The Only Certainty in the Proposed Home Care Plan for Medicaid Is That Its Cost is Prohibitive
New legislative language for the home care benefits for the elderly and disabled on Medicaid that are part of the administration’s $2 trillion (formerly $3.5 trillion) package, i.e., the “human infrastructure” proposal has now become accessible for comments. It is unclear whether the legislation will be successful in its goals to noticeably emphasize home over nursing home care, and raise the pay of direct care workers. While there is still no score from the Congressional Budget Office, what is clear, however, is that the federal government will pay much more for Medicaid.
A few months ago, I criticized the Biden administration proposal to spend an additional $400 billion on home care benefits for the elderly and disabled eligible for Medicaid. I found that the legislation would cause direct harm to those in the middle-class not on Medicaid, by raising the costs of hiring direct care workers, the cost of nursing home stays, and indirectly raising the cost of competitive labor services such as child care. Lastly, the proposal lacked specificity on how that huge amount of federal money would be spent.
New details about proposed changes to Medicaid, a program jointly funded by states and the federal government, reveal that if a state puts forward a home care improvement plan and gets approval from the Department of Health and Human Services (HHS), it will get an extra seven percentage points added to its existing federal medical assistance percentage (FMAP) for at least seven years for all of its Medicaid home care expenditures, provided it meets minimal maintenance of effort requirements. The state would continue to get the higher FMAP in the eighth year and beyond if it increases availability of home care services (increase not specified in the legislation), reduces disparities in utilization among various demographic, income and service categories (again not specified), and increases to, or at least keeps above 50 percent, the share of home care expenditures compared to total Medicaid spending on long-term services and supports, including traditional institutional care (mainly in nursing homes). Given that all but 11 states were near or above this 50 percent threshold in 2018, this one substantive requirement does not imply much of a change and could even allow for a bit of backsliding. Moreover, states could, at least temporarily, pocket the extra federal support by economizing in other areas, such as slowing rate increases for nursing homes.
Would the home care improvement plans themselves accomplish the intended goals? Again, the answer is vague. The legislation directs states to reduce barriers and disparities for expanded access, expedite eligibility for home care services, improve counseling and coordination of services, provide support to family caregivers, and expand services. It also directs the adoption of processes to ensure sufficient payments for home services, as envisioned in the plan, and to set up training and qualification standards for direct care workers providing home care. It also authorizes, if necessary, pay increases to support recruitment and retention. This would be vapid language unless there were concrete data to quantify the achievement of such goals. And while the legislation does call for collection of statistics, currently such data does not really exist. It is also doubtful that HHS would have the institutional ability and the political will to thoroughly vet and enforce these plans.
In addition, the legislation would increase the FMAP by another two percentage points, for two years, if the state supports a self-directed care program. As condition for the increase, the state must establish directly, or contract with a non-profit entity for a registry of qualified and vetted direct care workers, undertake recruiting and training of such workers and beneficiaries, address complaints, facilitate coordination with state and local agencies, process timesheets and tax filings, prevent discrimination against labor unions, and facilitate the enrollment of family members (paid by Medicaid) as providers in states where it is allowed. Although these conditions are quite concrete, I am skeptical that they are all achievable by state or non-profit actors.
It is often claimed by advocates that home care can save money for Medicaid by replacing expensive institutional care. And in the past, it is true that people sometimes had to stay in an expensive nursing home to get Medicaid coverage even though their needs could have been handled by occasional but unavailable home care visits. But now with Medicaid supporting the widespread use of home care, it seems that the opposite is the case, and that the desired policy for severely disabled individuals is to avoid nursing homes and be cared for 24/7 by aides and attendants at home. This is surely more expensive, given economies of scale and scope in institutions, and probably less safe and efficacious for the care of the elderly and disabled.
The massive sums of money set aside for this legislation (up to $200 billion is now being discussed) would be better spent in areas with greater needs, including the reform of long-term care in both the private and public sectors. The extra money from this proposal is likely to be used for what is already being done by states. It will not necessarily provide more or better services.
Mark J. Warshawsky is a Senior Fellow at the American Enterprise Institute. He served as Vice-Chairman of the 2013 Long-term Care Commission.
