Pivotal Moment for the HCBS Industry

The HCBS Industry has reached a pivotal moment to retain it’s existence. The Proposed Medicaid cuts currently under debate in Congress could significantly impact Home and Community-Based Services (HCBS), which are vital for millions of older adults and people with disabilities who prefer to receive care at home rather than in institutional settings. Although HCBS are not explicitly targeted, they are particularly vulnerable due to their optional status under Medicaid and reliance on state-level funding decisions.

The Bottomline: The Congressional Budget Office estimates these changes could result in at least 8.6 million Americans losing health insurance coverage.

Brief Summary of HCBS:

HCBS was created to improve care options and independence — not primarily to reduce the deficit — but its cost-effectiveness made it politically appealing during periods of fiscal restraint. The history of HCBS in the U.S. is rooted in a long effort to move away from institutional care (like nursing homes or hospitals) and provide people with disabilities and older adults the ability to live independently in their homes and communities.

Here are just a few potential consequences:

• Provider Payment Reductions: States may lower reimbursement rates for HCBS providers, exacerbating existing workforce shortages.
• Service Access Limitations: Increased administrative burdens and reduced funding could lead to longer waiting lists and decreased availability of services.
• Workforce Challenges: Cuts could hinder efforts to recruit and retain home care workers, many of whom are already underpaid and rely on public assistance themselves.

What are the implications at the State-Level?

States like Pennsylvania, which have significant populations relying on Medicaid-funded HCBS, may face difficult choices. Potential outcomes include scaling back services, reducing provider payments, or tightening eligibility criteria. Such measures could disproportionately affect rural areas and underserved communities.

A Quick Overview of Proposed Medicaid Cuts

The Majority Party in Congress has advanced a legislative package aiming to reduce federal spending by approximately $900 billion over the next decade, with Medicaid cuts comprising a substantial portion. Key elements of the proposal include:

• Work Requirements: Mandating 80 hours of work or approved activities per month for Medicaid recipients aged 19–64 to maintain eligibility.
• Cost-Sharing Measures: Introducing co-pays of up to $35 for individuals earning above the poverty line.
• Eligibility Restrictions: Implementing stricter asset tests and frequent eligibility verifications.

The How, When and Why of HCBS through the years:

1. The Problem: Institutional Bias (1965–1970s)
   When Medicaid was created in 1965, it only covered long-term care in institutions like nursing homes. People who wanted to live at home had no support.

2. The Advocacy Movement
   In the 1970s, the disability rights movement pushed for independent living and alternatives to institutionalization.

3. The Policy Breakthrough (1981)
   Congress passed the Omnibus Budget Reconciliation Act of 1981, which created Section 1915(c) waivers.
   ➤ These waivers let states use Medicaid funds for home and community-based care instead of institutions.

4. Legal Support (1999)
   The Olmstead v. L.C. Supreme Court case ruled that unnecessary institutionalization violates the Americans with Disabilities Act (ADA), reinforcing the shift to community-based care.

5. Ongoing Growth
   Since then, federal and state programs have expanded HCBS, making it the main form of long-term care under Medicaid today.

Here is a visual comparison of Medicaid spending on Home and Community-Based Services (HCBS) versus institutional care from 2000 to 2023. As shown, HCBS spending has steadily increased and overtook institutional spending around 2020, reflecting the national shift toward community-based care models.