Medicaid Home-Based and Community-Based Services Long-Term Care Expenditures

Why It Matters

The findings demonstrate that targeted federal incentives can meaningfully shift Medicaid resources toward community‑based care, informing future policy design and state budgeting decisions.

Key Takeaways

• BIP states raised HCBS share of LTSS spending by 5.2 pp (2013‑19)
• Study used synthetic control method across 34 states
• Results show statistically significant increase, confidence interval 0‑9.8 pp
• Findings exceed growth reported in prior Medicaid HCBS research
• Policy implication: incentives can shift spending toward community care

Pulse Analysis

The Balancing Incentive Program (BIP) was embedded in the 2010 Affordable Care Act to encourage states to move Medicaid beneficiaries from institutional settings to home‑based and community‑based services. By tying federal funding to the proportion of long‑term services and supports (LTSS) allocated to HCBS, the program aimed to reduce costs, improve quality of life, and align Medicaid with broader health‑care reform goals. Understanding whether these financial levers actually altered state spending patterns is crucial for policymakers assessing the return on federal investments.

To isolate BIP’s effect, researchers employed a synthetic control design, constructing a weighted composite of 17 non‑participating states that mirrored the pre‑program characteristics of the 17 BIP participants. This counterfactual approach allowed a clean comparison of HCBS share trends over multiple post‑implementation years (2013, 2016, 2019). The analysis revealed a cumulative 5.2‑percentage‑point lift in HCBS spending relative to LTSS, with a confidence interval that barely excludes zero, indicating a modest yet statistically credible impact. The methodology underscores the value of quasi‑experimental techniques in health‑policy evaluation where randomized trials are infeasible.

The study’s results have immediate relevance for state Medicaid directors and federal legislators. A measurable shift toward community care suggests that incentive‑based policies can overcome structural barriers that have historically favored institutional settings. As states grapple with rising health‑care costs and aging populations, the evidence supports expanding or refining similar incentive mechanisms to accelerate HCBS adoption. Moreover, the findings provide a benchmark for future research, encouraging deeper exploration of how payment reforms affect service quality, patient outcomes, and overall system sustainability.