Enhancing Federal Revenue under the American Rescue Plan Act: An Opportunity to Bolster State Medicaid Home and Community-Based Services Programs

The American Rescue Plan Act (ARPA) includes a one-year 10 percentage point increase in the Federal Medical Assistance Percentage for Medicaid-funded home and community-based services (HCBS). The goal is to strengthen state efforts to help older adults and people with disabilities live safely in their homes and communities rather than in institutional settings during the COVID-19 pandemic. This essay provides a detailed description and analysis of this provision, including issues state governments need to consider when expending the additional federal revenue provided. It also draws lessons from the Affordable Care Act's Balancing Incentive Program to suggest insights for the potential of ARPA to promote further growth in Medicaid HCBS programs. It argues that key to success will be consultation with community stakeholders under the auspices of clear and frequent federal guidance and the development of concrete plans with which to expend the additional revenues in the most effective way possible in the limited time frame provided. The essay concludes by highlighting the importance of instituting strategies and processes for maximizing enhanced federal matching funds under ARPA in preparation for subsequent availability of substantial additional federal resources targeting Medicaid HCBS under other proposed initiatives.