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VOLUME 49 | NUMBER 3 | JUNE 2014

The Hidden Costs of Rebalancing Long-Term Care

Expanding the funding of home- and community-based services (HCBS) has become a key policy goal of many state Medicaid programs in recent decades. Whereas 87 percent of state Medicaid spending on long-term care went to institutional care (nursing homes) as of 1990, now almost half goes to HCBS (The Henry J. Kaiser Family Foundation 2012). This shift has been achieved in two primary ways—expanded provision of HCBS services under Medicaid state plan options, and the use of 1915(c) waiver programs allowing states to use Medicaid funds to provide long-term care services in noninstitutional settings. HCBS includes such services as home care, adult day care, respite care, and adult foster care, with home care being the most common.

Several provisions of the Affordable Care Act reinforce and encourage this trend. The Act extends the Money Follows the Person demonstration, in which states may use enhanced federal matching funds to transition Medicaid beneficiaries in nursing homes back to the community. Under the Act's New Balancing Incentive Program, states also receive additional matching funds to make structural changes to their Medicaid programs to increase availability of HCBS. Finally, some of the waiver requirements were relaxed to decrease the administrative burden associated with state expansions of HCBS.

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