Home and community-based services


Home and community-based services (HCBS) include personal care attendants, adult day care, and other services that allow the frail elderly and others with significant disabilities to live in their home or a home-like setting and remain integrated with the community. Medicaid programs are only required by statute to cover nursing facility and home health services. HCBS are optional benefits, and states vary considerably in how they organize their HCBS programs. Some states provide certain HCBS in their state plan, which requires that those services be made available to all eligible beneficiaries (although states may include level of care criteria). States may also use waiver authorities such as the 1915(c) HCBS waiver authority, which gives states flexibility to limit the number of beneficiaries receiving services through the waiver, target specific populations, or limit availability to certain parts of the state. States may also use 1115 research and demonstration waivers to provide HCBS, or use some combination of state plan and waiver options. (For more information on state options to provide HCBS, read the chapter from MACPAC’s June 2014 report, Medicaid’s Role in Providing Assistance with Long-Term Services and Supports.)

Recent federal initiatives have provided states with new resources and authorities to support increasing Medicaid beneficiaries’ use of HCBS, responding to beneficiary preferences to live at home or in home-like settings. In addition, by substituting for more expensive institutional services, increasing the use of HCBS has the potential to reduce costs or expand access to long-term services and supports (LTSS) in states with waiting lists for waiver services. Initiatives to support the increased use of HCBS include the Money Follows the Person (MFP) demonstration program and the Balancing Incentives Program (BIP), which are described below.

Recent data on Medicaid’s LTSS expenditures suggests that efforts to promote HCBS are producing their intended results. Aggregate national Medicaid expenditures spent on HCBS first exceeded spending for institutional care in fiscal year (FY) 2013. In FY 2014, Medicaid spent $80.6 billion on HCBS, and $71.2 billion on institutional services. This represented a 7.7 percent increase in HCBS spending over FY 2013 (Eiken et al 2016).

Money Follows the Person

MFP, first authorized by the Deficit Reduction Act of 2005 (DRA, P.L. 109-171) and extended by the Patient Protection and Affordable Care Act of 2010 (ACA, P.L. 111-148, as amended), provides competitive grants to states to assist individuals transitioning to the community from institutional settings, which include nursing homes, hospitals, intermediate care facilities for individuals with intellectual disabilities (ICFs/IID), and long-term psychiatric facilities. The Centers for Medicare & Medicaid Services (CMS) awarded grants to a total of 43 states and the District of Columbia since the program began (Irvin et al. 2015).

States participating in the MFP demonstration are eligible to receive a variety of resources and supports for transitioning individuals back to the community and increasing the use of HCBS, including:

  • enhanced federal medical assistance percentage (FMAP) for certain services;
  • matching funds for supplemental services that are not generally covered by Medicaid (e.g. security deposits);
  • full reimbursement for certain administrative costs such as investments in information technology infrastructure; and
  • technical assistance to address implementation barriers.

MFP programs assist beneficiaries who have been residents of an institution for 90 days but would like to live in the community, and are able to live in the community with the assistance of additional supports made available through the demonstration. Once a year-long transition period has ended, these beneficiaries will continue to receive HCBS offered through the state plan or waiver programs, and additional services at the state’s option. As of December 2014, participating states had transitioned a total of more than 51,000 individuals back into the community (Irvin et al. 2015).

Under MFP, states receive an enhanced FMAP that they must use to fund a rebalancing program to help eliminate barriers to HCBS. This rebalancing program may apply strategies such as:

  • providing housing supports (e.g. hiring a housing coordinator to assist beneficiaries in locating affordable and accessible housing);
  • expanding HCBS availability by increasing waiver program slots and reducing waiting lists;
  • supporting transitions of individuals who do not meet the 90-day institutionalization requirement to be eligible for the MFP transition program;
  • developing the provider base for HCBS through trainings and incentives; and
  • closing or downsizing institutions.

The MFP program was funded through the end of FY 2016, and CMS and states have worked to make the successful elements of the program sustainable. States may continue to offer additional benefits provided through the MFP, although they will have to be provided at the regular matching rate. However, states have noted several obstacles to sustainability, including inadequate access to affordable and accessible housing, high turnover rates among the direct care workforce, and a shortage of providers in rural areas (O’Malley Watts et al. 2015).

Balancing Incentive Program

BIP, authorized by the ACA, provided for a maximum of $3 billion to fund expanded HCBS access and facilitate structural changes to states’ LTSS delivery systems. Although program funding ended in 2015, states have until September 30, 2017 to spend earned funds. As of 2016, 18 states are participating in the BIP.

To be eligible for BIP funding, states had to spend less than 50 percent of their total Medicaid expenditures for LTSS on HCBS in 2009. Most participating states received a 2 percent enhanced FMAP for HCBS provided to beneficiaries. Mississippi was the only state to receive a 5 percent enhanced FMAP because it spent less than 25 percent of its LTSS expenditures on HCBS in 2009.

BIP-participating states were required to use the enhanced FMAP to fund expanded HCBS access and implement three required structural changes to their LTSS delivery system:

  • Implement a no wrong door-single entry point system for individuals to receive information and counseling on their HCBS options, determine eligibility for Medicaid-covered HCBS, and enroll in Medicaid if they are determined to be eligible. The no wrong door-single entry point system must include accessible points of entry such as aging and disability resource centers, a website with community LTSS options, and a statewide toll-free number (MAG/Acumen/HSRI 2013).
  • Develop a conflict-free case management process to prevent agencies that provide services from determining eligibility, developing the care plan for which services a beneficiary would receive, or providing case management as the care plan is implemented. This process aims to reduce adverse incentives, such as those that promote under or over utilization of services or might incentivize providers to keep beneficiaries as clients instead of fostering their independence (MAG/Acumen/HSRI 2013). Where complete separation of services and case management was not possible, states were required to develop mitigation strategies to lessen the effect of any adverse incentives.
  • Use a functional assessment process to determine eligibility for Medicaid-funded LTSS. Each assessment tool used for this process was required to include a core set of topics related to medical needs, activities of daily living, instrumental activities of daily living, and mental and behavioral health needs (MAG/NEC 2015). However, no specific tool was required. (Learn more by reading the chapter from MACPAC’s June 2016 report, Functional Assessments for Long-Term Services and Supports.)

As part of the application process, BIP-participating states were required to submit a plan to achieve a target spending percentage for HCBS as a proportion of total LTSS expenditures. For Mississippi, the one state that spent less than 25 percent of LTSS expenditures on HCBS in FY 2009, the target spending percentage was 25 percent; other states had a 50 percent target spending percentage. As of the third quarter of 2015, 15 of the 18 participating states had met or exceeded their target spending percentage. Because states have until the end of FY 2017 to spend earned funds, they may continue to make progress toward or beyond their target spending percentage.