But Will the Trend Last? – Center for Retirement Research
Most elderly people want to stay in their homes when and if they need care. In response to this demand and the relatively high cost of home health and assisted living services compared to nursing home care, Medicaid has expanded its coverage of home and community-based services (HCBS) over time.
According to the Centers for Medicare & Medicaid Services, in 2023, 8.4 million Medicaid beneficiaries will receive help paying for care at home or in assisted living facilities – a significant increase of 8 percent from 7.8 million in 2022. However, the total cost of institutional services increased by 17 percent compared to 13 percent for HCBS.
Growing up HCBS To cover
HCBS accounted for nearly two-thirds of all spending on long-term services and supports (LTSS). For historical perspective, in 1981 only one dollar of Medicaid spent on LTSS went to HCBS, rising to half of LTSS spending in 2013 and continuing to grow thereafter (see Figure 1).
Regional Diversity
Substantial variation exists in Medicaid coverage of HCBS by most states because such coverage is optional, unlike nursing home coverage, which is mandatory. Ninety-nine percent of Medicaid beneficiaries in Oregon and Wisconsin receiving LTSS were doing so at home or in assisted living facilities, in contrast to only 56 percent in Kentucky and 61 percent in Mississippi.
In terms of spending, Medicaid spending on HCBS accounted for 95 percent of LTSS spending in Wisconsin compared to just 36 percent in Arkansas. In other words, only 5 percent of Wisconsin’s spending on LTSS goes to nursing homes compared to 64 percent of spending in Arkansas.
The future?
Many people working on long-term care policy are concerned that the $900 billion in Medicaid cuts in the “One Big Beautiful Bill” will reverse the trend toward more HCBS coverage. While many of the bill’s cuts are aimed at small beneficiaries, in large part by establishing work requirements, others, such as limits on so-called provider taxes, are not. Countries will have to find ways to make up revenue shortfalls or reduce resources. Another option may be to cut home health and assisted living services, because they are an option under federal Medicaid rules.
For more from Harry Margolis, check out his Risking Old Age in America blog and podcast. He also answers consumer property planning questions on AskHarry.info. To stay updated on the Squared Away blog, join our free mailing list.
