Although Medicaid is jointly financed by the states  and the federal government, it is directly administered by the states, with  oversight from CMS, within the Department of Health and Human  Services (HHS). States are required by federal Medicaid law to cover certain mandatory  benefits in their state Medicaid plan. Four PPACA Options Provide States with New Incentives and Flexibilities for Offering HCBS

The four PPACA options include new incentives and flexibilities to help  states increase the availability of HCBS for Medicaid beneficiaries. PPACA also requires the Secretary of HHS to conduct  an evaluation of Community First Choice to determine (1) the  effectiveness of the provision of services in allowing individuals to lead  independent lives, (2) the impact of the services on individuals’ physical  and emotional health, and (3) the cost of services provided under the  option compared with the cost of institutional care. Since PPACA’s Enactment, 13 States Applied for and Received New Money Follows the Person Grants, and States Have Begun to Apply for the Other Three Options

Thirteen of the 20 states that had not previously received Money Follows  the Person grants applied for and received new grants made available as  a result of funds appropriated in PPACA. In addition, states were  beginning to apply and applications had been approved for the other  three PPACA HCBS options. As of April 2012—18 months after PPACA’s changes to the option  became effective—three states had submitted state plan amendments  and received CMS approval to offer the revised 1915(i) state plan option. States Are Factoring Potential Effect on State Budgets, Staff Availability, and Interaction with Existing Reform Efforts into Their Decisions

Medicaid officials in the states we selected for our study reported being  attracted to the enhanced federal matching funds available under three of  the PPACA options, but also expressed concern about the potential effect  on budgets given continuing fiscal challenges at the state level. Officials were also considering broader Medicaid reforms  occurring in the state and the potential interaction with existing HCBS. Limited Staff Resources and Competing Priorities Pose Barriers to States’ Pursuing New Options

According to state officials, staffing shortages in a number of states have  made it difficult for states to review all the new HCBS options in depth or  put together the teams needed to assemble applications and implement  the options. Planned Changes to State Medicaid Programs and Potential Interaction of Options with Existing HCBS Programs Factor into States’ Decisions

Officials in several of the states we interviewed reported putting off  decisions about the HCBS options in PPACA until they completed major  reforms to their Medicaid programs. Similarly, Florida was also  moving to statewide Medicaid managed care. The complexities of the Medicaid HCBS options  available and the changing factors affecting states’ planning underscore  the importance of ongoing federal technical assistance to help states  navigate various HCBS options as they seek to ensure appropriate  availability of HCBS. Agency Comments

We provided a draft of this report to HHS for review. HHS had no general  comments on the report but provided technical comments, which we  incorporated as appropriate. Appendix I: Medicaid Options for Home- and Community-Based Services in the Patient Protection and Affordable Care Act

The Patient Protection and Affordable Care Act (PPACA) created two  new options—Community First Choice and the Balancing Incentive  Program—and amended two existing options—1915(i) state plan option  and Money Follows the Person—for states to cover home- and  community-based services (HCBS) for Medicaid beneficiaries. The Centers for Medicare & Medicaid Services  (CMS) awarded Money Follows the Person grants to 30 states and the  District of Columbia as part of the original round of funding in 2007. Therefore, individuals with intellectual disabilities were  some of the first to start transitioning.
Why GAO Did This Study

The 1999 Supreme Court decision in Olmstead v. L.C. held that states must serve individuals with disabilities in community-based settings under certain circumstances. Under the joint federal and state Medicaid program, states are required to cover nursing facility care for eligible individuals, while the provision of most HCBS is optional. In 2010, PPACA created two new options and revised two existing options for states to cover HCBS for Medicaid beneficiaries.
GAO was asked to assess the implementation status of the four Medicaid HCBS options in PPACA. GAO assessed (1) how the four options are structured to increase the availability of services, (2) what is known about states plans to use the options, and (3) factors affecting states decisions regarding implementing the options.
To determine the structure of the options, GAO reviewed federal statutes and regulations and interviewed officials at CMS. To determine what is known about states plans, GAO obtained copies of states grant applications and state plan amendments. To understand factors affecting states decisions, GAO conducted interviews with officials in 10 states. The states were selected to reflect a range of state Medicaid spending for HCBS as a percentage of total Medicaid expenditures for long-term services and supports.
GAO provided a draft of this report to HHS. HHS had no general comments on the report but provided technical comments, which GAO incorporated as appropriate.

What GAO Found

The four Medicaid options for home- and community-based services (HCBS) included in the Patient Protection and Affordable Care Act (PPACA) provide states with new incentives and flexibilities to help increase the availability of services for Medicaid beneficiaries. Two of the options were newly created by PPACA, and the other two were existing options amended by the law. Three of the options provide states with financial incentives in the form of enhancements to the Medicaid matching rate that determines the federal share of the programs costs.
As of April 2012, 13 states had applied for and received Money Follows the Person grants, in addition to the 30 states and the District of Columbia that had received grants prior to PPACA, and states were beginning to apply for the other three options. The 13 new Money Follows the Person states were awarded $621 million and were in various stages of implementation. One state had applied for Community First Choice. Two states had received approval to participate in the Balancing Incentive Program, and the Centers for Medicare & Medicaid Services (CMS) was reviewing two additional state applications. Three states had received approval to offer the revised1915(i) state plan option since PPACAs enactment.
The 10 states GAO contacted reported considering several factors in deciding whether to pursue the PPACA options, including potential effects on state budgets, staff availability, and interaction with existing state Medicaid efforts. States were attracted by the increased federal funding available under some of the options, but were concerned about their ability to contribute their share of funding. Limited staff resources and competing priorities were also concerns. Finally, broader Medicaid reform efforts, such as transitions to statewide managed care, and the potential interaction with existing HCBS options factored into states considerations. The Department of Health and Human Services (HHS) and CMS have initiatives under way to assist states with their HCBS efforts. The complexities of the Medicaid HCBS options available and the changing factors affecting states planning underscore the importance of ongoing federal technical assistance to help states navigate various HCBS options as they seek to ensure appropriate availability of HCBS.