A Quarter Century Evolution of Medicaid 1915(c) HCBS Waivers: Little Progress and Persistent Challenges

In the two decades since LeBlanc, Tonner, and Harrington's seminal 2000 study on Medicaid 1915(c) Home and Community-Based Services (HCBS) waivers, these programs have undergone significant transformation. This article examines the evolution of HCBS waivers over the past quarter-century, highlighting both advancements and persistent challenges in providing long-term care services to low-income Americans.

?Program Growth and Expansion

?The landscape of HCBS waivers has dramatically expanded since 2000. As of 2020, there were 254 active 1915(c) waivers across 47 states and the District of Columbia, serving approximately 1.9 million individuals—a substantial increase from 561,510 in 2000. This growth was largely propelled by the landmark Olmstead decision, and most recently, the COVID pandemic has reshaped the long-term care landscape.

?Nursing Home (NH) residents continue to sweep into HCBS programs based on “Freedom of Choice” and not based on their clinical and functional capacity needs. The goal was to push as many people as possible away from institutions and towards home and community-based settings no matter the situation of the comparative cost.

?States have leveraged their 1915(c) waivers to rebalance Long-Term Services and Support (LTSS), often interpreting the Olmstead decision much more broadly than its original intent. This has resulted in a shift away from institutional care, with many nursing home residents transitioning to HCBS programs based on "Freedom of Choice" principles, sometimes without full consideration of clinical and functional capacity needs and foregoing physician recommendations against HCBS placement.

Participant-Directed Services

?The emergence of Consumer-Directed Care (CDC) models, noted as an area of interest in 2000, has become a cornerstone of many HCBS programs. By 2020, 45 states offered some form of participant-directed services option in their 1915(c) waivers, granting individuals greater control over their care.

?However, this model has faced recent challenges. Health plans have raised concerns about potential fraud, waste, and abuse despite the implementation of Electronic Visit Verification (EVV) systems. Additionally, the quality of care provided by CDC workers has been scrutinized, as they are not held to the same standards as contracted home care agency workers.

Eligibility and Access

?While the 2000 study highlighted concerns about restrictive financial eligibility criteria and structural barriers, states have generally expanded access to HCBS programs. Many have increased income and asset limits for eligibility, and the Affordable Care Act of 2010 introduced new options like the Community First Choice 1915(k) state plan option.

?Despite these efforts, the proportion of state residents served by these programs has paradoxically decreased from 2.1 per 1,000 in 2000 to 1.9 per 1,000 in 2020, indicating ongoing challenges in program reach and accessibility.

?Cost Neutrality

?The Centers for Medicare and Medicaid Services (CMS) has maintained its stance on cost neutrality requirements for 1915(c) waivers. Some states have responded by implementing various cost management strategies, including:

1.????????? Tiered benefits packages based on assessed need and not want

2.????????? State-sanctioned standardized Health Risk Assessment (HRA) profiling

3.????????? Using imminent nursing home placement as a primary qualifier for program admission

4.????????? State-established max spending caps that do not allow HCBS to exceed annualized institutionalization costs.

5.????????? Implementation of Statewide Medicaid Managed Care (SMMC) LTC programs

?The shift to SMMC contracting has allowed states the ability to cost-shift to contracted risk-bearing health plans. The health plans are required to bear Per Member Per Month capitation risk payment and provide expanded benefits. However, this approach has created challenges for health plans, often resulting in financial losses due to discrepancies between state-determined rates and actual service costs.

?For example, the state gives a plan a composite PMPM of $2500. The average cost for service is based on $26/hour. The average number of hours per week of service is 30 hours or 120 hours per month. This brings the PMPM service cost to $3120 per month. This creates a loss of $620 per month for the health plan on each member ($3120 - $2500). Based on the composite, for health plans to break even, the number of hours per week and per month cannot exceed 24 hours and 96 per month, which brings them to $2496 per month.

?States report to CMS that rates are paid to the health plans on a PMPM basis. They do not report the cost that was borne by the risk-bearing health plan. This is a business arrangement between the state and its health plans. If the state reports the cost of its HCBS program as below the presumed cost of institutionalization (as prescribed by the state’s actuary), the state has complied with its cost neutrality attestation. Therefore, cost neutrality is based solely on cost-shifting by states. Without this ability to cost shift, states would have proven HCBS to be far more costly than institutionalization.

?Case Management and Quality Monitoring

?Significant advancements have been made in case management and quality monitoring since 2000. States have implemented comprehensive quality improvement strategies, often delegating responsibilities to contracted health plans. Key developments include:

?1.??????? Implementation of robust electronic case management systems with built-in quality monitoring tools

2.??????? Adoption of standardized quality measures such as HEDIS, LTSS Measures, PIP, and CAHPS 1.0

3.??????? Introduction of liquidated damages for non-compliance with quality initiatives

Despite these improvements, quality remains a significant challenge for states and health plans alike. The lack of standardization among the states has created benefit incongruity from state to state.

?Enrollee Satisfaction and Outcomes

?There is now a greater emphasis on measuring enrollee satisfaction and outcomes in HCBS programs. The National Core Indicators (NCI) program, launched in 1997, has expanded to include aging and disability surveys in 46 states as of 2021. Additionally, CMS has developed a standardized HCBS Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey to gauge client experiences.

?Persistent Challenges

?Several challenges have emerged or intensified since 2000:

?1.??????? Workforce Shortages: The growing shortage of direct care workers, exacerbated by the COVID-19 pandemic, has placed immense pressure on LTSS systems.

2.??????? Pandemic Impact: COVID-19 has caused major disruptions to state-level LTSS systems, leading to decreased nursing home occupancy and increased demand for home-based care.

3.??????? Workforce Development: States face complex challenges in addressing low wages, limited benefits, and challenging working conditions for caregivers.

4.??????? Cultural Competence: There is a growing need to improve service delivery for diverse populations, particularly communities of color and those with limited English proficiency.

5.??????? Mental and Behavioral Health: Health plans report a significant increase in enrollees with severe mental illness (SMI), often without accurate diagnoses, leading to increased case management complexity and costs. Health plans have seen upward of a 30 percent increase in their case mix of SMI enrollees. The level of complexity of the combined SMI and physical medicine enrollee requires far more case management expertise and benefit allocation than states have earmarked in their rates. Again, this causes the at-risk health plan to take it on the chin as part of their Medical Loss Ratio (MLR).

?Conclusion

?The evolution of Medicaid HCBS waiver programs over the past quarter-century reflects both some progress and persistent and new challenges. While these programs have expanded substantially, serving nearly 1.9 million individuals nationally in 2020 compared to 561,510 in 2000, they continue to grapple with issues of cost, quality, workforce shortages, and equitable access.

The COVID-19 pandemic has further exposed weaknesses in LTSS delivery systems, emphasizing the need for more resilient and adaptable programs. As states and health plans navigate these complex issues, it is crucial to consider innovative approaches that balance cost-effectiveness with high-quality, person-centered care.

?No matter how you look at it, Medicaid programs of any type are expensive. They are at or above a third of a state’s annual budget. LTC programs serve a minute fraction of the state’s population who require long-term services. These programs were designed for the sole purpose of nursing home diversion to reduce a state’s cost of institutionalization.

?The actual cost of providing HCBS as an alternative to institutionalization has not changed since 2000. With the Olmstead ruling and the pandemic making striking impacts on enrollments in these programs, the cost of servicing this population has increased significantly. States have utilized their SMMC contracting abilities to manage their cost neutrality through the simple means of cost shifting. It is nothing more than a smoke-and-mirrors numbers game. Health plans willing to assume the risk in entering state contracts understand the game's rules and have accepted them. The question is, for how much longer? Then what?

Moving forward, policymakers, healthcare providers, and stakeholders must collaborate to address these challenges head-on. This may involve reimagining funding models, investing in workforce development, and leveraging technology to enhance service delivery and quality monitoring. Only through concerted efforts can we ensure that Medicaid HCBS waivers continue to evolve to meet the changing needs of aging and disabled populations in the years to come.

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