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Does Increasing Home and Community-based Services Save Money?

by Published On: Jun 08, 2012

One of the most frequently asked questions concerning Medicaid costs is “does shifting Medicaid spending on long-term services and supports from institutional to home and community-based services, a process known as re-balancing reduce spending?  Stephen Kaye PhD attempts to answer this question in the June 2012 issue of Health Affairs in the article “Gradual Rebalancing Of Medicaid Long-Term Services And Supports Saves Money And Serves More People, Statistical Model Shows”.

Dr. Kaye developed a statistical model to assess the effect of re-balancing on overall spending for long-term services and supports. He focuses on the years 1995 to 2009 and uses state expenditure data to support his assertion that gradual rebalancing decreases Medicaid expenditures by roughly two percentage points annually, and can reduce Medicaid spending by about 15 percent over ten years. He also states that rapid re-balancing increased Medicaid spending even in states that tend to spend a higher percentage of their Medicaid LTSS budget on HCBS. 

During that five year period, gradually re-balancing states increased spending on HCBS by 5.5% and also increased the number of services for recipients by 8.4%. The rapidly re-balancing states increased their spending on HCBS by 10.9% and increased the number of services for recipients by 29.9%. The gradually rebalancing states included CT, FL, IN, ME, MA, MS, NV, OH, PA, SC and WY. The rapidly rebalancing states included AK, CO, ID, IL, LA, MN, NC, OK, TX and WA. 

Kaye says that his research demonstrates that cuts to home and community-based services that hinder re-balancing are likely to increase, not decrease, overall spending on long-term services and supports as people who were receiving these services shift into nursing homes. This approach gives states a useful approach on how to determine the pace of their efforts to re-balance in a manner that will increase access to HCBS, but not lead to further budget shortfalls.


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