Medicaid cuts threaten home and community-based care

Key Takeaways

While home and community-based services (HCBS) are not specifically being targeted in any proposed federal cuts to Medicaid, roughly two-thirds of funding for them come from the low-income healthcare program, meaning the home care workforce and the nation’s most vulnerable populations they serve would be negatively affected, panelists said March 1 at NACo’s Health Policy Steering Committee meeting.

The rapidly aging population in the United States has increased demand for home and community-based services, resulting in a long-term care services and supports financing crisis, said Lisa Harootunian, director of health for the Bipartisan Policy Center. More than 4 million people rely on Medicaid-funded home and community-based services — including those with intellectual and developmental disabilities, older adults and people with complex medical needs. A “crucial” element of accessing those services is having a strong and robust direct-care workforce, she said.

The HCBS workforce is expected to grow more than any single occupation in the coming decade, creating more than an estimated 700,000 new jobs, but turnover is upwards of 80%, largely due to the challenging nature of the work and a retirement wave, with its workforce skewing older, said Stephen McCall, the director of research for PHI. Cuts to Medicaid would only exacerbate the workforce shortage, he noted.

“Medicaid has a very important role in financing these jobs, shaping job quality and in providing an important source of coverage for this workforce, allowing them to attend to their own healthcare needs without fear of financial ruin,” McCall said. “When we think about the cuts that are on the table, HCBS is probably a low priority for cuts, but already, states are facing really significant budget challenges.

“…So, if we take more money out of the system, I think we’re likely to experience some degree of cuts to care and also to jobs that will worsen the recruitment and retention challenges that we’re already facing.”

American Rescue Plan Act dollars — the deadline to obligate the funds has passed — increased federal investment in home and community-based care by 10 percent, with the majority of funding going toward workforce development, McCall said. Once ARPA funding expires at the end of 2026, the home care workforce will take an added hit, he added. 

Roughly 40% of home care workers live in low-income households and the majority rely on some form of public assistance, with about one-third relying on Medicaid. Reducing the federal medical assistance percentage, which would shift more Medicaid costs to states, is “on the table” — meaning workers would lose coverage themselves, he said. About half of the home care workforce works part-time, and gaps in employment could also lead to gaps in coverage, according to McCall. 

Family caregivers — the majority of whom already report facing challenges balancing caregiving and work — would also feel the effect of Medicaid cuts, McCall said. 

“If we implement these cuts, the workforce challenges grow,” McCall said. “That could mean greater care gaps, and more family caregivers leaving the labor force to provide caregiving. So, I think fundamentally the question is, in our communities, are our populations feeling a greater burden from taxes or from care gaps? 

“And if the answer is the latter, that’s a message that legislators at every level really need to hear, because this could really have a significant and deleterious impact on folks that we’re already sort of struggling to support in the community.”

Because of the urgent need for home care workers, the Bipartisan Policy Center has proposed immigration reforms and domestic workforce reforms as solutions, according to Harootunian. Some paths forward include increasing the number of permanent employment-based visas or green cards that are available for home care workers and expediting that process, as well as creating a legalization program for qualifying foreign-born workers who help relieve the care workforce shortage. Under the approach, people who have provided a minimum of 180 days of direct caregiving labor over the past two years would be eligible, granting them certified direct care worker status that would be valid for five years and renewable.

“Ultimately, this would all create a lawful path to citizenship,” Harootunian said. “So, we’re thinking about how we can really target our immigration reforms in a way that recognizes the needs within the U.S. and both balances domestic and immigration reforms to accomplish those goals.”

Community based care services are optional, but they’re popular to implement because they’re more cost effective and a “better alternative from a humanities perspective,” said Matt Salo, CEO of Salo Health Strategies.

“If you have physical, intellectual developmental disabilities, or if a family member does, where do you want to be? You want to be in your home,” Salo said. “You want the freedom, you want the independence, you want to be in and around your community, and quite frankly, that’s good, because that’s a much cheaper place to be.”

Because of the optional nature of HCBS, there could be reduced access to them if federal cuts to Medicaid move forward, Harootunian said. With there being so much uncertainty around the future of Medicaid, now is the time to come up with solutions for simplifying and streamlining the process, she said.

To improve access to HCBS and maintain some of the benefits of existing Medicaid, home and community-based services authorities, the Bipartisan Policy Center has recommended asking Congress to streamline the authority process into one that highlights and captures the existing flexibilities within current waivers, such as the most commonly used 1915(c) waiver, preserving access to coverage and making the service delivery less administratively complex, Harootunian said.

“We have to think about ways to make [Medicaid] work better, in a way that’s not going to reduce access to care or coverage of these services,” Harootunian said. “Because significant cuts to Medicaid funding put states in a position where they have to make really tough choices about what to cover, who to cover and how much.”

A consistent issue with garnering widespread support for Medicaid is that most people don’t know exactly what it is – largely due to it functioning differently state-by-state and also having different names, such as Medi-Cal in California, SoonerCare in Oklahoma and MassHealth in Massachusetts, Salo said. Even congressional and federal policy-makers have difficulty grasping everything that falls under the healthcare program, according to Salo. 

He shared a story he had heard from a staff member of a former chairman of the Senate Finance Committee, which has jurisdiction over Medicaid, who had said, “Is Medicaid the one for old people [referring to Medicare], or the other one?” 

“When something is hard to understand, it’s hard to appreciate,” Salo said. “It becomes easy to dismiss. It becomes easy to ‘other’-ize, and therefore easy to make significant, devastating changes to it without really understanding.”

While Salo said he hasn’t heard of home and community-based services or long-term care specifically being targeted by cuts, it “all comes out of the same pot” with Medicaid, he said.

“Sometimes there’s an implicit — but now you’re sort of starting to hear it explicitly said — ‘That’s the parasite class, don't worry about that. Cuts will just be eliminating waste, fraud and abuse’ — and that's a good argument, but it’s not real,” Salo said. “… So if you see significant pressure, if the Feds start making big changes to the federal matching rates, to getting rid of the expansion, to limiting the federal contribution, all the money that was going there has to get back-filled somehow, because people’s health care needs don’t go away, and the hospitals will certainly tell you that. 

“And, what are you going to do? Raise taxes at the state or local level? That’s really what you’re going to talk about here, so that’s what we’re facing.”

However, Salo said he is “cautiously optimistic” that there won’t be significant changes to Medicaid, because the majority of Americans have some connection to the healthcare program. Medicaid covers about 40% of all children in the United States and it is the largest payer of behavioral health services.

“I do think that the awareness gap, the appreciation gap in Medicaid, is changing,” Salo said. “… And I think it’s no longer going to be as easy to say ‘Medicaid — that’s those people over there.’ It’s us. And I think that’s the message that has to continue.”