Medicaid Home Care Cuts Could Cost States $1 Billion Over 5 Years

State home and community-based services (HCBS) programs are on the chopping block due to Medicaid funding cuts from the One Big Beautiful Bill – and reductions in HCBS services could have costly consequences.

If the state of California cut its HCBS funding by just 10%, the state would likely spend over $1 billion to care for HCBS recipients in nursing facilities, according to a recent report by the California Health Care Foundation and research and advisory firm ATI Advisory.

The report narrows its focus on California’s Medicaid program, Medi-Cal, and analyzes what could take place if the state cuts funding for five of its home and community-based services programs.

These programs include In-Home Supportive Services, the Home and Community-Based Alternatives Waiver, Community-Based Adult Services, the Assisted Living Waiver and the Multipurpose Senior Services Program.

Overall, the report found that a 10% cut to those programs would result in higher state costs and increased unmet care needs.

Specifically, a 10% cut to these home and community-based services programs would mean that 3% of Medi-Cal enrollees would transition to nursing facility care. This would skyrocket the state’s long-term support services spending by $57 million in the first year. It would further increase to an estimated $1.17 billion over the next five years.

What’s more, California is already facing capacity issues when it comes to nursing facilities. The report found that there are only 16,123 unfilled nursing facility beds across the state, as of 2024.

Though ATI Advisory’s report only focuses on California, it’s reasonable to assume that rolling back home and community-based services in other states could have unfavorable impacts as well, though extrapolating data from one state’s Medicaid program to another is difficult, according to Nils Franco, a director at ATI Advisory and the study’s lead researcher.

“[Home and community-based services] cuts in any state would likely result in more individuals entering facility settings sooner than they otherwise would,” Franco told Home Health Care News. “In most instances, this shift will increase state spending in the long-term. California’s HCBS program serves people before they meet full nursing home level of care criteria. States that limit HCBS to the frailest Medicaid enrollees — those already needing full nursing home care — may have an even stronger relationship between HCBS cuts and nursing home entry than California.”

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