Close up of a senior woman talking to her caregiver
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The COVID-19 pandemic put a spotlight on fundamental, long-term challenges for state Medicaid home- and community-based services programs, but it also provided opportunities for change, according to a new Kaiser Family Foundation issue brief.

In 2021, states reported offering 255 waivers under Section 1915(c), the largest source of HCBS spending and the type through which assisted living operators often provide services, with an average of five waivers per state. The data are based on the 20th KFF survey of state Medicaid HCBS officials in all 50 states and Washington, DC, between April and September. 

Workforce shortages affect HCBS providers

All responding states indicated they were experiencing direct care worker shortages, which were cited as a contributing factor to provider closures during the pandemic. Most states (44) reported a permanent closure of at least one Medicaid HCBS provider this year, up from 30 states in 2021.

The Peterson-KFF Health System Tracker showed that the number of workers dropped by 9% in community elder care facilities and 14% in nursing care facilities between February 2020 and June 2022. 

Most states (48) responded to the workforce crisis by increasing HCBS provider payment rates. Half of the states that increased provider payment rates required the rate increases to be passed through to worker wages. More than half of states (28) indicated that they plan to continue those rate increases after the temporary funding expires. 

ARPA dollars target HCBS enhancement or expansion

The American Rescue Plan Act and the COVID-19 public health emergency gave states new, but temporary, flexibility and funding to address pandemic-related challenges. Those initiatives, according to the KFF survey, allowed states to respond to the pandemic and invest in HCBS programs.

In March 2021, ARPA increased the federal medical assistance percentage by 10 percentage points for states’ HCBS expenditure paid between April 1, 2021, and March 31, 2022. Those funds were intended to enhance, expand or strengthen HCBS through retention bonuses or student loan forgiveness for HCBS workers, expanded coverage or infrastructure investments related to the delivery of HCBS. States have until March 31, 2025, to spend those extra federal funds.

More than two-thirds of states (35) reported using ARPA funding for initiatives with high start-up costs that were time-limited to avoid higher ongoing costs after enhanced federal funding ended. Some of those initiatives included provider bonuses or incentive payments, worker training or certification programs, studies to assess provider rates or workforce development, workforce registry expanding and IT system upgrades.

All reporting states indicated that they adopted policies to streamline enrollment processes and expand access to Medicaid HCBS during the public health emergency. Although telehealth service delivery will continue in most states, increased HCBS use limits are more likely to end with the public health emergency. 

Waiting lists inaccurate measurement of need

Meanwhile, more than 650,000 people spent an average of 45 months on Medicaid HCBS waiting lists in 2021, but those lists can both overstate and understate unmet need, according to a separate KFF analysis of data from state and Washington, DC, on the ongoing effects of the pandemic on HCBS.

According to the report, waiting lists sometimes can overstate the need for services because not all states screen for Medicaid eligibility before adding people to their lists. That approach can inflate numbers by including people who never may be eligible for services. In fact, KFF found that more than half of those on HCBS waiting lists lived in states that did not screen for eligibility, making comparisons among states difficult.

On the flip side, waiting lists also can understate need, reflecting populations a state chooses to serve, as well as the resources it commits. In many instances, people may need additional services, but because a state doesn’t offer those services, or limits their availability to specific populations, those individuals would not appear on waiting lists.

Although most people on waiting lists have intellectual or developmental disabilities (84%), they comprise less than half of those served through 1915(c) waivers. Older adults and adults with physical disabilities account for 24% of those on waiting lists. 

In 2021, individuals on waiting lists waited an average of 45 months to receive HCBS waiver services, up from 44 months in 2020. People with intellectual or developmental disabilities waited the longest, at 67 months, on average, whereas older adults waited an average of two months. 

The future of HCBS

Looking ahead, the KFF analysis stated that shortages of direct care workers may continue to create problems for states seeking to reduce their waiting lists. States reported workforce shortages as the primary effect of the COVID-19 pandemic across all HCBS settings. 

“It remains to be seen how policy changes enacted during the pandemic will affect the provision of HCBS in future years, and whether the investments in HCBS through the American Rescue Plan Act will result in capacity increases even after the federal funding ends,” the report concludes.

Policymakers have called for additional changes to HCBS, including eliminating waiting lists, increasing opportunities for family members to be paid caregivers, increasing HCBS provider wages and enabling more people to age in place. 

“Although there is consensus on those broad policy goals, there is little consensus on how to pay for significant federal investments needed to achieve these goals, suggesting it may be some time before major reforms are enacted,” the authors concluded.