Modernizing Long-Term Services And Supports And Valuing The Caregiver Workforce

On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act, increasing the federal matching assistance percentage (FMAP) in Medicaid by 10 percentage points for home and community-based services (HCBS) provided from April 1, 2021, to March 31, 2022. By requiring this increase in federal matching funds to supplement and not supplant state spending on HCBS, it infuses significant federal dollars into home and community-based care financed by Medicaid. President Biden rapidly followed up on March 31 with an astonishing proposal of $400 billion, as part of his American Jobs Plan, to expand access to HCBS and create good caregiving jobs.

It’s hard to imagine a more important time for federal action to modernize our aging and disability financing and delivery system. COVID-19 has shone a spotlight on underresourced congregate settings and policies that rely too heavily on institutional settings of care. It has also highlighted the role of the direct caregiving workforce, which has heroically provided vital services and supports, often in very difficult situations and with little support. This workforce is composed mostly of women of color who very often don’t earn a living wage or receive health care benefits, paid leave, formal training, professional recognition, or opportunities for advancement. They’re disproportionately losing jobs as nursing homes grapple with the financial fallout from COVID-19.

For President Biden’s vision to be realized, we have to address the laws, regulations, and budgetary pressures that create barriers to receiving care at home. Medicaid is the only substantial third-party payer for long-term services and supports (LTSS), and it spends more on nursing home care than home and community-based care for older adults and individuals with physical disabilities. Internal ATI Advisory, a research and consulting firm based in Washington, D.C., analysis of data from the Medicare Current Beneficiary Survey indicates that about one-fourth of the frail older adults who live at home don’t qualify for Medicaid, despite having an average income below 135 percent of the federal poverty level. Many can’t afford to “spend-down” on home and community-based services and also pay for basic living necessities such as food, rent, and clothing. Provider taxes levied on nursing homes as a revenue source further complicate parity in the effective federal matching rate between institutional and community-based settings.

Radical redesign of systems and policies is necessary, but it will take work and time. The system that delivers these services today sits on a fragmented and state-specific chassis, under a variety of federal legislative and regulatory authorities. States have built limited programs out of a fear of unanticipated demand and in response to a fragile or often non-existent infrastructure.

How do we convert this loose and diverse confederation of programs, recognizing the key state and local roles in its evolution, into a more comprehensive system that ensures equitable and adequate service delivery and financing for the rapidly growing older adult population? How do we accomplish this in a manner that retains choice and flexibility? And critically, how do we remove the institutional bias baked into many crevices and corners of statutory and regulatory policy, while preserving access to nursing home care for those who truly need it?    

It’s not easy, but there are answers. From September 2020 through February 2021, ATI Advisory conducted extensive research on HCBS authorities, Medicaid eligibility policies, workforce programs and policies, and existing Medicaid program design. We also performed more than 20 interviews with state Medicaid agency personnel, former Medicaid directors, consumer advocates, health plan and home care leaders, disability experts, previous Centers for Medicare and Medicaid Services (CMS) and Administration for Community Living leadership, and workforce specialists. Interviewees included experts in and individuals with experience implementing the various Medicaid HCBS authorities and reflecting diverse program designs and geographies, as well as experts across the spectrum of LTSS need (aged, physically disabled, behavioral health, intellectually/developmentally disabled). Interview questions were tailored to the unique experiences of each interviewee. Based on this research, supported by the Robert Wood Johnson Foundation, we’ve released a package of legislative and administrative reforms that, together, would improve access to LTSS in this nation and create better caregiving jobs in the process. The reforms include:

• Providing states with financial relief through an enhanced federal match for Medicaid HCBS;
• Modernizing long-standing eligibility policies that make it difficult for individuals to receive care in the community and at home; and
• Investing in the direct care workforce.

Provide States With Immediate Financial Assurances

Medicaid accounts for 29m percent of total state spending across all funding sources, and LTSS make up 32 percent of Medicaid costs. During times of extreme budget shortfalls, Medicaid, and especially optional and waivered services such as HCBS, are vulnerable to cuts. Even outside of budget crises, states report that uncertainty about demand dampens interest in expanding HCBS access and prevents them from shifting waiver services into a more permanent state plan option.

Congress took important first steps in providing this financial assurance to states through the passage of the American Rescue Plan Act and its one-year HCBS FMAP increase, and the president has called for further expanded access to HCBS in his American Jobs Plan. As part of this follow-on legislation focused on infrastructure, Congress should make the one-year increase permanent and further increase FMAP to encourage and enable both HCBS service and eligibility expansions and workforce investments. The additional FMAP enhancement should be tied to a long-term plan for workforce investment, state increases in the percentage of individuals with high levels of LTSS needs served in community-based settings, and the achievement of population-specific (for example, older adults, individuals with physical disabilities) balance targets.

Second, coupled with this enhanced funding, CMS should educate states on financial controls currently available through various HCBS authorities, such as enrollment controls available through 1915(i) state plan authority. Because the 1915(i) is a state plan amendment, and because state plan amendments are perceived as entitlements that lack the ability to set enrollment caps, few states use this approach to expand HCBS. However, the 1915(i) also allows states to offer HCBS to individuals before they require a full institutional level of care, making this authority a strong approach for preventing significant functional decline and allowing for a broader expansion of HCBS even with potential enrollment caps. Education for states on controls and successes associated with 1915(i) and other HCBS authorities could increase state uptake and expand access to HCBS generally.

Finally, CMS should provide states with predictive modeling and data support to quantify the impact of expanding HCBS eligibility and services and to demonstrate cost-effectiveness.

Taken together, these approaches would put us on a longer-term path to a more balanced system, with a more equitable share of LTSS spending and service use delivered in home and community-based settings, relative to institutional settings.  

Modernize Long-Standing Medicaid Eligibility Policy

Long-standing Medicaid eligibility policy creates a bias toward institutional care, making it difficult for individuals to remain in their home when they have LTSS needs. There are three policy changes Congress and CMS should enact to address institutional bias in eligibility criteria:

First, Congress should decouple “medically needy” program eligibility from the temporary assistance for needy families limits, which, in some states, can be as low as 10 percent of the federal poverty level.

Second, CMS should implement a minimum maintenance/personal needs allowance that reflects the actual cost of remaining at home, and income and asset tests should disregard expenses related to home repairs and modifications that allow a person to live and age with dignity. A personal needs allowance is the amount of income an individual can retain to pay for clothing and other living expenses, while still qualifying financially for Medicaid. Research suggests the median essential household costs among low-income, aged, and disabled individuals are considerably higher than the amount that states typically allow through HCBS maintenance and personal needs allowances, with “34 percent of households with incomes below 100 percent of the FPL spend[ing] more than their state’s Medicaid HCBS allowances.”

Third, 1915(c) waiver slots should be available to individuals who would otherwise require LTSS in an institute for mental disease (IMD). 1915(c) eligibility is limited to individuals who have an institutional level of care need, and current policy doesn’t consider IMDs an institution for these purposes.

Longer term, Congress should consider a federal function and financial eligibility “floor” to maximize equity across states.

These eligibility policy changes would expand access to HCBS and improve eligibility parity across state lines. But they’ll also increase costs as more people become eligible to receive services, and so they must be paired with the increased FMAP and financial predictability provisions we describe above.

Invest In The Direct Care Workforce

Roughly 4.5 million direct care workers (DCWs) provide care to older adults and individuals with disabilities in facilities and in the community. Demand for DCWs is growing rapidly, with the Bureau of Labor Statistics projecting 1.3 million new DCW jobs from 2019 to 2029. At the same time, DCW pay is low, with mean pay for home health aides and personal care aides at $12.71 per hour and for nursing aides at $14.77 per hour in 2019. Low pay and demanding work result in high turnover, with estimates of roughly 60–80 percent home care turnover annually.

A successful LTSS system relies on a strong workforce. We can put federal dollars toward state financial assurance and predictability and modernize eligibility; but if we don’t make direct care jobs better and more attractive, we won’t have the workforce we need to deliver services and the other policies will be ineffective.

We recommend investment in our direct care workers through higher compensation, building the pipeline and elevating the work, and implementing policies that engage, retain, and develop workers.

Specifically, Congress should increase the minimum wage to create a pay floor for DCWs and ensure funding increases for Medicaid programs to cover costs of increased wages. Congress should expand support for affordable childcare, health care, and paid sick leave. It should also create and fund a Center for Direct Care Excellence, to serve as the “home”—or central coordinating office—in our federal government for direct care workers, and support infrastructure investments for workforce data, registries, and other state-level infrastructure. Congress should invest in certain training programs such as the Apprenticeship Program and provide parity in training reimbursement for DCWs who serve Medicaid beneficiaries in the community compared to those working in nursing homes.

Additionally, the administration should conduct a public service campaign to elevate the caregiving profession and to put the full force of the federal government’s programs behind improving training and pipeline programs. It should also convene a stakeholder advisory group to evaluate and modernize training standards and to assess and make recommendations on state-level DCW wage increase approaches.

These actions will put us on the right path to valuing, developing, and supporting this integral, growing workforce and to building the infrastructure necessary for a strong LTSS system. To repeat the words of President Biden’s father, “Don’t tell me what you value, show me your budget. I’ll tell you what you value.”

We sit here today at a unique moment in US history that has everything to do with whether we can make a commitment to care for each other—a moment when the social compact is under complete disruption. Are we really going to create a multicultural society that values caregiving? That’s a tall order, but what other choice do we have?

Authors’ Note

The authors’ work on this topic was supported by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the Foundation. The authors acknowledge Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, for her guidance and support.