State Options to Expand Medicaid HCBS: Examples & Evaluations of Section 1115 Waivers

The coronavirus pandemic’s disproportionate impact on seniors and people with disabilities and chronic illnesses has brought heightened focus on the unmet need for home and community-based services (HCBS). Medicaid serves as the primary source of coverage for HCBS, which help these populations to live independently outside institutions by assisting with daily needs. In addition to determining whether to retain Medicaid HCBS policy changes adopted during the pandemic, states are currently developing plans to access an increased federal matching rate (“FMAP”) for Medicaid HCBS spending established in the American Rescue Plan Act (ARPA) of 2021. In the future, states may also be able to access increased HCBS funds proposed in the Biden Administration’s American Jobs Plan and the Better Care Better Jobs Act recently introduced in Congress.

To provide context for state considerations of policy options for the post-pandemic period and the potential use of new federal funds, this brief highlights examples of Medicaid HCBS policy changes authorized through Section 1115 demonstration waivers in seven states (Arizona, Delaware, New Jersey, New York, Rhode Island, Vermont, and Washington). Where available, we discuss waiver evaluation findings and reports that assess the impact of these policy changes. Key waiver provisions seeking to expand HCBS include the following (and are summarized in a state-by-state table in the Appendix):

• Streamline processes for determining eligibility and providing services.
• Expand financial eligibility rules to help certain enrollees afford to live in the community.
• Serve additional populations by expanding financial and/or functional eligibility rules.
• Offer new services through alternative benefit packages.

States may be unlikely to pursue new 1115 waivers to use the ARPA HCBS funds because these funds are available for states to claim for one year only (though states have until March 2024 to spend the enhanced funds). However, these examples from 1115 waivers identify policy areas that states may consider targeting through existing state plan or HCBS waiver authorities, particularly where state evaluations and experiences have found that policy changes seeking to expand HCBS access have achieved their goals.

Streamlining eligibility and enrollment processes

To provide faster access to HCBS, states have used 1115 authority to streamline processes for determining eligibility and providing services, including by authorizing benefits during a presumptive eligibility period and accepting self-attestation as verification for financial eligibility.

Authorizing benefits during a presumptive eligibility period. Presumptive eligibility is a longstanding option that allows states to authorize certain qualified entities to enroll individuals who appear likely eligible for coverage while the state processes the full application and makes a final eligibility determination. Presumptive eligibility can facilitate access to coverage and services when individuals in need of critical services also may need extra time to collect documents needed to complete a full eligibility determination. While states may allow hospitals to determine presumptive eligibility for Medicaid pathways based on old age or disability without an 1115 waiver, several states have used 1115 authority to provide presumptive eligibility (determined by non-hospital entities) for more limited populations and/or benefits to provide faster access to HCBS. For example:

• Washington uses 1115 authority to provide presumptive eligibility for both its Tailored Support for Older Adults (TSOA) and Medicaid Alternative Care (MAC) programs, which provide supportive services to older adults and their caregivers (see Appendix for program details). An interim evaluation Quarterly progress reports from 2020 indicate high proficiency for appropriate determinations of nursing facility level of care, performed primarily by local Area Agencies on Aging, for those enrolled presumptively and low percentages of enrollees determined ineligible after the presumptive eligibility period. In a recent pending waiver amendment requesting to further extend presumptive eligibility for LTSS, Washington noted that the high accuracy rate of presumptive eligibility determinations for TSOA “exemplifies the minimal risk to the state and [] federal partners.”
• Rhode Island’s waiver also authorizes HCBS benefits to new long-term care (LTC) applicants during a presumptive eligibility period while final financial eligibility determinations are pending.

Accepting self-attestation as verification for financial eligibility. States may simplify the Medicaid application process by allowing applicants to self-attest to certain financial eligibility criteria. During the COVID-19 public health emergency (PHE), some states are using Medicaid emergency authorities to allow self-attestation of eligibility requirements for applicants to Medicaid pathways based on old age or disability. States may also use 1115 authority to allow more limited populations to self-attest to financial eligibility requirements. For example,

• New Jersey’s 1115 waiver eliminates state review and instead accepts self-attestation of no asset transfers during the five-year look-back period for applicants below 100% FPL seeking LTC and HCBS. The look-back period delays the date of Medicaid eligibility for applicants who transferred assets for less than fair market value, which instead could have been used to meet long-term care needs. New Jersey conducted electronic asset verification of randomly selected applications in 2015 and 2016 and found a 0% error rate on these sampled self-attestations, concluding that “the often burdensome five year lookback process can be safely eliminated for many low-income applicants.”

Expanding financial eligibility rules

To help enrollees maintain community residence, states have used 1115 authority to modify financial eligibility rules for limited populations (though states may more generally expand financial eligibility without waiver authority). These expanded eligibility rules enable enrollees to more easily afford to live in the community rather than in nursing facilities and include:

• Establishing an income disregard that accounts for average rent (in New York). New York’s 1115 waiver applies a special income disregard that accounts for average rent when determining financial eligibility for individuals moving from institutional to community settings. An evaluation of New York’s waiver has found positive impacts among individuals transitioning out of institutional settings, including that high percentages of enrollees remained in the community.
• Increasing the asset limit for certain HCBS beneficiaries (in Vermont). Vermont uses 1115 authority to increase the asset limit for certain high-need beneficiaries receiving HCBS. Evaluation results suggest positive impacts for this population, including an increase in the percentage of participants living in home and community settings versus in nursing facilities.
• Increasing the personal needs allowance for certain HCBS beneficiaries (in Rhode Island). For enrollees transitioning from nursing facilities to the community, Rhode Island’s 1115 waiver increases the personal needs allowance, which is the amount of funds not considered available to contribute to the cost of LTC services.

Serving new populations by expanding eligibility rules

Several states use 1115 authority to expand financial and/or functional eligibility rules to serve additional populations, such as:

• Elderly and near-elderly adults (in Washington). Washington’s TSOA program creates a new eligibility pathway and benefit package for otherwise ineligible adults older than 55 who require nursing facility level of care. By serving these adults with and without unpaid caregivers, TSOA aims to delay or avoid the need for more intensive LTSS. An interim evaluation of the program suggests that TSOA has met this goal: while 24-35% of TSOA participants enrolled in regular Medicaid within 6 months of TSOA enrollment, only a very small percentage used traditional LTSS. Both TSOA caregivers and recipients expressed high satisfaction with the program, with 86-90% of recipients indicating that the TSOA program would help keep them from moving to a nursing home or adult family home.
• Young adults with disabilities (in Rhode Island). Rhode Island’s 1115 waiver covers young adults age 19 to 21 who age out of the Katie Beckett group (which provides coverage to children with significant disabilities without regard to family income) and are in need of services for behavioral health or medical/developmental diagnoses. This new pathway aims to enable children with disabilities to maintain continuity of care and remain in the community as they age into young adulthood. Issues related to continuity of care for young adults with disabilities are widespread beyond Rhode Island: for example, a recent New York Times article details how in New York, the change from “medically fragile child” to “medically fragile adult” includes lower pay rates for nurses that could result in young adults with disabilities losing care and being forced to move into nursing homes.
• Children with disabilities (in Delaware). Delaware’s 1115 waiver creates a new eligibility pathway for children with disabilities who do not meet institutional level of care criteria for the Katie Beckett pathway, but are at risk of institutionalization absent the provision of services. By providing benefits to serve these children with disabilities in the community, this new pathway could help delay or avoid the use of more costly LTSS. States may use Section 1915 (i) state plan authority to serve enrollees with functional needs that are less than an institutional level of care; however, Delaware uses 1115 authority in order to limit this population to children with incomes at or below 250% of Supplemental Security Income (SSI) ($1,985 per month in 2021).

Offering new services

While states may add services to existing benefit packages without 1115 authority, they instead may use 1115 waivers to design alternative benefit packages. For example, the MAC program created by Washington’s 1115 waiver provides an alternative benefit package to support unpaid caregivers for older adults who are otherwise Medicaid eligible. This provision supports these enrollees and their caregivers by providing additional HCBS benefits not available in the standard Medicaid benefit package (though not the full Medicaid benefit package in other respects), which in turn may help the clients they care for remain in the community. An interim evaluation report shows that MAC enrollment has been lower than anticipated (with just 251 caregiver/care-receiver pairs enrolled in MAC as of October 2020, compared to initial projections of 4,673 MAC enrollees in that month) and suggests that further outreach may be necessary to reach eligible populations. Of those who did enroll, however, both caregivers and care recipients reported high satisfaction with the MAC services provided. The report also suggests that MAC participation has reduced the occurrence of adverse health outcomes and helped enrollees delay or avoid the use of more intensive traditional Medicaid LTSS.

Looking Ahead

As the primary source of coverage for HCBS, Medicaid plays a significant role in helping states meet community integration obligations under the Americans with Disabilities Act and the Supreme Court’s Olmstead decision. While the unmet need for HCBS for seniors and people with disabilities pre-dates the COVID-19 pandemic, during the PHE states have taken a number of emergency Medicaid LTSS actions, such as HCBS benefit expansions and provider payment rate increases for HCBS. In guidance on considerations for the end of the PHE, CMS specifically encourages states to identify temporary authorities that increase access to HCBS and to consider making these changes permanent. Further, the American Rescue Plan Act provided a time-limited increase in the Medicaid FMAP for HCBS spending to fund activities beyond what is currently available in states’ Medicaid programs. States must develop plans to use these funds for expanded HCBS activities such as streamlining eligibility/enrollment processes, increasing covered services, and supporting family caregivers. The existing HCBS policy changes in Section 1115 waivers summarized in this brief may provide useful examples of areas that states could target, particularly where state evaluations and experiences have found that policies seeking to expand HCBS access have achieved their goals.