Behind the Numbers: What is Driving Continued HCBS Rebalancing?

The Centers for Medicare & Medicaid Services (CMS) recently released the 2022 Medicaid long-term services and supports (LTSS) expenditure report. This annual review of claims data serves as a barometer of Medicaid LTSS rebalancing, the shift in Medicaid LTSS spending and use away from institutions and toward home and community-based services (HCBS). The 2022 report describes trends in rebalancing, details variation across states, and breaks down data by several demographic categories. Key findings in the report include: 

• The share of Medicaid LTSS spending going toward HCBS reached an all-time high of 64.6 percent in 2022. 

• Nationally, 86.6 percent of people who use LTSS in Medicaid use HCBS. However, the rebalancing ratio varies across certain demographics, with the largest variation seen across age groups. Among adults 65 and older who used LTSS, only 64.9 percent used HCBS, compared to 97 percent of those 0–20 and 92.4 percent of those 21–64. 

• State variation in HCBS spending as a share of total LTSS spending ranged from 34.2 percent in Mississippi to 84.5 percent in Minnesota and Wisconsin. The proportion of HCBS users among total LTSS users ranged from 60.6 percent in Mississippi to 99.3 percent in Oregon. 

• HCBS users had a lower average spending ($16,491) compared to $48,143 for people who received services in institutions.  

This data demonstrates growth in HCBS use, meaning more individuals with LTSS needs are living in their own homes and communities, a goal of federal and state policy for several decades. While the trend toward rebalancing long preceded COVID-19, the pandemic gave attention and additional resources to address the challenges of providing HCBS, including workforce shortages. However, COVID investments are time-limited, especially in states that must spend enhanced HCBS funding they earned under the American Rescue Plan Act of 2021 (ARPA) by March 31, 2025. States used ARPA funds for a variety of purposes, including increases in payments to HCBS direct care workers and reducing or eliminating HCBS waiver waiting lists. 

So how can this progress continue and be sustained? Looking ahead, states will need to determine how to sustain and build upon the infrastructure changes they have made to meet the needs of an aging population. The implementation of the Medicaid Access Rule will continue to encourage states to increase HCBS access. States may be challenged by the sunsetting of COVID relief funding and the lack of new funds for Access Rule implementation. However, they may leverage existing opportunities like funding available through Money Follows the Person (MFP) Rebalancing Demonstration Program to support HCBS quality measure reporting in the Access Rule. Another challenge to HCBS sustainability could be significant changes in Medicaid funding, such as the establishment per capita caps, reported as being under consideration by the House Budget Committee. Such funding changes could put pressure on states to reduce optional benefits such as HCBS. 

Aurrera Health Blog Series on Home and Community-Based Services 

This year, Aurrera Health will publish a series of posts highlighting the latest information on state and federal investments in HCBS. We look forward to helping states and other stakeholders understand and implement strategies to support serving people with LTSS needs through HCBS. If you would like to discuss how we can help you, please reach out to Aurrera Health Managing Principal Kristal Vardaman. 

Kristal Vardaman [Managing Principal]