Senate Health Bill Pays Lip Service to Home- and Community-Based Services, But Imposes Deep Cuts

The Senate Republican health bill directs the Health and Human Services (HHS) Secretary to implement procedures to encourage states to adopt or extend home- and community-based services (HCBS) Medicaid waiver programs, which allow seniors and people with disabilities, including children with complex health care needs, to stay in their homes. But like the House-passed health bill, the Senate bill would cut Medicaid deeply — by $772 billion over ten years, amounting to a 26 percent cut in 2026 and rising to 35 percent by 2036. Any encouragement the Secretary might provide states to increase HCBS would be futile in the face of these Medicaid cuts.

Republican plans to cut Medicaid represent a severe threat to HCBS funding, as we’ve explained. Both the House and Senate bills would cap federal funding at a set amount per beneficiary (a “per capita cap”), with the amount rising each year by less than the Congressional Budget Office’s (CBO) current projection for actual Medicaid per capita costs. That would cut federal Medicaid funding, with the cuts growing each year. (Under the Senate bill, the caps would grow only at the general inflation rate starting in 2025, well below the already inadequate rate in the House bill.) As states coped with increasing cuts in federal funds they would likely cut payments to health care providers, restrict eligibility, and eliminate optional services, according to CBO.

Optional services, which states can choose whether to cover, would be at particular risk because states can eliminate or cut them when they face funding shortfalls. Most states already scale these services up or down in response to budget pressures. And the largest share of Medicaid funding for optional services goes to provide HCBS to seniors and people with disabilities, including children with complex health care needs.

States have made dramatic progress in shifting Medicaid expenditures from nursing home care to HCBS. The share of Medicaid expenditures for long-term services and supports that states allocate to HCBS has climbed from 18 percent in 1995 to 55 percent in 2015. Medicaid funding for HCBS allowed almost 3 million people to receive care at home instead of in a nursing home in 2013, and that number has likely risen since as state spending on HCBS has continued to rise.

As the population ages, the need for HCBS will grow — at the same time the per capita cap would squeeze state spending. Per beneficiary costs for seniors will rise as baby boomers age and more seniors move from “young-old age” to more costly “old-old age.” The caps wouldn’t adjust to account for that increase in per beneficiary costs.

Unlike nursing home care, which must be provided to all financially eligible beneficiaries who meet functional and medical criteria, states can control their HCBS spending based on their fiscal and organizational capacity to support the services. States usually do this by limiting the number of slots available for people served by HCBS waivers and creating waiting lists. Under a per capita cap, they would almost certainly further limit HCBS despite any “encouragement” HHS provides to expand them.