Capping Medicaid: How Per Capita Caps Would Affect Long-Term Services & Supports and Home Care Jobs

Source: LeadingAge and Community Catalyst – Center for Consumer Engagement in Health Innovation, June 2017

The American Health Care Act (AHCA) – passed by House Republicans in May, and currently under consideration in the Senate – would dramatically change Medicaid’s financing structure. Currently, Medicaid operates as a federal-state partnership where each pays a percentage of Medicaid’s costs and federal financial support increases with need. Under the per capita cap system proposed in the AHCA, the federal government would provide states with an aggregate amount of funding based on the number and category of eligible beneficiaries in the state, with nominal differences in the amount per beneficiary category. The proposed per capita cap system would adjust for overall population growth, but would not account for other relevant factors affecting Medicaid expenditures, such as changes in health care needs or costs. The Congressional Budget Office estimates that this change in the financing structure along with other changes proposed in the AHCA would cut $834 billion from the Medicaid program. States would likely have to account for the decreased funding by cutting benefits, cutting payments to providers, changing eligibility requirements, and/or adding to program waiting lists.

A per capita cap system would have serious implications for people receiving long-term services and supports (LTSS) – including millions of older adults with functional and cognitive impairments. LTSS include a range of typically non-medical services designed to help individuals perform activities of daily living such as bathing, dressing and eating. Medicaid is the primary payer for LTSS so reductions in Medicaid funds would have serious consequences for people receiving LTSS.

States provide LTSS both in the community and in institutional settings. Per capita caps would cause a shift away from home and community based services (HCBS) toward institutional care such as nursing homes. This is because providing LTSS services through HCBS is optional under Medicaid rules while institutional care is mandatory. HCBS varies by state but generally includes home health services and other services such as adult day care.

This brief provides information on some of the factors that would affect states’ abilities to provide LTSS in a per capita cap system. Additionally, we look at a portion of the labor force that provides LTSS – home health aides and personal care aides specifically – and predict that across the United States, between 305,000 and 713,000 home health aides and personal care aides would lose their jobs if the proposed per capita cap system in the AHCA were to be implemented.