Assessing Enhanced Federal Funding for HCBS Under the American Rescue Plan Act

Manatt on Health

Editor’s Note: On March 11, 2021, President Biden signed the American Rescue Plan into law, enacting a sweeping $1.9 trillion COVID-19 relief package. The legislation includes a number of provisions that will significantly impact state and federal health care policies and programs, including enhanced federal funding for state Medicaid spending on home- and community-based services (HCBS). In a new issue brief for State Health and Value Strategies, a grantee of the Robert Wood Johnson Foundation, Manatt Health describes the American Rescue Plan’s enhanced HCBS funding provision, the requirements for states receiving the enhanced federal funding, and considerations and next steps for state policymakers. Highlights are summarized below. Click here to download a free copy of the full brief.

Enhanced HCBS in the American Rescue Plan Act

Section 9817 of the American Rescue Plan provides states with a one-year, 10 percentage point increase in their federal medical assistance percentage (FMAP)—the share of state Medicaid spending paid for by the federal government—for state Medicaid expenditures for HCBS. Under the American Rescue Plan’s enhanced HCBS funding provision, a state that currently receives federal payments for 60 percent of its Medicaid expenditures will now receive federal payments for 70 percent of its Medicaid HCBS expenditures. This 10 percentage point increase will apply only to HCBS expenditures provided between April 1, 2021, and March 31, 2022, and it will be provided on top of any other FMAP increases a state may receive for HCBS. However, the American Rescue Plan caps the cumulative federal contribution a state may receive for Medicaid HCBS at 95 percent. All HCBS authorized by a state plan or waiver are eligible for the increased FMAP, as well as home health care, personal care, services provided by Programs of All-Inclusive Care for the Elderly (PACE), case management, rehabilitative services, and other services as specified by the Secretary of the U.S. Department of Health & Human Services. The federal Centers for Medicare & Medicaid Services (CMS) is expected to release guidance on this provision soon.

Importantly, the American Rescue Plan requires that the additional federal funds received by a state through the enhanced FMAP must supplement, not supplant, the state funds expended for HCBS as of April 1, 2021. This means that a state must at least maintain, and may not reduce, its level of spending on HCBS as of April 1, 2021, in order to receive the 10 percentage point increase in federal funding.

Immediate Activities That States May Undertake With Enhanced HCBS Funding

States may use the additional federal funds to preserve or expand access to HCBS by:

  • Increasing HCBS provider rates or providing hazard and retainer payments to direct care providers, such as personal care aides
  • Creating new HCBS waiver slots to reduce waiver waitlists 
  • Modifying existing waiver eligibility criteria or submitting an SPA to expand eligibility for state plan HCBS
  • Adding coverage of new HCBS—including devices and remote technologies—to waivers or state plans

Investments to Expand Capacity in the HCBS System for the Long Term

States should also consider using the enhanced federal funding to create capacity to meet the growing demand for HCBS and support the structural change needed to strengthen their HCBS systems for the long term. Subject to CMS guidance on allowable activities, the enhanced federal funding for HCBS made available through the American Rescue Plan could be used for:

  • Supporting and expanding the HCBS workforce through recruitment, training and credentialing, which states should consider in tandem with service or eligibility expansion to ensure the workforce can meet the increased demand
  • Reforming compensation and benefit structures, building career pathways, and establishing directories and referral networks for direct care providers
  • Outreaching to and engaging targeted communities to facilitate access to HCBS for which they may already be eligible
  • Engaging family advocates and representatives to identify opportunities to use the enhanced funding to support paid and unpaid family caregivers
  • Supporting transitions out of institutional settings and into safe home- and community-based settings
  • Implementing quality improvement programs
  • Better integrating HCBS into the broader health care delivery system

In addition to the American Rescue Plan HCBS funding, the Biden Administration has also proposed including $400 billion in HCBS infrastructure investments in the recently announced American Jobs Plan.

Outstanding Questions for States

There are several critical questions that CMS still needs to address in guidance, including:

  • How should states calculate the state expenditure “baseline,” or the level of state spending on Medicaid HCBS as of April 1, 2021? Is CMS making this calculation, or are states expected to make this calculation and report to CMS?
  • Which, or what types of, activities will fulfill the requirement to “enhance, expand, or strengthen” Medicaid HCBS activities? Will the Secretary explicitly specify additional HCBS than those outlined in the American Rescue Plan, or do states need to propose additional services to be included? Are there specific activities that may not be funded with the enhanced federal funds provided under the American Rescue Plan?
  • What constitutes implementation of an activity, or supplementing implementation of an activity? Does “implementation” imply that it has to be a new activity, or can it be an enhancement to an existing activity?
  • Is there a time limit for using the enhanced federal funds to “enhance, expand, or strengthen” Medicaid HCBS activities?
  • Will there be any state reporting requirements on use of the enhanced federal funds provided under the American Rescue Plan?


States have been working tirelessly to expand access to HCBS to shift care out of institutional settings and into less intensive and restrictive settings. The COVID-19 pandemic intensified people’s preference for receiving home-based care and reinforced the need for a robust and stable HCBS system to provide high-quality, person-centered care to Medicaid populations. The increased funding provided in the American Rescue Plan will help provide states with resources needed to continue state efforts to expand and strengthen HCBS while also signaling to policymakers that investment in HCBS is foundational to broader delivery system reform.



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