While Home Care Is Touted As A Panacea, Rates And Regulations Hold Providers Back

The U.S. health care system is banking on home- and community-based services (HCBS) to help keep seniors and individuals with disabilities at home and away from more costly brick-and-mortar facilities. But for now, incongruent rates mean disparate access to those services state by state.

The Centers for Medicare & Medicaid Services (CMS) released the Medicaid Access Rule earlier this year. The goal of the rule was to enhance quality and transparency in HCBS across the country.

Included in the rule was the 80-20 provision, which broadly would force providers to pay 80% of HCBS reimbursement to direct care workers. CMS sees low pay as a reason for high turnover and reduced access in HCBS, and therefore believes enhanced pay from providers will mitigate those issues.

But the problem is far more complex than that. While the 80-20 provision is a nationwide blanket rule for pay in HCBS – which generally is operated by state Medicaid programs – there is no nationwide blanket rule for provider rates in HCBS.

Rates vary greatly state by state, as do minimum wage mandates, labor environments and regulations for home care. 

This puts providers in a precarious position. The Biden-Harris administration has touted home care as a cost-effective service that will help alleviate pressure on millions of Americans and their families.

The largest providers, however, are making sure they enter into markets where they can run a sustainable business. Even before the 80-20 provision is implemented, providers are picking their spots when it comes to expansion.

As the market responds to rate setting and regulations in each state, demand will be mostly covered in some places. In other places, home care-needy seniors and individuals with disabilities will be left without access.

In this week’s members-only, exclusive HHCN+ Update, I take a closer look at the dynamics that are shaping the future of the home care space, specifically as it relates to Medicaid HCBS.

Disparities in access

Average hourly wages for direct support professionals (DSPs) increased from just $14.41 in 2021 to $15.79 per hour in 2022, according to a new report from ANCOR.

A recent report from Activated Insights similarly showed slim hourly wages for caregivers and personal care attendants. The median worker made about $16 per hour in 2023.

On the intellectual and developmental disabilities (IDD) front, more than half a million people in the U.S. were on their state’s waiting list for services in 2023. On average, IDD patients spent 50 months waiting to receive services, according to the ANCOR report. The turnover ratio for caregivers was 40.9%. Across home care, the turnover rate is even higher, at close to 80%.

Hundreds of thousands of seniors, too, sit on wait lists for HCBS, a problem CMS hopes the Medicaid Access Rule will help address. But if there’s not enough caregivers, there’s not enough care.

“Variability in payment rate assumptions can incentivize workers to switch to higher-paying services, creating access challenges” Robert Nelb, principal analyst with Medicaid and CHIP Payment and Access Commission (MACPAC), recently wrote in a report.

But HCBS caregiver wages are often a reflection of the state’s rate environment. Even the largest and most successful providers have left certain states due to operating difficulties of late.

Addus Homecare Corp. (Nasdaq: ADUS) recently left New York.

“For us, while it’s $100 million in revenue, it’s really zero on the bottom line — we were making nothing,” Addus CEO Dirk Allison said in June.

Help at Home exited the Alabama market last year, citing “reimbursement and regulatory challenges.”

Both Help at Home and Addus have expanded their footprint elsewhere in the meantime.

Bayada Home Health Care in 2022 left the Florida Medicaid HCBS market, though the state has made attempts to improve its program since then.

“Due to several external forces, we have made the difficult decision to close our locations that provide Medicaid personal care and support services in the state of Florida,” a Bayada spokesperson told me at the time.

The largest organizations have the greatest ability to drive efficiency, to find a margin in places where smaller providers cannot. Even then, some Medicaid environments are so behind that most providers don’t find them worth their time.

“Not only are rates important, but the evaluation of those rates are important,” Dave Totaro, the chief government affairs officer at Bayada, told me on stage at HHCN’s FUTURE conference in August. “There are many states where rates … haven’t been reevaluated for a decade.”

During the same discussion, Darby Anderson – the chief government affairs officer at Addus – said that rates, labor mandates and Electronic Visit Verification (EVV) are three major considerations for the company when deciding whether to enter a market.

“First there’s rates, and I mean rates relative to the cost of labor and labor mandates in those states – if you can make enough margin in order to cover reasonable administrative standards,” Anderson said. “This was one of our comments on why the 80-20 provision doesn’t really work. Alabama requires a supervisory visit every 30 days by a registered nurse for doing personal care services. Illinois, in contrast, requires a non-clinician every six months. That’s a huge difference in the cost of administering the program.”

The Biden-Harris Administration has supported HCBS, verbally and financially. Harris – now a presidential candidate herself – has also suggested bringing in home care as a benefit under Medicare.

That specific proposal would create greater theoretical access to home care services for older Americans, ones that don’t qualify for Medicaid and don’t have the ability to pay for services out of pocket.

But legacy home-based care providers that have worked with government payers for decades still see problems in how home health care and home care are currently run. Medicare-certified home health care is regulated federally, and the industry has been hit with payment cuts over the last few years.

Medicaid HCBS is regulated on a state-by-state basis, with some federal involvement from CMS – like the Medicaid Access Rule, for example.

HCBS are not currently a panacea for older adults in need of care, however. And wage mandates aren’t a panacea to workforce shortages or access issues, either.

“It is more than just payment, I can tell you some crazy stories,” Jeff Stevens, the co-founder and CEO of Village Caregiving, told me last month. “We went to one state and had to wait over a year to even begin to provide services. That’s nuts to me. We’re coming to your state. We want to take care of people, provide jobs, pay taxes, provide great care. We wait 13 months for you to even look at the application. We’ve learned some lessons like that. Let’s make sure we know the licensing and regulatory issues that the state has [prior to entering].”

Village Caregiving is a home care provider that takes all forms of payment: private pay, Veterans Affairs (VA), long-term care insurance and Medicaid.

As the West Virginia-based company takes a “common sense” approach to growth across the country, it makes no sense to go to certain places – even if there’s a need.

The company wants to take care of everyone, as do most home care providers. But rates and regulations for Medicaid HCBS in certain states don’t always make that possible.

“Is it viable to go there? Sometimes it’s not,” Stevens continued. “It’s not even an option.”

Greater home care access and better wages for caregivers are goals for the current administration. Those are also goals for providers. But something has to give on the other end, if home care is going to be an antidote to some of America’s aging problems.