Order Code RS22448
May 26, 2006
CRS Report for Congress
Received through the CRS Web
Medicaid’s Home and Community-Based
Services State Plan Option: Section 6086
of the Deficit Reduction Act of 2005
Karen Tritz
Analyst in Social Legislation
Domestic Social Policy Division
Summary
Section 6086 of the Deficit Reduction Act of 2005, (DRA, P.L. 109-171)
established a new optional Medicaid benefit that allows states to cover home and
community-based, long-term care services (HCBS) for Medicaid beneficiaries with
disabilities or chronic conditions, starting in January 2007. Prior to the enactment of
DRA, states were generally required to receive a Section 1915(c) home and community-
based waiver to cover these services. However, this new HCBS benefit differs in
several ways from the structure of both current Medicaid state plan benefits and the
Section 1915(c) waiver program. For example, unlike other Medicaid state plan
benefits, this benefit is limited to individuals whose income does not exceed 150% of
the federal poverty level. This report outlines the requirements of the new Medicaid
home and community-based services benefit, and compares key features of this benefit
with other Medicaid state plan benefits and the Section 1915(c) waiver program. This
report will be updated to reflect significant policy or programmatic changes.
Background
Medicaid has covered home and community-based, long-term care services since the
inception of the program in 1965 through various service categories. Home and
community-based, long-term care services refer to a broad range of health and supportive
services (provided in a non-institutional setting) that are needed by individuals who lack
the capacity for self-care due to a physical, cognitive, or mental disability or chronic
condition resulting in functional impairment(s) for an extended period of time.
Starting in 1965, Medicaid allowed states to cover a range of home health services
and required states to cover those services for individuals who would otherwise require
nursing facility services. Home health services include skilled nursing, aide services,
medical equipment and supplies, and, in some cases, therapy. States were also permitted
to cover rehabilitation and private duty nursing services. Rehabilitation can include a
broad range of medical or remedial services recommended by a physician or other
Congressional Research Service ˜ The Library of Congress

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CRS-2
licensed practitioner to reduce the degree of physical or mental disability and restore
functioning.1 Private duty nursing is skilled nursing care for individuals who generally
require a level of care beyond what is available under the home health or personal care
benefits.
Over time, Congress and the Centers for Medicare and Medicaid Services (CMS)
have allowed states to cover other types of home and community-based services as
optional benefits under the Medicaid state plan such as personal care and case
management services.2 The personal care benefit was added as an optional Medicaid
benefit in 1978, and includes assistance with activities of daily living, (e.g., dressing,
bathing, eating).3 The case management benefit was added as an optional benefit in 1986,
and includes services to assist a Medicaid beneficiary in gaining access to needed medical,
social, educational, and other services.
In addition to the Medicaid state plan benefits, in 1981 Congress authorized the
home and community-based (HCBS) waiver program under Section 1915(c) of the Social
Security Act. The HCBS waiver program gives states the ability to cover a wide range
of home and community-based services for individuals who would otherwise require the
level of care in an institution — i.e., a nursing facility, hospital, or intermediate care
facility for individuals with mental retardation (ICF/MR). Under an HCBS waiver, the
Secretary is permitted to waive Medicaid’s “statewideness” requirement to allow states
to cover HCBS services in a limited geographic area. The Secretary may also waive the
requirement that services be comparable in amount, duration, or scope for individuals in
particular eligibility categories. Under an HCBS waiver, states may limit the number of
individuals served and target certain populations (e.g., individuals with developmental
disabilities, individuals with a brain injury, the aged). To receive approval for the HCBS
waiver, states have to meet certain other requirements such as a cost-effectiveness test —
which requires that on average Medicaid expenditures for waiver participants not exceed
the cost that would have been spent if these individuals were residing in an institution.
All states cover some Medicaid home and community-based services for certain
groups of Medicaid beneficiaries. Table 1 below summarizes the number of states
offering specific Medicaid benefits, the numbers of beneficiaries receiving specific
services, and the total expenditures. For example, 45 states and the District of Columbia
use the Medicaid rehabilitation state plan benefit to provide services for individuals with
mental illness. Under the HCBS waiver program, 49 states and the District of Columbia
provide at least one waiver for individuals who are elderly and/or younger adults with
physical disabilities, and one waiver for individuals with mental retardation or
developmental disabilities. Some states also use the HCBS waiver program to provide
services for other groups such as individuals with HIV/AIDS or brain injury.
1 Section 1905(a)(13) of the Social Security Act.
2 The Medicaid state plan is the document states submit to the federal government for approval
that describes the eligibility groups and covered services.
3 43 FR 45228, 9/29/78, effective 10/1/78. Congress added personal care services as a covered
Medicaid service to the Social Security Act in the Omnibus Budget Reconciliation Act of 1993
(P.L. 103-66).

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Table 1. Medicaid’s Coverage of Home and Community-Based
Long-Term Care Services: Implementation by States,
Number of Beneficiaries, and Total Expenditures
Number of states
Number of Medicaid
Total expenditures,
(and D.C.)
beneficiaries, FY2003
FY2003
covering benefit
(in thousands)
(in millions)
in 2005
Home health
51
1,107
$2,894
Rehabilitation
51
1,520
$4,961
Private duty nursing
27
32
$496.8
Personal care
36
634
$7,044
Case management
48
2,363
$2,756
HCBS waivers
50
919
$18,855
Source: CRS Analysis of CMS Medicaid Statistical Information System (MSIS), FY2003 and
[http://www.cms.hhs.gov/MLNProducts/downloads/MedGlance05.pdf].
Note: For additional information about state-specific coverage of Medicaid state plan services, see
[http://www.cms.hhs.gov/MLNProducts/downloads/MedGlance05.pdf]. For state-specific information on
Section 1915(c) home and community-based waiver programs, see [http://www.nasmd.org/
waivers/1915cdb.htm].
Home and Community-Based Services State Plan
Option: Section 6086 of the Deficit Reduction Act
Section 6086 of the Deficit Reduction Act of 2005 (DRA, P.L. 109-171) established
a new optional benefit under the Medicaid state plan that allows states to cover certain
home and community-based services without requiring a HCBS waiver. The
requirements of this new optional benefit differ in many ways from other Medicaid state
plan benefits (e.g., home health and personal care) and the Section 1915(c) waiver
program. Table 2 compares key features of the new HCBS benefit with existing
Medicaid program authorities.
CMS is in the process of developing guidance and regulations for states to
implement the HCBS state plan option. CMS expects that state guidance will be released
in the summer of 2006, and interim final regulations will be published in late 2006.
It is too soon to determine how many states will choose to cover this new Medicaid
benefit, how the new benefit will be designed (e.g., covered services, the target group),
and how this option will be used relative to existing home and community-based services.
For example, states that currently do not cover personal care may use the new HCBS
option to cover personal care, since enrollment under this new benefit can be capped.
Other states may use this benefit to provide services to individuals who generally do not
receive HCBS waiver services, such as individuals with severe and persistent mental
illness. A further exploration of these issues will be addressed in future reports as
additional information becomes available.

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Table 2. Comparison of Medicaid Benefits under State Plan, Home and Community-Based
Waiver, and the Home and Community-Based (HCBS) Benefit,
(Section 6086 of the Deficit Reduction Act of 2005)
Feature
Medicaid State Plan Benefits
Section 1915(c) Home and
Section 6086: Optional HCBS Benefit
Community-Based Waiver
Under DRA
Federal
States submit a state plan amendment
States submit a waiver application with
This new benefit will likely require a
approval of
(SPA) usually based on a pre-print, and
significant detail that justifies the cost-
SPA amendment in which the state
benefit
provide an estimate of total expenditures.
neutrality of the waiver. (See below.)
describes what services and population
the proposed benefit would cover.
Federal approval of the SPA is not time-
Initial waiver approval is for a three-year
Federal approval of the SPA is not time-
limited. Certain changes to a Medicaid
period. Subsequent waiver renewals may
limited. Certain changes to a Medicaid
benefit may require an amendment to the
be approved for a five-year time period.
benefit may required an amendment to
SPA.
the SPA.
Allowable
The Medicaid state plan allows states to
The Section 1915(c) provision
This benefit allows states to cover those
scope of
cover a variety of acute and long-term
specifically allows states to cover case
HCBS waiver services that are
service
care benefits both in institutional settings
management, homemaker/home health
specifically listed in Section 1915(c) of
(e.g., nursing facilities, and hospitals),
aide services, personal care, adult day
the statute. The Secretary may not
and in home and community-based
health, habilitation, respite care, day
approve other state-requested services on
settings (e.g., home health, case
treatment or other partial hospitalization
a case-by-case basis.
management).
services, psychosocial rehabilitation
services, and clinic services (whether or
Generally, the scope of a service must
not furnished in a facility) for individuals
follow broad parameters outlined in
with chronic mental illness.
federal law. When a state submits a SPA,
CMS interprets whether a particular
However, the Secretary may approve
activity meets this broad purpose.
other services on a case-by-case basis.
Availability of
Medicaid state plan benefits are generally
HCBS waivers can be made available on
The new benefit can be made available
the benefit
available statewide and are not limited to
a less-than-statewide basis, and are only
on a less-than-statewide basis, for
target groups.
available for certain target groups.
individuals who meet state-specified,
needs-based criteria. (See below.)
Projected
States are not required to report the
States project the enrollment in the
States will project enrollment in the
enrollment/
projected enrollment in a particular
HCBS waiver (within the cost-neutrality
benefit, and can limit the number of
limits on
benefit, and are not permitted to limit the
provision), and can limit the number of
individuals who can receive these
number served
number of individuals who can receive
individuals who can receive services.
services.
these services.

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Feature
Medicaid State Plan Benefits
Section 1915(c) Home and
Section 6086: Optional HCBS Benefit
Community-Based Waiver
Under DRA
Requirement
Not applicable (state plan services are not
Under a HCBS waiver, the average per
Not applicable (state plan services are not
for cost-
subject to cost-neutrality).
capita expenditure for medical assistance
subject to cost-neutrality).
neutrality
for HCBS recipients may not exceed the
average per capita expenditures that the
state would have spent in an institution.
States may apply the per capita
expenditure limit to each individual, or
apply the limit as an aggregate cap across
all waiver participants.
(This calculation includes the costs of
other Medicaid state plan services which
the individual may be eligible for such as
inpatient hospital, etc.)
Eligibility
Those who meet functional and financial
Those who are Medicaid eligible for a
Those who are Medicaid-eligible, who
criteria
criteria associated with a Medicaid
group that the state has designated
meet the needs-based criteria (discussed
eligibility group.
qualify for an HCBS waiver (e.g.,
below) and have income below 150% of
institutional group, medically needy),
FPL, ($1,225/month for an individual in
States may cover Medicaid eligible
who meet the institutional level of care,
2006).
individuals under various income and
and who are part of the HCBS waiver
resource standards such as the following:
target group (e.g., individuals with
developmental disabilities, the aged,
— Institutional group (300% of the
those with HIV/AIDS, etc).
Supplemental Security Income (SSI)
federal benefit rate, $1,809/month in
2006, about 222% of the federal poverty
level (FPL)).
This benefit is often a pathway to
Unlike the HCBS waiver, this benefit
— Medically Needy group whereby an
Medicaid eligibility for community-
does not confer Medicaid eligibility for
individual’s income is reduced to a state-
dwelling individuals with disabilities or
individuals who meet eligibility criteria
specified standard by deducting medical
the elderly who qualify for Medicaid
for the institutional group (300% of SSI).
expenses.
because they meet the eligibility criteria
— Other eligibility groups (e.g., SSI).
for the institutional group (300% of SSI)
which is generally a higher income
States may set additional functional
threshold than other Medicaid eligibility
eligibility criteria to receive specific
categories.
services that ensure medical necessity;
see below.

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Feature
Medicaid State Plan Benefits
Section 1915(c) Home and
Section 6086: Optional HCBS Benefit
Community-Based Waiver
Under DRA
Functional
The state may require that an individual
Persons eligible for waiver services must
Individuals are required to meet the state-
eligibility
meet a certain level of care to be eligible
require the level of care provided in a
established needs-based criteria which
criteria for
for a particular service. Some services
hospital, nursing home, or ICF/MR.
may take into account the need for
receiving
require an institutional level of care,
assistance with 2 or more activities of
services
(e.g., nursing facility). Other services
A state may choose (with the Secretary’s
daily living, and other risk factors.
may require a specific level of care; or, at
approval) the specific criteria to be used
the very least, that the service must be
to determine whether an individual
The needs-based criteria for the HCBS
medically necessary. For example, a
requires the level of care provided in a
option must be less stringent than the
state may require that an individual need
hospital, nursing home, or ICF/MR.
level of care required for an institution
assistance with activities of daily living
(i.e., nursing facility, hospital, or
(ADL) to receive personal care services.
intermediate care facility for persons with
mental retardation (ICF/MR)).
States can continue to receive federal
Medicaid funds for individuals already
receiving institutional-level benefits.
If enrollment exceeds what the state
projects, a state may modify the needs-
based criteria. The statute outlines
certain conditions that this modification
must meet.
Written
Medicaid state plan benefits do not
HCBS waiver services that are approved
There must be an independent evaluation
individualized
usually require that an individual have a
by the Secretary must be provided
and assessment to establish a written,
plan of care
written plan of care. However, a
according to a written plan of care for
individualized plan of care. The statute
provider likely keeps service record
each individual. Medicaid law is not
outlines specific criteria that must be met.
documentation.
specific as to how the evaluation and
For example, there must be a face-to-face
assessment are conducted.
evaluation of each individual, and an
examination of the individual’s relevant
history and medical records.
Cost-sharing
For individuals who qualify for Medicaid
Depending upon the beneficiary’s
Post-eligibility treatment of income does
and post-
through institutional rules, all income in
Medicaid eligibility category, a waiver
not apply.
eligibility
excess of certain allowances is paid
participant may be subject to post-
treatment of
toward the cost of their care (known as
eligibility treatment of income.
The state may require cost-sharing
income
“post-eligibility treatment of income”).
charges for this service, subject to
Medicaid’s general cost-sharing rules.
In addition, for service-specific cost-
sharing general Medicaid rules apply.
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