The Unintended Consequences Of CMS’ Proposed HCBS Medicaid Rule

The U.S. Centers for Medicare & Medicaid Services (CMS) recent proposed rule for Medicaid may cap business for certain providers, but industry experts believe the government agency is likely foreshadowing its intentions for the final rule.

The new rule would force 80% of payment to go to workers in home- and community-based services (HCBS).

There is still plenty of time for providers and advocates to submit public comment to CMS about desired changes to the proposed rule. Industry advocates do not believe the 80% threshold will stand in the final rule.


“I think CMS is very much committed to pushing out something in the final rule,” Damon Terzaghi, director of Medicaid HCBS at the National Association for Home Care & Hospice (NAHC), said during a webinar Wednesday. “I don’t think that they’re going to be too flexible on eliminating this requirement entirely. I think that they’re going to really try to push this out in the final rule and the likely flexibility is going to be around that 80% number.”

For providers, there may be some reasons to be optimistic about the proposed rule.

However, some of the provisions in the proposed rule may not have the effect CMS is after, Terzaghi explained.


“If you read the proposed rule, CMS is not actually putting anything specifically on providers,” Terzaghi said. “They’re saying states have to assure and then demonstrate that they are meeting the 80% assurance and that it is going to wages and other types of compensation to the direct care workers. However, based on how Medicaid works and how things like this have been rolled out in the past, I would anticipate that the majority of states will then take this rule and pass it down and say, ‘OK providers, you have to spend 80% of what we pay you on these requirements, per CMS directive.’”

Putting blanket Medicaid regulations over the whole country also creates confusion because each state operates their Medicaid program differently.

For example, CMS specifically excluded nurses that are supervisory and are not giving hands-on support from their list of caregivers included in the 80% rule.

“That obviously creates some challenges, particularly in states that have nursing oversight requirements for personal care,” Terzaghi said. “Because you have those individuals that are mandated by state rules that you have to fit into the 20%, not the 80%, of the Medicaid rate. That’s something providers have to consider as they work through their analyses and develop comments.”

HCBS waiting lists

One of the other major changes included in the proposed rule is that states would need to more rigorously and accurately report on waiting lists in section 1915(c) waiver programs, along with service delivery timelines for personal care, homemaker and home health aide services.

More than half a million people across the U.S. were on state waiting lists for HCBS in 2021, but those lists are often incomplete and sometimes inaccurate.

States would also have to report how they manage those waiting lists.

“Some states create an interest list where somebody says they want HCBS and states will say, ‘Great, we’ll put you on our waiting list,’” Terzaghi said. “But then they don’t actually evaluate whether the individual would be eligible for that waiver until their time on the list comes up. The argument there is that those waiting lists look longer in the states that don’t do a full evaluation for eligibility prior to putting people on the waiting list as opposed to states that actually do screen first. This would create some transparency around how those lists are managed and how long they actually are.”

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