The 2022-23 Budget: Update on Home- and Community- Based Services Spending Plan

The 2022-23 Budget: Update on Home- and Community- Based Services Spending Plan FEBRUARY 2022 Summary. As a part of the 2021-22 budget, Background the state was required to submit a package of Temporary Increase to Medicaid Federal home- and community-based services (HCBS) Share of Cost for HCBS Programs and Services. enhancements—known as the HCBS spending Under the American Rescue Plan Act of 2021, the plan—to the federal government as a condition of federal government increased the federal medical drawing down additional federal funds resulting assistance percentage (FMAP) by 10 percentage from a temporary 10 percentage point increase to points for Medicaid-funded HCBS services and the federal Medicaid match rate. California’s plan programs provided from April 1, 2021 through included $3 billion in HCBS enhancements (which March 31, 2022. (The FMAP represents the federal would be matched by an additional $1.6 billion in government’s share of cost for Medicaid services standard Medicaid funds, totaling $4.6 billion). eligible for cost sharing.) States have discretion The 2021-22 budget included provisional language about whether to claim the additional funding that allowed the administration to allocate (which we refer to throughout this post as the and expend funds to implement the HCBS “increased FMAP funding”) for some or all of its enhancements through the annual budget process HCBS expenditures during the spending period, or written midyear notifications to the Legislature. provided they meet certain program requirements. On January 4, 2022, the federal government For example, states cannot replace existing conditionally approved the state’s HCBS spending state funding for HCBS programs and services plan, allowing the state to move forward with with the increased FMAP funding; rather, the implementing each HCBS enhancement (approval increased FMAP funding must be spent on new—or is considered conditional given that final amounts enhanced—programs that are in addition to existing and program details could change slightly over time state HCBS funding (this and other requirements and those changes would require federal approval). are discussed in the next section of this post). The A number of the approved HCBS enhancements 2021-22 budget assumed that the state would support the implementation of various state plans, draw down $3 billion in increased FMAP funding, including the Master Plan for Aging and Department which reflects the estimated maximum amount of Development Services’ (DDS) rate model of federal funding California could claim from the implementation. The Legislature recently approved increased FMAP. the allocation and expenditure of funds primarily States Required to Spend an Amount of based on 2021-22 estimates to implement HCBS State Funding Equivalent to the Increased enhancements through the midyear notification FMAP Funding on New HCBS Expansions process. Additionally, the Legislature requested and Enhancements. The state’s decision to that the administration keep them up to date on claim increased FMAP funding reduces its share any fiscal and programmatic changes to the HCBS of cost for existing HCBS services by an equal spending plan that are included in the required amount (in California’s case, $3 billion). The federal quarterly reports to the federal government. In this government requires states to “reinvest” these post, we summarize the conditionally approved freed-up state funds on expanded, enhanced, or HCBS enhancements and discuss opportunities for strengthened HCBS services (which we refer to Legislative oversight. throughout this post as “HCBS enhancements”). 2022-23 Budget Series 1 These HCBS enhancements must supplement We understand that it was denied because HCBS and build upon existing HCBS activities in place enhancements may not include improvements as of April 1, 2021 in either Medicaid-funded or in institutional settings like nursing homes. non-Medicaid-funded services and programs. Instead, the administration proposed to use the Additionally, states are given until March 31, 2024 $2 million to expand the Long-Term Services and to fully expend the required amount of funding on Supports Data transparency proposal included HCBS enhancements. After March 31, 2024, if it is in the HCBS spending plan.) For the remaining decided that the program enhancements should HCBS enhancements, the federal government continue, California would need to provide funding requested the state submit additional clarifying from an alternative state or local fund source information, primarily to confirm that the proposed to do so. activities are allowable under the federal guidance. The 2021-22 Budget Included Provisional (Refer to The 2021-22 California Spending Plan: Language to Assist in Implementation of HCBS Home- and Community-Based Services Spending Spending Plan Following Federal Approval. Plan for additional information on the September The federal government released guidance to states 2021 response from the federal government.) The on allowable HCBS enhancements and the overall administration submitted revised HCBS spending claiming process for increased FMAP funds in plans in September 2021 and October 2021. May 2021. At the time, the administration estimated On January 4, 2022, the federal government that state could draw down a total of $3 billion in notified the state that it conditionally approved all of increased FMAP funds. Based on this estimate, the state’s proposed HCBS enhancements, which the Legislature and administration agreed upon a are summarized in Figure 1. The total cost of the package of over 25 HCBS enhancements, which HCBS enhancements is estimated to be $4.6 billion were initially submitted to the federal government ($3 billion increased FMAP funds and $1.6 billion in July 2021. Given the uncertain timing of when additional federal funds for enhancements that are the federal government would approve the state’s also eligible to draw down the standard federal HCBS spending plan, and it being unknown Medicaid match). In addition to the initiative that whether changes to the state’s plan would be was denied after the initial submittal of the plan, needed based on federal feedback, the 2021-22 we understand that the state was required to make budget included provisional language that allowed one other substantive change to the originally the administration to allocate and spend the submitted HCBS spending plan to comply with $3 billion of estimated increased FMAP funds on federal expenditure rules. Specifically, the federal federally approved HCBS enhancements through government would not allow increased FMAP funds the annual budget process or written midyear to be used for an “operating reserves” component notifications to the Legislature. of the Community Care Expansion (CCE) initiative. As a result, the conditionally approved HCBS Status Update on HCBS Spending Plan spending plan shifts $295 million increased Approval and Implementation FMAP funds from the CCE initiative to further offset State Received Conditional Federal Approval the outyear General Fund costs associated with of Entire HCBS Spending Plan in January 2022. the DDS rate model implementation. (The state still On September 3, 2021, the federal government plans to fully fund the CCE initiative at the agreed responded to the state’s initial HCBS spending upon total fund levels [$805 million] with General plan (submitted in July 2021). At the time, the Fund and other federal funds.) We note that many of federal government only fully approved 13 of the the HCBS enhancements included in the approved HCBS enhancements and denied one initiative. plan have not been established in statute and will, (The initiative that was denied was a $2 million instead, be established administratively. For those proposal to improve broadband access and programs that have been established in statute, disaster readiness in nursing home facilities and they are done so at a high level, leaving many expand the Small Home nursing facility pilot. implementation details up to the administration. 2022-23 Budget Series 2 Figure 1 Summary of Conditionally Approved HCBS Spending Plan (In Millions) Conditionally Approved HCBS Spending Plan Initiatives Total Fundsa Workforce: Retaining and Building Network of Home- and Community-Based Direct Care Workers In‑Home Supportive Services (IHSS) Career Pathways. Provide specialized training opportunities to IHSS $295 providers. IHSS HCBS Care Economy Payments. Provide one-time $500 payments to IHSS providers that worked at least two 275 months between March 2020 to March 2021. Direct Care Workforce (Non‑IHSS) Training and Stipends. Provide specialized training opportunities to non-IHSS 150 HCBS providers. Providing Access and Transforming Health Funds for Homeless and HCBS Direct Care Providers. Expand 100 homeless system of care and create an effective pre-release care for justice-involved populations. Increasing Home‑ and Community‑Based Clinical Workforce. Increase the number of home- and 75 community-based clinical care providers for individuals with disabilities and aging adults. Non‑IHSS HCBS Care Economy Payments. Provide one-time $500 payments to non-IHSS HCBS care providers 13 that worked at least two months between March 2020 to March 2021. Traumatic Brain Injury (TBI) Program. Expand the capacity of existing TBI sites and stand up new TBI sites. 5 HCBS Navigation Language Access and Cultural Competencies Orientations and Translations. Provide funds to translate $46 Department of Developmental Services (DDS) documents, coordinate and streamline interpretation and translation services, and ensure culturally appropriate translations. CalBridge Behavioral Health Pilot Program. Hire trained behavioral health navigators in emergency departments to 40 screen and refer patients to mental health or substance use disorder programs. Dementia Aware and Geriatric/Dementia Continuing Education. Develop a cognitive health assessment tool and 25 provide geriatric/dementia trainings to health care providers. No Wrong Door/Aging and Disability Resource Connections (ADRC). Support ADRC program operations, 5 including data collection and sharing practices. HCBS Transitions Housing and Homelessness Incentive Program. Provide incentive funds to Medi-Cal managed care plans to $1,300 address homelessness and keep beneficiaries housed. Community Care Expansion Program. Acquire, rehabilitate, or construct adult and senior care facilities. 53b Community‑Based Residential Continuum Pilots for Vulnerable, Aging, and Disabled Populations. Provide 298 medical and supportive services to individuals residing in permanent supportive housing and congregate care settings. Eliminating Assisted Living Waiver Waitlist. Eliminate Assisted Living Waiver waitlist by increasing waiver slots by 255 7,000. Services: Enhancing HCBS Capacity and Models of Care Developmental Services Rate Model Implementation. Implement rate models recommended by the 2019 Rate $1,260b Study. Social Recreation and Camp Services for Regional Center Consumers. Provide camping services, 121 social recreation activities, educational therapies, and nonmedical therapies for eligible individuals who have a developmental disability. Older Adults Resiliency and Recovery. Provide funding to various older adult programs, including food assistance, 106 legal services, employment services, and behavioral health line. Contingency Management. Implement treatment pilot for stimulant use disorder. 59 Coordinated Family Support Services. Create pilot to assist families in coordinating the receipt and delivery of 42 services for DDS consumers living in the household. Enhanced Community Integration for Children and Adolescents. Provide local grants to develop integrated 13 community-based social recreational activities for children with and without developmental disabilities. Adult Family Homes for Older Adults. Create Adult Family Homes pilot that places older adults with a family. 9 Alzheimer’s Day Care and Resource Center. Provide dementia-capable services at licensed Adult Day and Adult 5 Day Health centers. (Continued on page 4) 2022-23 Budget Series 3 Conditionally Approved HCBS Spending Plan Initiatives Total Fundsa HCBS Infrastructure and Support Access to Technology for Seniors and Persons With Disabilities. Increase access to technology for older adults $50 and adults with disabilities. Senior Nutrition Infrastructure. Provide capacity and infrastructure improvement grants to senior nutrition program 40 vendors. Modernize Regional Center Information Technology Systems. Conduct initial planning process to update the 8 regional center fiscal system and implement a statewide Consumer Electronic Records Management System. Long‑Term Services and Supports (LTSS) Data Transparency. Create LTSS Data Dashboard linked with statewide 4 nursing home and HCBS utilization, quality, demographics, and cost data. Total $4,649 a Reflects total funding levels as proposed under the HCBS spending plan conditionally approved by the federal government on January 4, 2022. Per federal guidance, the state must spend all of these funds by March 31, 2024. b Final HCBS spending plan shifted $295 million from Community Care Expansion to the Developmental Services Rate Model Implementation initiative. The state will still cover the total costs of the Community Care Expansion initiative proposed under the 2021-22 budget with General Fund and other federal funds. HCBS = home- and community-based services. Legislature Recently Approved Federally Required HCBS Quarterly Report Administration’s Request to Allocate and Due Prior to Completion of 2022-23 Budget Expend Estimated Increased FMAP Through Process. The federal government requires states Midyear Notification Process. As a result of the to submit quarterly reports that provide up-to-date conditional federal approval, the state can begin information on (1) the amount of increased FMAP to allocate and expend increased FMAP funds to funds the state has claimed and/or anticipates to implement the HCBS enhancements. In compliance claim between April 1, 2021 and March 31, 2022; with the provisional budget bill language, through a (2) implementation progress of approved HCBS midyear budget request, the administration notified enhancements; (3) anticipated and/or actual the Legislature of its intent to (1) draw down the expenditures for HCBS enhancements; and estimated $3 billion of increased FMAP funds, (4) modifications to the state’s planned HCBS (2) allocate the increased FMAP funds to implement enhancements, including creation of new HCBS federally approved HCBS enhancements, and enhancements. Given that the next quarterly (3) draw down additional federal funds for report is due on April 2022, the administration HCBS enhancements that are eligible for the will be required to provide updated funding and standard Medicaid federal match. The Joint expenditure estimates and implementation updates Legislative Budget Committee (JLBC) approved to the federal government prior to the completion of the administration’s request. The administration’s the 2022-23 budget. estimate of total increased FMAP funds and Consider Ways to Ensure Legislative HCBS enhancement costs continue to be based Oversight Over Implementation of HCBS on 2021-22 estimates. The provisional budget Spending Plan. As previously mentioned, JLBC language continues to require the administration to requested that the administration keep the Senate go through the annual budget process or provide and Assembly Budget Committees up to date on midyear notification to the Legislature to modify the proposed programmatic and funding changes budgeted 2021-22 funding and expenditure levels to the HCBS spending plan that are reported to based on updated caseload and utilization data. the federal government through the quarterly (This provisional language is also included in the reports. In addition to these requested updates, proposed 2022-23 budget.) Additionally, as a part of the Legislature could consider ways to use the the recent approval of the administration’s midyear budget process to further strengthen Legislative notification, JLBC requested the administration oversight of the implementation and outcomes of brief the Senate and Assembly Budget Committees the HCBS spending plan. For example, now that of any programmatic and fiscal changes to the the federal government has conditionally approved HCBS spending plan when the state submits the the HCBS spending plan, the Legislature could federally required quarterly updates. 2022-23 Budget Series 4 consider adopting legislation that establishes or Legislature to assess the effectiveness of certain provides more detail on the intended program HCBS enhancements in order to make decisions structure of longer-term HCBS enhancements. about whether to use state funding to continue Additionally, the Legislature could consider the initiative after the enhanced federal funding adopting reporting requirements with regards to is expired. tracking program outcomes. This would allow the 2022-23 Budget Series 5 2022-23 Budget Series 6 2022-23 Budget Series 7 LAO PUBLICATIONS This post was prepared by Jackie Barocio, and reviewed by Ginni Bella Navarre and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. 2022-23 Budget Series 8