Memo

This memorandum presents data on Medicaid 1915(c) Home and Community-Based Services (HCBS) waiver expenditures from Federal Fiscal Years 1997 through 2002. As in previous years, we have classified each individual HCBS waiver by the target population served in order to present information on the distribution of HCBS waiver expenditures across long term care populations.[1]

Table 1 presents HCBS waiver spending by target population from FY 1997 through FY 2002. Figure 1 presents the distribution of HCBS waiver expenditures by populations served in FY 2002. Figure 2 shows the growth in waiver spending by target population served from FY 1997 through FY 2002. Table 2 presents data on HCBS waiver expenditures by state.

In FY 2002, waiver expenditures increased 12.2%, from $14.5 billion to $16.3 billion. This rate of increase is slightly lower than the 14–17 percent increases in HCBS waiver spending that occurred from FY 1998 through FY 2001. However, we believe that FY 2002 waiver expenditures in the attached tables are understated by about $400 million (2-3 percent) since they do not include all prior period adjustments (see technical information section). Prior period adjustments submitted to CMS by states in FY 2002 increased FY 2001 HCBS waiver expenditures by $404 million. These 2001 adjustments are reflected in Tables 1 and 2, which explains why 2001 waiver spending reported in this memo differs somewhat from 2001 waiver spending reported in last year’s memo. We believe this trend will continue in the future. That is, waiver expenditures in the most recently reported year will be somewhat understated due to the fact that states have not yet submitted all prior period adjustments.

As shown in Figure 1, about three-fourths of HCBS waiver expenditures – $12.0 billion – are used to purchase long term supports for persons with mental retardation and other developmental disabilities (MR/DD). The high level of spending for MR/DD waivers is primarily a function of the higher per capita costs associated with providing supports to persons with MR/DD, since most persons with MR/DD who are provided long term supports through waiver programs receive supports on a 24-hour basis.

Almost all other waiver expenditures were for people with physical disabilities and older people. Waivers serving one or both of these target populations spent just under $4.0 billion in FY 2002. Waivers for people with brain injuries (BI), people with HIV or AIDS, and technology-dependent or medically fragile people account for about 1.6% of all waiver spending, or about $260 million in FY 2002. As shown in Figure 2, waivers for persons with traumatic brain injury have experienced relatively rapid growth over the last five years. There are also three small waiver programs which serve individuals with a primary diagnosis of mental illness, accounting for less than 0.2% of all HCBS waiver expenditures.

As always, we are interested in hearing from state administrators of HCBS waiver programs about whether the data presented in this memorandum are consistent with internal state reports of HCBS waiver spending. We have received a number of communications from states in past years, which has helped improve the accuracy of the information presented in these annual memos. If there are discrepancies between internal state reports and the data reported in Tables 1 and 2, please let us know. Please contact either Steve Eiken at steve.eiken@medstat.com or Brian Burwell at brian.burwell@medstat.com.

We would like to thank Carl Underwood and John Hoover in CMS’s Center for Medicaid and State Operations, Division of Financial Management and John Klemm in CMS’s Office of the Actuary for their assistance in making these data available and for assisting us in their interpretation.

Technical Information

Information on target populations served by each waiver program was originally drawn from CMS internal reports and from 1915(c) Medicaid Home and Community Based Waiver Participants, Services, and Expenditures, 1992-1998 by Charlene Harrington, Helen Carrillo, Valerie Wellin, and Fanny Norwood, which can be found on the CMS website at (http://www.hcfa.gov/medicaid/waiv9298.pdf). This year, Medstat also verified target population data by reviewing copies of official waiver documents at CMS. As a result of our review, we changed the target population for a small number of waivers.

The data in Tables 1 and 2 are drawn from CMS 64 reports, which states are required to submit to CMS on each individual waiver in order to receive Federal Financial Participation (FFP). For both Table 1 and Table 2, the CMS 64 data include prior period adjustments. States submit prior period adjustments to CMS 64 reports to adjust claims submitted in their regular quarterly reports. In the case of HCBS waivers, this is usually due to an underreporting of payments made for HCBS services for a particular quarter. Our investigations have shown that the underreporting of HCBS waiver expenditures on CMS 64 reports is primarily associated with the administration of HCBS waiver programs by a state agency other than the state Medicaid agency. In these cases, the administering agency (e.g. a state Department of Developmental Disabilities Services) usually pays waiver providers directly and then reports the amount of aggregate payments to the state Medicaid agency. This process can cause delays in the reporting of HCBS waiver expenditures on the CMS 64, which are then later corrected through prior period adjustments.

The information in Tables 1 and 2 includes prior period adjustments submitted to CMS prior to the end of FY 2002 (September 2002). Some prior period adjustments apply to expenditures made in previous years, so the HCBS waiver expenditures for FY 1997 through FY 2001 reported in Tables 1 and 2 are somewhat different than the waiver expenditure data reported in last year’s memo. For example, FY 2001 waiver expenditures increased by over $404 million (2.9%) due to prior period adjustments submitted in FY 2002. FY 2000 waiver expenditures increased by $64 million (0.5%) for the same reason. Changes in reported expenditures for FY 1997 through FY 1999 are minimal. Since FY 1995, most adjustments were submitted within two years of the initial CMS quarterly report. Thus, it is reasonable to assume that prior period adjustments submitted to CMS in 2003 will moderately increase HCBS waiver expenditures reported in this memo, more so for FY 2002 than for FY 2001.

On the CMS 64 report, states report both total spending for HCBS waiver services and spending for each HCBS waiver. For Connecticut, the sum of the FY 2002 expenditures for each HCBS waiver in Table 2 is significantly less than the FY 2002 total spending for HCBS waiver services reported on the CMS 64. Connecticut reported no expenditures for individual waivers in the first quarter of FY 2002, while the state reported $92.3 million in total spending for HCBS waiver services.

It is important to reiterate some caveats about CMS 64 data. First, CMS 64 data are by date of payment, not date of service. Thus, the data reported in Tables 1 and 2 reflect expenditures in regard to when payments are made to HCBS providers, not when waiver participants use HCBS services. Second, CMS 64 reports represent state claims to the Federal government of expenditures that states believe are eligible for Federal matching funds. As a result of its audit process, HCFA may disallow some of these claims as not eligible for Federal match. Third, CMS 64 reports on HCBS waiver spending represent only Medicaid fee-for-service spending, not spending for services provided through capitated managed care programs. Arizona, Florida, Wisconsin, Texas, and Minnesota are examples of states which pay for at least some HCBS waiver services through capitated long term care programs. In Arizona, virtually all spending for long-term care services is paid through capitation payments under an 1115 waiver.

[1]Eiken, S. and Burwell, B. Medicaid HCBS Waiver Expenditures, FY 1995 through FY 2000, Medstat, July 6, 2001 and

Eiken, S. and Burwell B. Medicaid HCBS Waiver Expenditures, FY 1996 through FY 2001, Medstat, May 13, 2002.


From	Steve Eiken and Brian Burwell	To	Distribution


Date	May 15, 2003	Copies


Subject	Medicaid HCBS Waiver Expenditures, FY 1997 through FY 2002