ARP Boosted Funding for Home, Community-Based Services, SDOH

The American Rescue Plan boosted the federal matching rate (FMAP) for Medicaid home and community-based services (HCBS), thereby increasing federal spending on social determinants of health, according to a Kaiser Family Foundation (KFF) data note.

“The pandemic’s disproportionate impact on seniors and people with disabilities, particularly those living in congregate settings such as nursing homes, has brought heightened focus on the need for additional HCBS, and the growing elderly population in the coming years will further intensify the need for these services,” the KFF researchers wrote.

The American Rescue Plan boosted the federal matching rate for HCBS costs on the condition that states that wanted to partake of June 12, 2021, although a month-long extension is available if needed. 

The regulation gives states additional 10 percentage points of federal funding match starting on April 1, 2021 and extending through March 31, 2022. However, the states can use the funds through March 31, 2024.

The states must use the funds to expand the home and community-based offerings beyond what they offered before April 1, 2021.

“For example, in response to COVID-19, states might use the enhanced funds to expand covered services to reduce the risk of institutionalization, facilitate COVID-19 vaccine access for HCBS enrollees, or support the direct care workforce,” the data note explained.

“To build HCBS capacity and advance LTSS rebalancing, states might streamline eligibility and enrollment processes, increase covered services, expand the direct care workforce, or serve additional HCBS enrollees.”

The researchers used data from the fiscal year (FY) 2018 HCBS program surveys and CMS Financial Management Reports. These data points drew from home healthcare, personal care and state plan services under certain sections of the Affordable Care Act including Section 1115 demonstrations.

As a result of this influx of federal dollars, HCBS spending would likely shift, however the impact would vary by state. States would receive federal dollars depending on the trends in their HCBS spending before April 1, 2021 and the amount that they chose to expand, which differs broadly.

State size and HCBS program design have a significant influence on the cost to states and the federal government.

California is projected to spend the most on HCBS between April 1, 2021 and March 31, 2022. The state may expend over $21 billion on its HCBS programs. If this holds true, the state may also receive the most in federal dollars, up to around $2 billion.

On the other end of the spectrum, Wyoming is likely to spend a fraction of California’s HCBS budget at around $197 million and could expect to receive around $19 million in federal funding, if that is the actual expenditure.

Moreover, this move could bump federal spending on HCBS by approximately $11.4 billion. That projection falls slightly below the Congressional Budget Office’s $12.7 billion estimate, the KFF researchers acknowledged.

The researchers also recognized that there were certain unknowns that could not be factored into this estimate.

“These estimates do not account for states expanding underlying HCBS spending beyond current levels due to the additional federal incentive,” the researchers stated. 

“Additionally, some spending in some states may not be eligible for the full increase, should the state hit the 95% federal match cap, after accounting for the 10 percentage point increase in the bill as well as other enhanced matching rates available to states, such as the enhanced match for the ACA Medicaid expansion group.”

HCBS programs are a part of the CMS social determinants of health roadmap. The roadmap highlighted how states can support those in need of home-based and community services by providing transportation and food, for example.

These programs have been indispensable during the coronavirus pandemic as many states have expanded long-term supports and services coverage and benefits for vulnerable populations. While states expanded benefits in this area, many did not expand the number of enrollees. As of September 2020, there were long waitlists for HBCS programs in many states.