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Why billions in Medicaid funds for people with disabilities are being held up

The American Rescue Plan Act that President Biden signed into law increased funding to Medicaid, but delays and red tape have kept several states from claiming much of the cash almost a year later.
Doug Mills
Getty Images
The American Rescue Plan Act that President Biden signed into law increased funding to Medicaid, but delays and red tape have kept several states from claiming much of the cash almost a year later.

Matthew Southern, 35, who has intellectual and developmental disabilities, is able to stay out of an institution because health aides paid through a Medicaid program assist him and his roommate with ordinary tasks.

But amid a worker shortage worsened by the pandemic, Southern's father, Dan, has had to step in to fill in gaps in his son's care by volunteering at their home 45 minutes away from his northwestern Atlanta suburb. He blames the low pay across the industry.

"No one wants to work for $12 an hour," Dan Southern said. "People can work at Burger King and make more money."

Last year brought an injection of hope: The federal government, through the American Rescue Plan Act that President Joe Biden signed into law in March 2021, increased funding with a 10-percentage point match that could amount to some $25 billion in federal money for Medicaid home and community-based services, which have long faced staffing crunches. That massive infusion of cash could be used by states to buttress wages, move people off waiting lists for disability services, train more workers, or expand covered services for vulnerable elderly and disabled people, helping to keep them out of nursing homes.

But almost a year later, Indiana, Massachusetts, New York, North Carolina, Ohio and Washington were among 19 states as of Feb. 17 yetto receive the "conditional approval" needed from the Centers for Medicare & Medicaid Services to fully access the money.

Over half of states — 28 of them — received such approval in 2022, according to CMS. That's more than nine months after the relief package was signed into law. California, for example, received its conditional approval Jan. 4. Other states have their own red tape and are waiting for legislative or other approvals, Kaiser Health News found by querying all state Medicaid offices.

"We all would have liked to see the money out sooner," said Damon Terzaghi, a senior director at ADvancing States, a national membership association for state aging and disabilities agencies. "Bureaucracy is what it is."

Daniel Tsai, director of the CMS Center for Medicaid and CHIP Services, said that this infusion of federal aid was a "life-changing amount of funding," and that CMS staffers were doing everything they could alongside states to "move forward as quickly as possible."

Tsai also pointed out that the states' partial approvalfrom CMS, which they've all received, allows them to access some of the money. But some states — such as Kansas and Wyoming — have been reluctant to do so without full approval. Others bemoaned the slow federal process.

The Medicaid disbursement process contrasts sharply with the distribution of relief dollars through Medicare channels to hospitals, said Connie Garner, national public policy adviser for Easterseals, a health care provider for people with disabilities. Garner said the typical back-and-forth in the federal-state Medicaid partnership is part of the reason for the delay, as well as states' desire to spend the massive amount of cash wisely. But funding is needed now, she said.

"Needed care can't wait," she said.

A 2021 survey by the American Network of Community Options and Resources, an advocacy group for providers that support those with intellectual and developmental disabilities, found that because of staffing shortages, more than three-quarters of service providers were turning away new referrals, more than half were discontinuing programs and services, and the vast majority were struggling with recruitment and retention of staff.

Seema Verma, CMS administrator during the Trump administration, said that such funding was crucial considering the staffing crunches, but that states' Medicaid programs probably were challenged to efficiently move that massive amount of money.

"The reality is different states may have different procurement processes that can take a long time," she said.

Colorado was the first state to gain full access to the money — nearly $530 million — back in September, according to Bonnie Silva, director for the Office of Community Living at the Colorado Department of Health Care Policy & Financing.

The money has already gone toward raising the base wage for direct care workers, Silva said, from $12.47 to $15 an hour — which Democratic Gov. Jared Polis has proposed in his budget to make permanent, because the federal funds stop in 2024. The state is also hiring dozens of short-term employees.

That was all possible, Silva said, because her team leveraged relationships with their governor and legislators, as well as moved quickly on federal deadlines. As for states that still haven't received funds, "I don't know what they're doing," she said. "It is a lot of gymnastics, but they should be moving."

In fairness, she said, some states may not have legislators or governors as willing to be as flexible with Medicaid, while others may have been slowed by their legislative calendars.

CMS' Tsai said the agency's staff has handled more than twice as many proposals and amendments for home and community services over the past year, on top of dealing with such funding approvals. "We're doing our best to be able to triage and prioritize," he said.

Careful planning and coordination on all sides is necessary, said Matt Salo, executive director of the National Association of Medicaid Directors, because the tranche of cash is a one-time infusion. That makes some states hesitant to increase home-care worker salaries they may not be able to maintain.

Spending until 2024 in government time is like a "nanosecond," Silva said. She's hopeful that more money is coming through Biden's Build Back Better plan, although the fate of that legislation remains unclear.

"If we really want to transform how care is provided, we must — not should, could — have ongoing federal investments to support that change," Silva said.

Meanwhile, the Consortium for Citizens with Disabilities, which represents several national disability groups, has asked the federal government to consider extending the spending deadline past 2024, citing the compressed timeline CMS and states face.

New Mexico has yet to receive the full green light from CMS, said its Medicaid director, Nicole Comeaux. Nothing is simple about this process, she said, because it can require waivers, public comment or legislative signoffs. Her agency has also lost staff.

"We have the same folks doing this work on top of their normal work, so that's also made it slower than we would have liked it to be," Comeaux added.

Jackie Farwell, spokesperson for the Maine Department of Health and Human Services, said her agency had to make "significant changes" to its claims and accounting systems to meet federal requirements.

Others were more direct about federal holdups: "The delay was due to federal approval timelines taking longer than expected," said Sarah Berg, spokesperson for the Minnesota Department of Human Services.

Dan Berland, director of federal policy for the National Association of State Directors of Developmental Disabilities Services, stressed the money will get there, as federal money not accessed in the match from this past year can be claimed retroactively.

For those dealing with worker shortages, though, the delay has real consequences. In Georgia, which got its full OK the week of Feb. 14, it's unclear how fast the money will be sent to many provider organizations.

Bob Rice's stepdaughter, Jennifer Randolph, a nonverbal 50-year-old with cerebral palsy who uses a wheelchair, lived at a group home in Athens, Ga., run by Hope Haven of Northeast Georgia for several years.

But amid staffing shortages during the pandemic, Hope Haven closed the facility down.

Since then, Randolph has cycled into her third group home — one that's an hour away from her stepfather's house. And he fears that the staffing problem will disrupt their lives again.

KHN (Kaiser Health News) is a national newsroom that produces in-depth journalism about health issues. It is an editorially independent operating program of KFF (Kaiser Family Foundation).

Copyright 2022 Kaiser Health News. To see more, visit Kaiser Health News.

Lauren Weber
Andy Miller