Key State Policy Choices About Medicaid Home and Community-Based Services

Medicaid continues to be the primary payer for long-term services and supports (LTSS), with these services typically unavailable or unaffordable through Medicare or private insurance. State Medicaid programs must cover LTSS in nursing homes, while most home and community-based services (HCBS) are optional, which results in considerable differences among states in HCBS eligibility, scope of benefits, and delivery systems. This issue brief illustrates current variation and trends in Medicaid HCBS state policy choices, using the latest data (FY 2018) from the Kaiser Family Foundation’s 18th annual 50-state survey. A related brief presents state-level HCBS enrollment and spending data. Key findings include:

State HCBS programs reflect states’ substantial flexibility in choosing among optional authorities.

• States have flexibility to target HCBS to certain populations. All states serve people with intellectual or developmental disabilities (I/DD), seniors, and adults with physical disabilities through HCBS waivers, while fewer states offer waivers for people with traumatic brain or spinal cord injuries (TBI/SCI), children who are medically fragile, people with mental illness, and those with HIV/AIDS. People with mental illness and those with I/DD are the populations most commonly served under Section 1915 (i) programs, which provide HCBS to people with functional needs below an institutional level of care.
• States generally use the same income and functional eligibility criteria for HCBS waivers and institutional care, placing access to HCBS on equal footing with nursing homes. Over three-quarters of states set HCBS waiver income limits at the federal maximum, and a notable minority of HCBS waivers do not include an asset limit.
• Medicaid HCBS benefit packages vary, reflecting the optional nature of most HCBS. Two-thirds of states offer the personal care state plan option, while fewer elect other optional state plan authorities. All states offer at least one HCBS waiver, with home-based services and equipment/technology/modifications as the most commonly offered waiver benefits across states and target populations. Waivers targeting seniors and/or adults with physical disabilities and people with TBI/SCI are the most likely to offer enrollees the option to self-direct services, while waivers serving people with mental illness are least likely to do so.
• Over three-quarters of states report an HCBS waiver waiting list. Waiting list enrollment totals nearly 820,000 people nationally with an average wait time of 39 months. All individuals on waiting lists ultimately may not be eligible for waiver services. Notably, the eight states that do not screen for waiver eligibility before placing an individual on a waiting list comprise 61% of the total waiting list population.
• All states monitor HCBS waiver quality, but no standardized measure set is used across programs. Most states measure beneficiary quality of life and/or community integration, while about half use an LTSS rebalancing measure.

Over half of states have capitated managed long-term services and supports (MLTSS) programs.

• Most states already have adopted policies to follow the 2016 changes in the federal Medicaid managed care rule. For example, over three-quarters of capitated MLTSS states have network adequacy standards for HCBS providers, with time and distance as the most common.
• Value-based payment for HCBS is an emerging area of interest. Over one-quarter of capitated MLTSS states currently use VBP models, and more states are planning to do so.

States are working to implement new policies in response to federal laws and regulations affecting HCBS.

• Few states have fully implemented electronic visit verification (EVV) systems to date, with a majority of states reporting challenges in this area. EVV is required for personal care services in January 2020, and home health services in January 2023, though states can seek a one year exemption.
• Nearly all states already have or plan to change policy to meet CMS’s home and community-based settings rule. Most changes relate to settings that must be modified to continue to be used for Medicaid-funded HCBS, while 20 states have identified settings that cannot be modified and will require beneficiaries to relocate.
• Less than half of states already have or plan to restrict direct care worker hours or make other policy changes in response to the U.S. Department of Labor minimum wage and overtime rules. One-third of states have budgeted funds for worker overtime and/or travel time.

States will face increasing pressure to meet the health and LTSS needs of a growing elderly population in the near future. Understanding the variation in Medicaid HCBS state policies is important for analyzing the implications of this demographic change as well as the implications of a range of policy changes that could fundamentally restructure federal Medicaid financing or the larger U.S. health care system. For example, substantially cutting and capping the federal Medicaid funds available to states through a block grant or per capita cap could put pressure on states to eliminate optional covered populations and services, such as those that authorize and expand the availability of HCBS. While all states could face challenges in this scenario to varying degrees, those with certain characteristics – such as existing restrictive Medicaid policies; demographics like poverty, old age, or poor health status that reflect high needs; high cost health care markets; or low state fiscal capacity – could face greater challenges. On the other hand, moving to a Medicare-for-all system would eliminate existing state variation in favor uniform coverage of HCBS for all Americans. Unlike Medicaid, HCBS would be required and explicitly prioritized over institutional services under current Medicare-for-all proposals. As these policy debates develop, there will be continued focus on Medicaid’s role in providing HCBS for seniors and people with disabilities.