HR 1 and HCBS: What the Law Actually Changes
As the leaves start to turn and everyone's calendars fill back up, we are glad to be back from our summer break and diving into a topic that has kept building steam while we were away. More than a year after the passage of HR 1, the debate about its impact on home and community-based services (HCBS) has shifted from what the law says to how states will implement it. For people who receive, provide, or simply care about HCBS, that distinction matters.
HR 1 does not eliminate Medicaid HCBS, repeal HCBS waiver authorities, or impose a work requirement on people who qualify for Medicaid because of a disability. It does, however, make significant changes to Medicaid financing, eligibility, and administration that are already having downstream effects on HCBS.
Despite all this, HR 1 does contain one small but potentially significant HCBS expansion opportunity.
A new HCBS pathway
HR 1 creates a new option for states to establish a Section 1915(c) HCBS waiver for individuals who need HCBS but do not meet the institutional level-of-care criteria traditionally required for a 1915(c) waiver. This provision could matter for people with disabilities whose support needs are substantial but do not rise to the institutional level-of-care standard required to qualify for a traditional waiver.
States could use this authority to expand access to HCBS for people who currently fall through the gap between needing services and meeting the institutional level-of-care threshold.
The new authority is optional. States do not have to adopt it, and it includes requirements intended to prevent the new population from increasing wait times for individuals who already meet an institutional level-of-care standard.
1915(c) waivers have long been the primary vehicle for states to provide HCBS to people who would otherwise qualify for institutional care. HR 1 adds another pathway within that framework for those who may currently be falling through the cracks.
What HR 1 does not do
There is a lot to worry about surrounding HR 1 implementation, so for people who care about HCBS, it is worth being explicit about what the law does not do.
HR 1 does not:
Eliminate Medicaid HCBS
Impose a federal work requirement on people receiving Medicaid because of a disability
Establish a specific reduction in HCBS services
The law does, however, change the fiscal and administrative environment in which states operate their Medicaid programs. As states make implementation decisions, HCBS will be affected.
What about the Medicaid work requirement?
The Medicaid community-engagement requirement has received considerable attention, including concerns about its implications for people who receive HCBS.
The important point is that the community-engagement requirement does not generally apply to people who qualify for Medicaid on the basis of disability. The law is meant to target a subset of adults receiving Medicaid, mostly those qualifying under the Medicaid expansion, and it contains exclusions and exceptions for people who meet certain criteria.
That does not mean people receiving HCBS can ignore implementation of the community-engagement requirement. People receiving HCBS can qualify for Medicaid through different eligibility pathways, and some individuals may even move between eligibility categories over time. States must develop systems capable of correctly identifying who is exempt or excluded to prevent unnecessary coverage losses.
For HCBS stakeholders, how states implement the community-engagement requirement may be just as important as the statutory exemption itself.
The main issue is Medicaid financing
The most consequential issue for HCBS is not a specific provision in the law. It is how the law changes the way states finance their Medicaid programs.
HR 1 places new restrictions on Medicaid provider taxes and changes the rules governing state-directed payments. Those provisions will reduce state flexibility to generate or direct Medicaid funding.
This matters because states ultimately decide what benefits to offer, how much to reimburse providers, how many waiver slots are available, and nearly every other aspect of HCBS delivery.
These changes set in motion a chain reaction worth watching closely. Federal Medicaid financing changes will lead to state budget pressure. States will then be forced to make Medicaid policy decisions to ease that pressure, and those decisions will likely target optional services like HCBS. The result could be cuts to HCBS rates, capacity, services, and workforce.
That is different from saying HR 1 directly cuts Medicaid HCBS benefits. But for HCBS providers already operating on thin margins, the distinction may offer little comfort if states respond to fiscal pressure by limiting reimbursement or slowing program growth.
Why provider rates matter
HCBS is particularly sensitive to state reimbursement decisions because the workforce is largely made up of direct care workers whose wages compete with jobs, often less demanding jobs, in other sectors. If Medicaid financing pressures lead states to reduce or constrain reimbursement, providers may have difficulty:
recruiting and retaining direct care workers
serving individuals with higher support needs
maintaining existing service capacity
reducing waiting lists
This is one reason the implementation of HR 1's financing provisions deserves close attention from the HCBS community, even though the law does not contain a specific HCBS reduction.
What to watch
For the next several years, the most important developments will happen at the state level. HCBS stakeholders should carefully monitor:
State Medicaid financing strategies. How will states respond to the new limits on provider taxes and state-directed payments?
HCBS reimbursement. Will states maintain current reimbursement levels, increase rates to address workforce shortages, or reduce spending to ease other budget concerns?
Waiver capacity and waiting lists. Will states expand HCBS enrollment to reach more people, or cut capacity to serve fewer people more fully?
The new 1915(c) option. Which states will pursue this new authority, and how will they implement it?
Medicaid eligibility implementation. How will states roll out the new verification and community-engagement requirements while ensuring exempt individuals do not face unnecessary barriers to access?
Self-direction. How will states balance cost containment with participant choice and control over their services and workers?
The key takeaway
For HCBS, HR 1 is far more complicated than either "HCBS was cut" or "HCBS was protected."
The law leaves core HCBS authorities in place and creates a new potential pathway to support people who do not meet the institutional level-of-care criteria. It also changes Medicaid financing and eligibility rules in ways that will put significant pressure on state Medicaid budgets.
How states manage this new reality will determine the real-life impact of HR 1 on HCBS. State implementation, not simply the statutory language of HR 1, will determine most of the law's everyday impact on access to services, provider capacity, and, most importantly, the ability of people to live and receive support in their homes and communities.