Key Takeaways
- Home and community-based services (HCBS) help older adults and people with disabilities get support with daily activities, enabling them to stay in their homes and communities instead of moving to nursing facilities.
- Analysts developed a model to assess what might happen if California cuts Medi-Cal funding to five key HCBS programs.
- A 10% cut to the five HCBS programs could result in a net spending increase of more than $1 billion over five years if even a small portion of HCBS recipients had to move to nursing facilities for care.
Medi-Cal’s home and community-based services (HCBS) programs are an essential source of support for many people who might otherwise need to live in nursing facilities. But while states are required to provide nursing facility services for Medicaid enrollees who qualify, HCBS programs are optional benefits. When state budgets are tight, policymakers have more flexibility to make cuts to optional services. In light of anticipated reductions in federal Medicaid funding and ongoing state budget challenges, this analysis models what could happen if California were to cut Medi-Cal HCBS and the unintended increases in other state costs that would likely follow.
The model assumes that if California makes cuts to Medi-Cal HCBS, some Medi-Cal enrollees who meet nursing facility level of care (NFLOC) would lose access to these services. Some HCBS recipients would then transition into nursing facilities, which are typically much more costly than HCBS services. The model finds that HCBS cuts aimed at achieving state savings could increase state spending and strain system capacity due to increased nursing facility occupancy — trends that would be expected to continue in subsequent years.
This model demonstrates that cuts to optional HCBS programs could:
Increase California’s Medi-Cal long-term services and supports (LTSS) costs within the first year. The model estimates that a 10% cut to five HCBS programs for NFLOC recipients, resulting in 3% of NFLOC HCBS recipients transitioning to nursing facility care, would increase California’s spending on Medi-Cal LTSS by $57 million in the first year.
Increase Medi-Cal LTSS costs more than $1 billion over five years. If California sustained a 10% cut to the five HCBS programs between 2026–2030, the state’s Medi-Cal LTSS costs could increase by an estimated $1.17 billion. That’s because nursing facility costs have a faster projected growth rate than HCBS.
Fill all nursing facility beds. California’s nursing facility supply is already constrained. As of 2024, there are only 16,123 unfilled nursing facility beds statewide. Shifting just 3% of the NFLOC HCBS population to nursing facilities would overwhelm capacity, filling all currently unfilled beds and impacting hospital discharges for Californians needing nursing facility care.
Drive downstream impacts on recipients’ quality of life. Seventy-seven percent of adults age 50 and older prefer to remain in their homes as they age. HCBS honors those preferences and can enhance well-being, reduce depression, and improve self-reported health status.
Both the issue brief How Could Cuts to Medi-Cal Home and Community-Based Services Impact California? as well as the technical appendix, which details additional information on the assumptions built into the financial model, can be found in downloads below.
