Long-term services and supports (LTSS) include many types of health and health-related services for individuals of all ages who have limited ability to care for themselves because of physical, cognitive, or mental disabilities or conditions. Individuals needing LTSS have varying degrees of difficulty performing activities of daily living (ADL), such as bathing, dressing, toileting, and eating, without assistance. They may also have difficulties with instrumental activities of daily living (IADL), such as preparing meals, housekeeping, using the telephone, and managing money. Assistance for such needs takes many forms and takes place in varied settings, including care provided in institutional settings, such as nursing homes; services provided in community-based settings, such as adult foster care; and in-home care. Home- and community-based services (HCBS) cover a wide range of services and supports to help individuals remain in their homes or live in a community setting, such as personal care services to provide assistance with ADLs or IADLs, assistive devices, respite care for care givers, and case management services to coordinate services and supports that may be provided from multiple sources. While a variety of sources are used to pay for LTSS, Medicaid is the largest. States and the federal government share responsibility for Medicaid costs. In general, state Medicaid spending for medical assistance is matched by the federal government, at a rate that is based in part on each state’s per capita income according to a formula established by law. The federal share of Medicaid expenditures, known as the federal medical assistance percentage (FMAP), typically ranges from 50 to 83 percent. Although Medicaid is jointly financed by the states and the federal government, it is directly administered by the states, with oversight from CMS, within the Department of Health and Human Services (HHS). For the most part, individuals who qualify for and receive Medicaid coverage of LTSS are age 65 or older, disabled, or blind. Such individuals typically qualify for Medicaid coverage of LTSS on the basis of their eligibility for the federal Supplemental Security Income (SSI) program, a means-tested income assistance program that provides cash benefits to individuals who meet certain disability criteria and have low levels of income and assets. States may also require individuals to meet state- defined level-of-care criteria for Medicaid coverage of certain LTSS. These criteria, which generally include some measures of an individual’s functional limits, help states manage overall service utilization and therefore costs. For decades, the majority of Medicaid LTSS expenditures have been for care provided in institutional settings, but Medicaid spending for HCBS has been steadily increasing as states invest more resources in alternatives to institutional care. Under Medicaid, coverage of certain institutional services is mandatory, while coverage of nearly all HCBS is optional for states. Since the Medicaid program was first established in 1965, states have been required to cover nursing facility care for all Medicaid beneficiaries age 21 and older. States may also offer other types of institutional care under their Medicaid programs, including care provided in intermediate-care facilities for individuals with intellectual disabilities and care provided for individuals age 65 or older and certain individuals under age 22 in institutions for mental diseases. Medicaid initially provided limited coverage for care provided in community settings or in the home, but numerous changes to federal Medicaid law since the program’s inception have expanded states’ options for covering HCBS. States have taken advantage of the new options, and since 1995, Medicaid spending for HCBS has steadily increased by 1 to 3 percentage points each year. In fiscal year 2009, total Medicaid expenditures for LTSS were $127.1 billion. Of this amount, about $55.9 billion was for HCBS, which was about 44 percent of all Medicaid LTSS spending that year, up from 18 percent in 1995. States’ ability to leverage federal Medicaid funding for the provision of HCBS can help them achieve compliance with the Olmstead decision, which outlined the scope and nature of states’ obligations to provide HCBS for individuals with disabilities; however, state spending on HCBS as a percentage of total LTSS spending varies widely. States have considerable flexibility in designing their Medicaid programs. Within broad federal guidelines, each state establishes its own eligibility standards; determines the type, amount, duration, and scope of covered services; and sets provider payment rates. In 2009, state spending on HCBS as a percentage of total LTSS spending ranged from 14.4 percent in Mississippi to 83.2 percent in New Mexico. (See fig. 1.) States have covered HCBS through a wide and complex range of options within Medicaid, including through state plan benefits and through waivers. A state Medicaid plan defines how the state will operate its Medicaid program, including which populations and services are covered. States are required by federal Medicaid law to cover certain mandatory benefits in their state Medicaid plan. For example, all states are required to offer the Home Health benefit to all individuals entitled to nursing facility coverage under the state’s Medicaid plan. Services that may be covered under this benefit include nursing, home health aides, medical equipment, and therapeutic services. States may also elect to cover other HCBS through optional benefits. For example, states have the option to offer the Personal Care benefit, which covers assistance with ADLs and IADLs, furnished either at home or in another location. According to a recent study, 33 states and the District of Columbia offered the Personal Care benefit in 2008. Changes a state wishes to make to its state Medicaid plan, including adding an optional state plan benefit, must be submitted to CMS for review and approval in the form of a proposed state plan amendment. With certain exceptions, services provided through state plan benefits (both mandatory and optional) must (1) be sufficient in amount, duration, and scope to reasonably achieve their purposes; (2) be comparable in availability among different groups of enrollees; (3) be offered statewide; and (4) allow beneficiaries freedom of choice among health care providers or managed care entities participating in Medicaid. States have also covered HCBS for Medicaid beneficiaries through waivers. Waivers can allow states to provide services not otherwise covered by Medicaid to designated populations who may or may not otherwise be eligible for Medicaid services. If approved, a waiver may allow a state to limit the availability of services geographically, target services to specific populations or conditions, control the number of individuals served, and cap overall expenditures—actions that are generally not otherwise allowed under the federal Medicaid law, but which may enable states to control costs. States must submit their waiver requests to CMS for approval. The 1915(c) waiver, authorized under section 1915(c) of the Social Security Act, is the primary means by which states provide HCBS for Medicaid beneficiaries and accounts for the large majority of state Medicaid HCBS expenditures. Under 1915(c) waivers, states may cover a broad range of services to participants, as long as these services are required to prevent institutionalization; thus to be eligible, individuals must meet the state’s level-of-care criteria for institutional care. Included among the services that may be provided are homemaker/home health aide, personal care, adult day health, and other services as approved by the Secretary of HHS. States can have multiple 1915(c) waivers that target different populations, for example, one for individuals with developmental disabilities and another for individuals with physical disabilities. In fiscal year 2010, 47 states and the District of Columbia operated 318 1915(c) waiver programs, expending over $35 billion, according to a study using CMS data. PPACA created two new Medicaid options for states to cover HCBS— Community First Choice and the Balancing Incentive Program—and amended two existing Medicaid HCBS options—the 1915(i) state plan option and Money Follows the Person. Community First Choice is a new optional state plan benefit created by PPACA to finance home- and community-based attendant and other services for Medicaid beneficiaries. Community First Choice became effective October 1, 2011. The Balancing Incentive Program is a new time-limited program established by PPACA to help increase access to HCBS for beneficiaries.October 1, 2011, and expires September 30, 2015. The Balancing Incentive Program became effective The 1915(i) state plan option was established by the Deficit Reduction Act of 2005 as a new optional state plan benefit under section 1915(i) of the Social Security Act. The 1915(i) state plan option provides states with a way to offer beneficiaries a comprehensive package of HCBS under a state plan option. One important distinction from 1915(c) waivers is that individuals qualifying for services under the 1915(i) state plan option do not need to meet the state’s institutional level of care criteria to receive HCBS. However, a state that offers services under the 1915(i) state plan option must establish needs- based criteria for determining eligibility for services under the option that are less stringent than the state’s criteria for determining eligibility for institutional care. Five states—Colorado, Iowa, Nevada, Washington, and Wisconsin—had offered 1915(i) prior to the changes to the option made by PPACA. These revisions included expansions to the scope of covered services and eligibility requirements, among other changes, and became effective October 1, 2010. Money Follows the Person was established by the Deficit Reduction Act of 2005 as a demonstration grant program to support states’ transition of eligible individuals who want to move from institutional settings back to the community. Each state’s Money Follows the Person program consists of a transition program, to identify Medicaid beneficiaries living in institutions who wish to live in the community and help them do so, and a rebalancing program for states to make systemwide changes to support Medicaid beneficiaries with disabilities living and receiving services in the community. A total of $1.75 billion in federal funds was appropriated for Money Follows the Person for fiscal years 2007 through 2011, and CMS awarded Money Follows the Person grants to 30 states and the District of Columbia in 2007.