State Variation in Medicaid LTSS Policy Choices and Implications for Upcoming Policy Debates

Introduction

Medicaid is a key source of coverage for seniors and people with disabilities, including those who need long-term services and supports (LTSS) to meet daily self-care and independent living needs. Many of the Medicaid eligibility pathways that are based on old age or disability, and nearly all home and community-based services (HCBS), are offered at state option, resulting in variation among states. Waivers continue to be the primary way that states expand financial eligibility and offer HCBS benefit packages to seniors and people with disabilities.

Unlike Medicaid state plan authorities, which require states to cover (and provide federal matching funds for) everyone who meets the associated eligibility criteria, waivers allow states to limit the number of people served. States’ ability to cap HCBS waiver enrollment can result in waiting lists when the number of people seeking services exceeds the number of waiver slots available. More than three-quarters of states (41) reported a HCBS waiver waiting list in 2018 (the most current year for which data are available).¹

Waiting lists are one proxy for unmet need for HCBS, but waiting lists alone are an incomplete measure of state capacity and unmet need. Waiting lists reflect the populations a state chooses to serve and how the state defines those populations, as well as the resources it commits. In addition, states’ waiting list management approaches differ with regard to prioritization and eligibility screening processes, making comparisons across states difficult. While some Affordable Care Act (ACA) opponents cite waiver waiting lists to argue that expansion diverts funds from seniors and people with disabilities in need of HCBS, research shows that the ACA Medicaid expansion has led to gains in coverage for people with disabilities and chronic illnesses. The ACA expansion is a pathway to Medicaid eligibility for people with disabilities, many of whom previously were ineligible for coverage (Box 1). In addition, HCBS waiver waiting lists predate the ACA Medicaid expansion, which became effective in most states in 2014. Waiver enrollment caps have existed since HCBS waiver authority was added to federal Medicaid law in the early 1980s, and states have reported waiver waiting lists in each year of the KFF 50-state Medicaid HCBS waiver program survey, dating back to 2002. Among the nearly 820,000 people on an HCBS waiver waiting list nationally, two-thirds reside in a non-expansion state.²

This brief takes a closer look at multiple measures beyond waiver waiting lists to evaluate state choices about optional Medicaid eligibility pathways, spending, and services for seniors and people with disabilities as of 2018.³ The analysis draws on several KFF resources, including 50-state surveys of Medicaid financial eligibility pathways for seniors and people with disabilities, HCBS waiver programs, and state plan benefits offered, as well as state Medicaid LTSS expenditures reported by Mathematica.⁴ We find substantial state variation in adoption of policies to expand Medicaid for seniors and people with disabilities, with states’ ACA expansion status not a strong predictor of policy choices related to seniors and people with disabilities. The Appendix contains detailed data tables. Understanding current state-level variation in Medicaid eligibility, spending, and services for seniors and people with disabilities will be important to inform upcoming policy debates about proposals, including those supported by President Biden during the campaign, to expand HCBS and eliminate Medicaid’s historical institutional bias.

Key Areas of State Variation in Medicaid LTSS Policies

This brief takes a closer look at over 50 measures across three key areas (optional Medicaid eligibility pathways, spending, and services for seniors and people with disabilities) to assess state variation in LTSS policy choices beyond waiver waiting lists⁶ (Figure 1). The analysis identifies measures that demonstrate general state-level variation and measures that vary notably by states’ ACA expansion status. If a measure is presented by the binary “adopted” or “not adopted,” we consider this measure to vary notably by expansion status if it meets the following two criteria: 1) at least 15 states adopt that measure, and 2) there is at least a ten percentage point difference in the share of states that adopt that measure, by expansion status. Measures that are presented as medians or averages are considered to vary notably by expansion status if they meet the following two criteria: 1) there are at least 15 states included in calculation of the median or average, and 2) there is any degree of difference between the expansion and non-expansion averages/medians. Measures that do not vary by expansion status are considered to exhibit more general state variation.

Eligibility and Enrollment

We examined 14 key measures related to eligibility and enrollment policies for seniors and people with disabilities, including optional eligibility pathways, financial and functional eligibility criteria, post-eligibility treatment of income, and renewals. Specific measures are listed in Table 1. While nearly all states offer at least one optional state plan eligibility pathway based on old age or disability, state choices about which pathways adopted vary. Nearly all states choose to cover children with significant disabilities and working people with disabilities, and three-quarters cover medically needy seniors and/or people with disabilities. Less than half of states cover seniors and people with disabilities up to the federal poverty level, and very few states elect the Section 1915 (i) optional eligibility pathway (Appendix Table 1). Within these optional pathways, a minority of states opt to expand or eliminate asset limits (Appendix Tables 2-5). Nearly all states expand LTSS financial eligibility for both institutions and HCBS beyond state plan limits (Appendix Tables 6-9), and most states apply the same or less stringent financial and functional eligibility criteria to pathways for institutional LTSS and HCBS (Appendix Table 10). Post-eligibility treatment of income policies and spousal impoverishment standards vary across states (Appendix Table 11). Most states have adopted the ACA options to streamline renewals for pathways based on old age or disability (Appendix Table 12).

Table 1:  Eligibility and Enrollment Policy Options for Seniors and People with Disabilities
Policy Area	Specific measures
Eligibility pathways	Adoption of optional state plan eligibility pathways Adoption of HCBS waiver eligibility pathways
Financial eligibility criteria	Maximum income limit for optional state plan eligibility pathways Maximum asset limit for optional state plan eligibility pathways Maximum income limit for institutional LTSS eligibility Maximum asset limit for institutional LTSS eligibility Maximum income limit for HCBS waiver eligibility Maximum asset limit for HCBS waiver eligibility Financial eligibility criteria for HCBS are more or less stringent than institutions
Functional eligibility criteria	Functional eligibility criteria for HCBS are more or less stringent than institutions
Post-eligibility treatment of income	Personal needs allowance for institutional long-term care Personal needs allowance for HCBS Spousal impoverishment standards (community spouse needs allowance and asset limit)
Eligibility renewal	Adoption of ACA streamlined renewal processes for pathways based on old age or disability

Some state policy choices related to Medicaid eligibility and enrollment for seniors and people with disabilities vary by states’ ACA expansion status, most notably with regard to optional coverage pathways. Expansion states are more likely than non-expansion states to offer coverage through certain state plan pathways, including the medically needy pathway and the buy-in for working people with disabilities (Appendix Tables 1-3, 5). Expansion states also are more likely than non-expansion states to not apply an asset limit to the buy-in for working people with disabilities (Appendix Tables 2, 5). While non-expansion states are more likely to expand financial eligibility for institutional LTSS beyond state plan pathway limits, expansion states are more likely to expand financial eligibility for several HCBS waiver populations (Appendix Tables 6-9). Expansion states typically adopt a higher median monthly personal needs allowance, expanding financial eligibility for HCBS waiver enrollees (Appendix Table 11). Additionally, non-expansion states are more likely than expansion states to adopt the ACA options to streamline Medicaid eligibility renewals for pathways based on old age or disability, including offering pre-populated forms and a reconsideration period (Appendix Table 12).⁷

Spending and Other Policies to Reduce Institutional Bias

We examined 17 key measures related to Medicaid LTSS spending and other policies to reduce institutional bias, including the share of LTSS spending devoted to HCBS, participation in federal HCBS grant programs, utilization controls, and waiting lists. Specific measures are listed in Table 2. Nationally, 56% of total Medicaid LTSS dollars are spent on HCBS as opposed to institutional care, with substantial variation among states, ranging from 30% to 83% (Appendix Table 13).⁸ Most states participate in the Money Follows the Person program, while over one-third were both eligible for and participated in the Balancing Incentive Program (Appendix Table 14).⁹ Two-thirds of states apply cost caps to HCBS waiver services, while very few do so for state plan home health or personal care services (Appendix Table 15). Half of states apply hour caps to home health state plan services, while less than half do so for personal care state plan services and HCBS waiver services (Appendix Table 15). Few states apply geographic limits to their HCBS waivers (Appendix Table 15). The majority of states screen people on a HCBS waiver waiting list for eligibility prior to waiting list enrollment and prioritize individuals with certain characteristics to receive waiver services when slots become available (Appendix Table 16-17). There is substantial variation among states in the average waiting period for waiver services by target population (Appendix Table 16-17).

Table 2:  LTSS Spending and Other Policies to Reduce Institutional Bias
Policy Area	Specific measures
LTSS spending	Share of overall LTSS spending devoted to HCBS Share of total LTSS spending on services for people with I/DD devoted to HCBS Share of total LTSS spending on services for seniors and people with physical disabilities devoted to HCBS Share of total LTSS spending on behavioral health services devoted to HCBS
Federal grant programs	Participation in Money Follows the Person Number of Money Follows the Person transitions Participation in Balancing Incentive Program
Utilization controls	Cost caps on home health state plan services Hour caps on home health state plan services Cost caps on personal care state plan services Hour caps on personal care state plan services Cost caps on HCBS waiver services Hour caps on HCBS waiver services Geographic limits on HCBS waiver services
Wavier waiting lists	Waiting list enrollment (overall and by target population) Average waiting time (overall and by target population Waiting list enrollment policies (pre-screen for eligibility, waiting list priority, receipt of state plan services while waiting) – (overall and by target population)

Certain state policy choices to increase HCBS spending and reduce institutional bias vary by states’ ACA expansion status. Nearly half of all expansion states spend above the national average  (56%) of their total LTSS dollars on HCBS (vs. institutional care) compared to under one-third of non-expansion states¹⁰ (Appendix Table 13). Additionally, among the states that were eligible for the ACA’s Balancing Incentive Program (BIP), expansion states were more than twice as likely to participate as non-expansion states¹¹ (Appendix Table 14). The overall average waiting period for waiver services was longer among individuals living in expansion states compared to non-expansion states (Appendix Tables 16-17).

Covered Services

We examined 22 key measures related to Medicaid covered services for seniors and people with disabilities, including optional state plan benefits, HCBS waiver services, and self-direction policies. Specific measures are listed in Table 3. There is a great deal of variation in terms of state adoption of optional state plan HCBS, ranging from nearly all states adopting the rehabilitative services option to eight states adopting Community First Choice (CFC) attendant services (Appendix Table 18). In addition to the rehabilitative services option, half or more of states offer targeted case management, personal care, PACE, and private duty nursing state plan benefits (Appendix Table 18). Just under half of states offer ACA health homes, while fewer states offer case management or Section 1915 (i) state plan HCBS (Appendix Table 18). States’ HCBS waiver benefit packages vary widely by target population (Appendix Tables 19-24). Nearly all states offer options to self-direct state plan and/or HCBS waiver services¹² (Appendix Table 25). When evaluating state variation in policies related to optional covered services, there is no clear relationship to states’ ACA expansion status.

Table 3:  State Policy Choices About Optional Covered Services
Policy Area	Specific measures
Optional state plan HCBS	Home health Personal care Community First Choice attendant services and supports Section 1915 (i) HCBS Rehabilitative services Case management Targeted case management PACE Private duty nursing ACA health homes
HCBS waiver services	Case management Home-based services Day services Nursing, therapy, other health services Round-the-clock services Supported employment Other mental health/behavioral health services Equipment, technology, modifications
Self-direction policies	Self-direction allowed for home health state plan services Self-direction allowed for personal care state plan services Self-direction allowed for HCBS waivers HCBS waiver self-direction policies (select/dismiss worker, set worker schedule, set worker pay, allocate service budget)

Looking Ahead

Our review of a range of measures, beyond waiver waiting lists, finds substantial state variation in adoption of policies to expand Medicaid for seniors and people with disabilities, with states’ ACA expansion status not a strong predictor of policy choices related to seniors and people with disabilities. In some cases, a state’s choice to adopt the ACA expansion is associated with state take-up of options to expand eligibility for seniors and people with disabilities, while in many cases, state variation in policies for seniors and people with disabilities appears to be unrelated to ACA expansion status.

Understanding current state-level variation in Medicaid eligibility, spending, and services for seniors and people with disabilities is important to inform upcoming policy debates. President Biden during the campaign supported expanding Medicaid HCBS through legislative changes to eliminate waiver waiting lists. COVID relief legislation being discussed in Congress would provide a time-limited 7.35 percentage point increase in federal Medicaid matching funds for state spending on HCBS, to fund a variety of activities to expand access to HCBS and support direct care providers during the COVID-19 public health emergency. Policymakers also may consider legislation to end Medicaid’s historical institutional bias by making HCBS a mandatory benefit, a policy that has garnered more interest in the recent months, given COVID-19’s disproportionate impact on people in institutional settings.

Though Medicaid is serving as a safety net during the public health emergency and economic downturn, state budget shortfalls could make it challenging for states to maintain optional LTSS without additional federal fiscal support. The Families First Coronavirus Response Act provided states with a temporary 6.2 percentage point increase in federal Medicaid matching funds to support their COVID-19 response, provided that states provide continuous coverage for current enrollees and meet other maintenance of effort (MOE) requirements. Notably, a few states – all of which have adopted the ACA Medicaid expansion — reported plans to expand optional eligibility pathways based on old age or disability in FY 2021.¹³ Still, as the pandemic and economic downturn continue, states may be forced to look to cutting provider payments or eliminating optional benefits, without further fiscal relief. The Biden Administration has indicated that the PHE is expected to extend through 2021, which would ensure that states can continue to receive the FMAP bump and prevent states from scaling back optional eligibility pathways. The MOE prevents states from adopting eligibility standards more restrictive than those in effect on January 1, 2020, while states are receiving enhanced federal matching funds, although changes to optional benefits, cost-sharing (including for LTSS), and provider payments are permitted.

The Biden Administration can take a variety of administrative actions to support state Medicaid programs and ensure continued coverage for enrollees during the public health emergency. States are using various Medicaid emergency authorities to expand eligibility for seniors and people with disabilities, including those who need LTSS, during the pandemic, and the Biden Administration’s indication that the PHE declaration is likely to continue through 2021, ensures that these authorities remain available to states. Over half of states have expanded eligibility criteria for seniors and people with disabilities, while a few states have increased the total number of HCBS waiver enrollees served. Nearly all states have streamlined enrollment processes, and over one-third of states have eased premium and/or cost-sharing requirements for seniors and people with disabilities. After the public health emergency ends, the Biden Administration could encourage and work with states to incorporate policy changes to support coverage adopted during the pandemic into their regular Medicaid programs. CMS guidance issued in December 2020 specifically encourages states to identify any temporary authorities that increased HCBS access and make those changes permanent.