More Federal Medicaid Funding Needed to Protect Home- and Community-Based Services

To help prevent cuts to home- and community-based services (HCBS), policymakers should substantially raise the federal government’s share of state Medicaid costs (the “FMAP”), as House Speaker Nancy Pelosi’s new economic relief proposal would do. The bill also includes an important, targeted FMAP increase for HCBS, and both policies are needed to ensure that seniors and people with disabilities can access these services. Without more federal Medicaid funding, states will be likelier to address their massive budget shortfalls and growing Medicaid costs by cutting HCBS.

Medicaid is the main source of coverage for HCBS, providing services such as home health and assistance with self-care and household activities to nearly 5 million seniors and people with disabilities. HCBS beneficiaries are typically older, have more chronic conditions, and may have unmet health care needs due, in part, to shortages of trained health care workers. With COVID-19 hitting nursing homes particularly hard, maintaining and expanding access to home-based care is important to keeping people safe. At the same time, providing HCBS is more challenging (and sometimes more expensive) during the crisis, with workers needing protective equipment, training, and other help to keep themselves, their clients, and their families safe.

Many seniors and people with disabilities receive HCBS through federal section 1915(c) Medicaid waivers, which let states provide these services to people who would qualify for Medicaid if they received care in a nursing home. To date, 39 states have temporarily modified these waivers to address COVID-19, taking such steps as streamlining eligibility and enrollment processes, paying family caregivers to address workforce shortage issues, and — to help health care providers stay afloat — increasing HCBS providers’ rates and making retainer payments to them.

But states struggled to meet the need for HCBS even before the crisis, as shown by longstanding waiting lists in many states, and they need more support to address the new demand. Without it, states will not likely maintain current access levels, let alone expand eligibility and benefits. For example, while nearly all states have modified their HCBS programs to allow more use of virtual eligibility and service planning meetings, only about half of these states have expanded benefits by providing more home-delivered meals or additional medical supplies, and only two states (Maryland and Utah) have increased the number of people that their HCBS waivers can serve.

During the Great Recession of a decade ago, temporary FMAP increases helped states avoid Medicaid cuts and, in particular, helped them protect HCBS. The increased FMAP gave states more federal Medicaid funding, letting them stretch their Medicaid budgets further by freeing up state funds that were already allocated to Medicaid to cover enrollment increases and Medicaid budget shortfalls without making cuts. For example, 36 states said the additional federal funding helped them avoid or limit benefit cuts for fiscal year 2009 (and 37 states said the same for 2010), while 38 states said it helped them avoid or limit cuts to provider payments for 2009 (and 35 states for 2010). The 2009 Recovery Act’s FMAP increase helped protect HCBS from cuts in many states, an AARP study concluded, although the growth of HCBS still slowed during the state budget crisis.

With regard to the current state budget crisis, the President and Congress took a good first step in the Families First Coronavirus Response Act of March by modestly raising the FMAP for the rest of the official public health emergency and providing maintenance-of-effort protections that prevent states from imposing new eligibility restrictions or ending coverage for beneficiaries while they’re receiving the extra federal funds. But that increase falls far short of need, threatening states’ ability to maintain access to care.

In addition, community-based Medicaid providers have received minimal assistance from the $175 billion fund in the Coronavirus Aid, Relief, and Economic Security (CARES) Act of March, and from the Paycheck Protection Program and Health Care Enhancement Act of April, which were intended to help ease providers’ revenue gaps and meet their increased costs from COVID-19. And even if the Department of Health and Human Services structures its future allocations from the fund to give these providers more help, that won’t help providers weather the cuts that states will invariably make as they confront the enormous budget shortfalls that they’re projected to face at least through 2022.

The Pelosi bill would provide a 14 percentage-point FMAP increase for July 1, 2020 through June 30, 2021. States would receive at least $117 billion from the combination of this increase and the FMAP increase of Families First. The Pelosi bill also would provide a 10 percentage-point FMAP increase for state HCBS costs for the same period. States would need to maintain their current levels of state HCBS funding, but they could use the additional federal funding to, among other things, raise wages and provide paid leave for home health workers and provide HCBS to those on waiting listings.

Without the broader FMAP increase, however, this provision may not ensure access to HCBS for seniors and people with disabilities. Without more overall federal Medicaid funding, massive state budget shortfalls and growing Medicaid costs could threaten states’ ability to maintain their HCBS funding and take advantage of the increased HCBS funds that they would receive. And the broader FMAP increase would ensure that the maintenance-of-effort protections from the Families First Act continue at least through June 30, 2021, preventing states from cutting eligibility or ending coverage, including for seniors and people with disabilities who receive HCBS.

To protect seniors and people with disabilities from losing access to care, federal policymakers should heed calls from the bipartisan National Governors Association and National Association of Medicaid Directors and provide additional relief for state Medicaid programs. Just as the 2009 Recovery Act enhanced FMAP to help states address their budget shortfalls and avoid Medicaid cuts, an additional, longer-lasting FMAP increase is critical to stabilizing state Medicaid programs and ensuring access to care by staving off cuts that states might otherwise make.