New Medicaid rule expected to lower wait times for home-based care, raise caregiver wages

Caregivers for older adults and people with disabilities could see a bump in their wages in the coming years, thanks to a forthcoming rule by the Centers for Medicare and Medicaid Services.

The new rule brings sweeping changes to a bevy of Medicaid programs throughout the country, including fee-for-service and managed care delivery systems. One of the most notable changes applies to the home and community-based services (HCBS) industry. CMS will now require home-based care providers to use 80% of the Medicaid reimbursements they receive toward caregiver compensation.

The rule changes were prompted in part by worker shortages that led to long wait times for home-based care, with nearly 700,000 Americans languishing on waiting lists every year since 2016 according to one estimate. The Covid-19 pandemic, skyrocketing home health care costs and rising wages in other industries hollowed out the direct support workforce, which includes home health aides and personal care aides who help people with daily tasks. Nearly 80% of providers reported that they turned away new referrals in the past year due to ongoing staffing shortages, according to a recent report from ANCOR, a nonprofit that works to improve quality of life for people with intellectual and developmental disabilities. CMS hopes that this new rule will stabilize the industry and help out caregivers, many of whom are immigrants and people of color.

“This rule should help ensure that older adults and people with disabilities who need help with activities of daily living can get high quality support and that they and their caregivers are treated with dignity,” said Natalie Kean, director of federal health advocacy for the nonprofit Justice in Aging.

Over seven million seniors and people with disabilities rely on home and community-based services, according to a fact sheet released last week by the White House. Disability activists have long sought to keep these people in communities rather than in institutions. This new regulation on how Medicaid payments to health care providers are structured is part of this broader shift towards home-based care over institutional care.

“We hope this will increase access to critical HCBS services that let people with disabilities live in their own communities while also improving historical inequities in how this workforce is paid,” said Jennifer Lav, senior attorney at the National Health Law Program, in a statement.

The new rule has received pushback from providers, however. When CMS first proposed it last year, the agency received a flood of comments decrying the 80% mandate, suggesting that it would effectively bankrupt providers and that 20% of payments would not cover providers’ overhead or other costs. Providers also said that the ruling would be “too complex to implement” and that CMS lacked data supporting the 80% mandate. After the agency released the final version last week, the National Association for Home Care & Hospice blasted the rule, calling the policy “misguided” and “devastating.”

“We all agree that more needs to be done to support the direct care workforce; however, this policy will make things worse, not better,” said NAHC President William Dombi in a statement.

Lydia Dawson, vice president for government relations at ANCOR, is thrilled that CMS is tackling the workforce shortages, but she is skeptical that the changes will fully address the industry’s workforce problems. She said that Medicaid reimbursement rates must increase and that changing the formula for caregiver wages only tosses the financial hot potato onto already-stressed providers.

“Without adequate funding in the system to attract and retain the direct support workforce, we’re already seeing these pretty extreme impacts on provider availability,” said Dawson.

Providers have up to 6 years to demonstrate compliance with the new rules, and states have the option to offer “hardship exemptions” and give small providers a lower threshold than the 80% mandate. Senators grilled Daniel Tsai, the deputy administrator and director of Center for Medicaid and CHIP services at CMS, during a Senate Energy and Commerce Committee hearing Tuesday and suggested that these rates were unfair to providers. But Tsai remained steadfast that the rule would save lives.

“[These rules] will change for the better how tens of millions of Americans receive care,” he said during a press call a week earlier. “I was just on [a call] with stakeholders earlier, and somebody described the set of rules here as ‘disrupting the complacency that too many of us have accepted for the Medicaid program for too long.’ And I think that is exactly what these rules are doing.”