant, they are often directed towards measuring undesirable outcomes, such as readmissions, rather than the delivery of high-quality care to complex patients, and they are not designed to measure the quality of HCBS.

State Resources – Another key concern is the lack of state-level fiscal resources required to finance the states’ Medicaid matching requirements. States stressed the need for spending predictability on Medicaid, given the demand for services. Today, Medicaid accounts for nearly 30% of states’ budgets. The use of HCBS waivers permits states to limit the number of individuals served, allowing an accurate estimate of HCBS costs. Many states, particularly those with significant unmet need, would be reluctant to expand services without significant federal resources. At the same time, there is skepticism that there will be enough federal resources to make services available to everyone who needs assistance, and most do not believe that $400 billion in federal spending will address all unmet needs.

State Requirement or State Option – Another key question is whether a state mandate to provide HCBS is needed to address what many consider to be a bias for institutional services over HCBS, since institutional services are required services under the Medicaid program, while HCBS are optional. Others suggest that states with a heavy reliance on nursing home provider taxes to supply the states’ share of Medicaid funding creates a disincentive for HCBS expansion.

Eligibility – Today, states set eligibility for HCBS, leading to significant variation from state to state, but also significant variance in eligibility for services from region to region and between populations (e.g., people with intellectual disabilities versus frail older Americans) within a state, given the flexibility to waive statewideness and comparability under waivers. Some experts have suggested the use of a federal floor to create greater equity within a state and between states. A number of other issues also arise in establishing eligibility, including income and resource tests, how individuals would spend existing resources to become eligible for services, and the resources a person will need to pay for ongoing living expenses, such as rent, utilities, food and other expenditures that Medicaid covers for those residing in an institutional setting. Finally, some have suggested the need for review of the amount individuals retain as a personal needs allowance.

Benefits – Most experts believe that it is important to maintain the flexibility to design benefits based on the need of the individual. Given the heterogeneity of people with disabilities, some may need short-term inpatient care to address serious mental illness, while others need long-term personal care assistance services for a physical disability, and others may benefit from targeted case management services along with social services and supports such as minor home modifications to help them remain safely at home. Most agree on the need for a uniform screening tool that will determine the need for services, but the screening tool must be designed to benefit all populations, not one over another. Also, there is an agreement on the need for an individual assessment and the development of a personal care plan developed with an individual and their informal caregivers.

Maintenance of Effort – While most experts agree in making new federal resources available, any new funding should supplement, not supplant, current state spending. This would require states to maintain their current level of spending. At the same time, a maintenance of effort would disadvantage those states that have made significant investments in HCBS, relative to their counterparts that have not expanded coverage of HCBS.

Implementation – As noted above, the shortage of caregivers and state infrastructure will require a significant transition period allowing states to gradually expand services. However, some experts suggest that it will be important to make short-term changes to allow expansion of services as states are able to expand. Some states will be reluctant to expand absent a permanent spending authority. Finally, some expressed concern that unless benefits are accelerated, future Congresses and administrations will scale-back or repeal expansion.

Until Congress secures adequate funding to make HCBS accessible to all who need services, it could take several approaches to expand the availability of HCBS. In addition to introducing legislation to require states to provide Medicaid HCBS, Congress could consider the following options:

^{i In addition to services outlined above, Section 1915(c) of the Social Security Act includes “case management services, homemaker/home health aide services and personal care services, adult day health services, habilitation services, respite care, and such other services requested by the State as the Secretary may approve and for day treatment or other partial hospitalization services, psychosocial rehabilitation services, and clinic services (whether or not furnished in a facility) for individuals with chronic mental illness.”
1 Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, “Understanding Medicaid Home and Community-based Services: A Primer 2010 Edition.” October 29, 2010. Available at: https://aspe.hhs.gov/report/understanding-medicaid-home-and-community-services-primer-2010-edition#note1-4.
2 Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services, “Understanding Medicaid Home and Community-based Services: A Primer 2010 Edition.” October 29, 2010. Available at: https://aspe.hhs.gov/report/understanding-medicaid-home-and-community-services-primer-2010-edition#note1-4.
3 Centers for Medicare and Medicaid Services, “Medicaid Long Term Services and Supports Annual Expenditures Report, Federal Fiscal Years 2017 and 2018,” January 7, 2021 2021. Available at: https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltssexpenditures-2017-2018.pdf
4 Centers for Medicare and Medicaid Services, “Long-Term Services and Supports Expenditures on Home & Community-Based Services.” Available at: https://www.medicaid.gov/state-overviews/scorecard/ltss-expenditures-on-hcbs/index.html.
5 Section 6086 of the Deficit Reduction Act of 2005 (DRA, P.L. 109-171).
6 Section 2401 of the Patient Protection and Affordable Care Act.
7 Pub. Law 117-2. Available at: https://www.congress.gov/bill/117th-congress/house-bill/1319/text.
8 The White House, “FACT SHEET: The American Jobs Plan,” March 31, 2021. Available at: https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan/.
9 HCBS Access Act of 2021. Available at: https://debbiedingell.house.gov/uploadedfiles/hcbs_access_act.pdf.
10 527 U.S. 581 (1999). Available at: https://www.loc.gov/item/usrep527581/
11 Bureau of Labor Statistics, U.S. Department of Labor, “EMPLOYMENT PROJECTIONS — 2019-2029,” News Release, USDL-20-1646, September 1, 2020. Available at: https://www.bls.gov/news.release/pdf/ecopro.pdf
12 Centers for Medicare and Medicaid Services, “Request for Information: Recommended Measure Set for Medicaid-Funded Home and Community-Based Service.” Available at: https://www.medicaid.gov/medicaid/quality-of-care/downloads/rfi-hcbs-recommended-measure-set.pdf.
13 Sections 1139A and 1139B of the Social Security Act.
14 Congress.gov, “H.R. 1892 – Bipartisan Budget Act of 2018,” Section 50102(b), 2018. Available at: https://www.congress.gov/bill/115th-congress/house-bill/1892/text
15 Congress.gov, “H.R. 6, “SUPPORT for Patients and Communities Act,” Section 5001, 2018. Available at: https://www.congress.gov/bill/115th-congress/house-bill/6.
16 Centers for Medicare and Medicaid Services, “CMS Announces New Federal Funding for 33 States to Support Transitioning Individuals from Nursing Homes to the Community,” Press Release, September 23, 2020, Available at: https://www.cms.gov/newsroom/press-releases/cms-announces-new-federal-funding-33-states-support-transitioning-individuals-nursing-homes}