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TABLE 3. Medicaid Rate-Setting Methods for Services Delivered in Residential Care Settings by State, 2016


CMS-approved MLTSS plan1

Medicaid rate-setting methods2



Case mix

Cost based

Fee for service


Total 24 18 16 6 7 10 14
Alabama N/A N/A N/A N/A N/A N/A
California 3
District of Columbia
Illinois 4
Iowa 5
Kentucky N/A N/A N/A N/A N/A N/A
Louisiana N/A N/A N/A N/A N/A N/A
Massachusetts 6
Michigan 7
Minnesota 8
New Hampshire 9
New Jersey
New Mexico
New York 10
North Carolina
North Dakota
Ohio 11
Pennsylvania N/A N/A N/A N/A N/A N/A
Rhode Island 12
South Carolina 13
South Dakota
Texas 14
Virginia 15
West Virginia N/A N/A N/A N/A N/A N/A
Notes: HCBS is home-and community-based services. LTSS is long-term services and supports. MLTSS is managed long-term services and supports. Dash (–) indicates state does not have MLTSS or uses other rate-setting method. N/A is not applicable, as the state does not provide Medicaid coverage for services delivered in residential care settings.
1 Data on states that use MLTSS are current as of April 2016. Count includes states with Financial Alignment Initiative (FAI) demonstration managed care plans.
2 Medicaid rate-setting methodology definitions:
  • Flat rates: The facility receives the same payment regardless of its individual facility costs and regardless of the type and amount of services actually provided. These rates may vary by factors such as urban/rural location or single/multiple occupancy unit.
  • Tiered: Reimbursement system is based on state-defined levels of care for the facility level or at the individual level. At the individual level, individuals are slotted into tiers based on their assessment or needs and there is a payment level associated with each category. At the facility level, the entire facility is slotted into a tier, which could be by licensure category that varies by the level of service they provide or the disability level of the residents that they serve.
  • Case mix: Reimbursement rates vary by the case mix of the facilities or individuals. Case mix only applies when there are no tiers or categories and the payment rate is determined along a continuum based on the individual’s assessment. Providers are paid based on the number of hours and level of assistance needed by the resident. The case-mix adjusted rate for a facility is calculated by averaging the assessment levels for all residents and multiplying that index by the standard rate set by the state.
  • Cost based: The reimbursement rate of each facility varies with the costs of each facility.
  • Fee for service: Payment is made for each separate service provided. Payment amounts are determined by the number of units of specific types of services used by a Medicaid beneficiary, which are identified from the resident’s service plan.
  • Negotiated: Reimbursement rates are not fixed, but are the result of deliberations between stakeholders (e.g., individual residents, providers, the state, or a managed care organization).
3 Under the state’s financial alignment demonstration, Cal MediConnect plans cannot enroll 1915(c) HCBS assisted living waiver participants. However, starting December 2015, the 1915(c) HCBS assisted living waiver participants must enroll in a Medi-Cal managed care plan for health care and LTSS under the California Coordinated Care Initiative if they reside in Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, or Santa Clara counties.
4 Under the 1915(b) MLTSS waiver program, non-dually eligible Medicaid residents of supportive living facilities must enroll in managed care if they reside in one of five regions of the state (Greater Chicago Region, Rockford Region, Quad Cities Region, Central Illinois Region, and Metro East Region). Additionally, under the financial alignment demonstration managed care plans can enroll dually eligible individuals who are residing in supportive living facilities.
5 Enrollment in Iowa’s Health Link managed care program, which includes coverage of LTSS for Section 1915(c) HCBS Elderly waiver program participants residing in assisted living began April 1, 2016.
6 In Massachusetts, under the FAI demonstration (One Care), managed care plans can enroll dually eligible individuals who are residents of assisted living and adult foster care residences. Massachusetts also has a MLTSS program (Senior Care Options) that voluntarily enrolls Medicaid beneficiaries age 65 or older into fully integrated dual eligible special needs plans. Senior Care Options plans cover services in assisted living residences.
7 In Michigan, under the FAI demonstration (MI Health Link), managed care plans can enroll dually eligible residents who reside in adult foster care homes and homes for the aged.
8 In Minnesota, Medicaid beneficiaries age 65 and over are required to receive their medical assistance benefits through managed care organizations, with two exceptions: beneficiaries who are required to pay a medical spend-down and certain people served by American Indian tribes. These beneficiaries and those who are not yet enrolled in managed care may receive waiver program services through the fee-for-service system.
9 New Hampshire plans to start mandatory enrollment of Section 1915(c) Choices for Independence waiver program participants into the state’s Medicaid Care Management managed care plan that will cover health services and LTSS.
10 New York’s Section 1115 Managed Long-Term Care program does not cover assisted living program participants. In addition, under the FAI demonstration (Fully Integrated Duals Advantage), managed care plans cannot enroll dually eligible individuals participating in the assisted living program.
11 In Ohio, under the financial alignment demonstration (Integrated Care Delivery System), managed care plans can enroll dually eligible individuals living in one of 29 counties participating in demonstration. These managed care plans must cover assisted living services in residential care facilities. Additionally, the Section 1915(b)/(c) Integrated Care Delivery System waiver program also provides assisted living services for dually eligible and Medicaid-only individuals under managed care.
12 Rhode Island has signed a memorandum of understanding with the Centers for Medicare & Medicaid Services to implement the financial alignment demonstration—Integrated Care Initiative (ICI). The ICI managed care plans will be able to enroll dually eligible individuals residing in assisted living facilities. Additionally, the state’s Section 1115 demonstration waiver program includes a voluntary managed LTSS option (Rhody Health Options) that covers services in assisted living residences.
13 In South Carolina, the financial alignment demonstration Health Connections Prime managed care plans (Coordinated and Integrated Care Organizations) can enroll dually eligible who are residents of community residential care facilities.
14 In Texas, the financial alignment demonstration STAR+PLUS Medicare-Medicaid managed care plans can enroll dully eligible individuals accessing adult foster care or assisted living services. Additionally, the state’s STAR+PLUS managed LTSS program enrolls on a mandatory basis individuals who qualify for STAR+PLUS HCBS waiver program services, including assisted living services that were previously covered under the Section 1915(c) Community-Based Alternatives waiver.
15 In Virginia, the financial alignment demonstration Commonwealth Coordinated Care managed care plans cannot enroll dually eligible individuals who are enrolled in the state’s Alzheimer’s assisted living waiver.
16 The Washington Medicaid Integration Partnership, the state’s managed LTSS voluntary program in Snohomish County, ended on June 30, 2014 per Wash. St. Reg. 14-15-091 (
Sources: RTI International (RTI), 2016, analysis of National Association of States United for Aging and Disabilities (NASUAD), State Medicaid integration tracker, Washington, DC: NASUAD, RTI, 2016, analysis of Centers for Medicare & Medicaid Services (CMS), approved demonstration and waiver applications, RTI, 2016, analysis of CMS, Medicaid state plan amendments, RTI, 2016, analysis of financial alignment initiative demonstration contracts. RTI, 2016, analysis of state Medicaid managed care websites. RTI, 2016, analysis of state Medicaid provider manuals. RTI, 2016, analysis of provider association websites.