New Federal COVID-19 Funding Means New Opportunities to Make Needed Investments in Long-Term Care

New Federal COVID-19 Funding Means New Opportunities to Make Needed Investments in Long-Term Care

Apr 14, 2021
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This is the third in a three-part series on value-based long-term care. Read Part 1 and Part 2.

In the wake of the devastation that COVID-19 brought on older adults and people with disabilities who need long-term care, state Medicaid programs face a daunting challenge, and an unprecedented opportunity.

As the pandemic advanced, state Medicaid agencies—the primary payers for long-term care services in nursing homes and in the community—tried several ways to shore up the long-term care system. Nearly all states loosened provider qualifications, increased payments to providers to cover the costs of new infection-control needs, created capacity to ensure those infected received enhanced care, and offset losses due to decreased use. Many states also expanded eligibility.

These changes were largely temporary and designed to maintain the system capacity that existed before the pandemic. If made permanent, some of these changes could help address long-standing problems like staffing shortages, poor quality of care, and limited availability of home- and community-based services (HCBS). But more fundamental reforms are needed to make lasting improvements in the quality and availability of long-term care services.

Value-based payment (VBP) is a critical tool that states can use to improve the quality of long-term care in nursing homes. But to achieve quality gains and potential cost savings, providers need to hire and train more staff, enable telehealth services delivery, and set up data systems that can track and report performance against quality metrics…all of which require funding.

Two new federal funding sources can help states address long-standing problems and make the up-front investments required for VBP arrangements to succeed:  

  1. The American Rescue Plan Act (ARPA), signed into law by President Biden on March 11, provides an opportunity to expand the reach and quality of HCBS for older adults and people with disabilities. ARPA will increase the federal medical assistance percentage for spending on Medicaid HCBS by 10 percentage points from April 1, 2021, through March 31, 2022, provided states maintain state spending levels as of April 1, 2021. The act requires that states use these enhanced funds to “implement, or supplement the implementation of, one or more activities to enhance, expand, or strengthen” Medicaid HCBS. With this provision, Congress made clear that this funding is for program improvements, not state fiscal stabilization.

    The Congressional Budget Office estimates that ARPA will increase federal spending by $12.7 billion over the next year to help build HCBS infrastructure—for example, by helping providers invest in information technology systems, strengthening the direct care workforce, funding data collection that demonstrates the value of HCBS services to managed care plans, and enabling providers to conduct evaluations that reduce unnecessary hospital and institutional care.

  2. The Centers for Medicare & Medicaid Services (CMS) recently announced the HCBS Capacity Building Initiative for states that are operating a Money Follows the Person (MFP) program. Through MFP, states can receive up to $5 million in supplemental grant funds for planning and capacity-building activities to accelerate design and implementation in long-term care system transformation. CMS is encouraging states to modify payment methodologies to expand HCBS provider capacity and improve the quality of HCBS and institutional services—objectives that align well with VBP. As Mathematica described in multiple MFP evaluation reports, states have used MFP grant funds to support registries of affordable, accessible housing units and to pay bonuses to health plans and providers who transition nursing-home residents back into the community. Tennessee, for example, used these funds to give managed care plans an incentive to help nursing-home residents move to community settings. Applications for MFP supplemental funding are due June 30, 2021.

Another funding opportunity to watch is the Biden administration’s proposed American Jobs Plan, which would provide up to $400 billion over eight years to invest in HCBS, about four times the total Medicaid spending on HCBS in 2018. If adopted, this plan would deliver a long-term source of funding to sustain the short-term investments made possible by ARPA.

The pandemic has uncovered a long list of critical issues to address in long-term care. But it has also presented an incredible opportunity to make meaningful, systemic change. As states work to address current challenges, federal funds can support short-term investments that will pay off in the long term. The CMS Long-Term Services and Supports Rebalancing Toolkit offers a wealth of resources and examples of strategies that states can use to build a future that provides all individuals who need long-term care the chance to live and receive high-quality support and services wherever they choose.

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