## States’ Use of Mechanisms to Limit Medicaid Spending on Home Care
Over one-third of Medicaid spending pays for long-term care, with most of the spending paying for home care-also known as “home- and community-based services” or HCBS. Medicaid pays for almost 70% of all home care spending in the U.S., nearly all of which is provided through optional services. among those optional services, states rely heavily on Medicaid “waivers” to provide home care, which allow them to manage costs using mechanisms such as capping spending or enrollment in the waiver. States may also use waiting lists to track and manage people who want to receive but are not yet receiving home care. While waiting lists may result from caps on waiver spending or enrollment, states also used them for other administrative reasons.
Medicaid’s notable spending on home care and the availability of mechanisms for limiting such spending could spur states to cut home care spending in response to the 2025 reconciliation law.Cutting spending on home care could result in either fewer people receiving any benefits or people receiving fewer covered services, even though the need for home care is unlikely to fall in future years. The recently passed reconciliation law is estimated to reduce federal Medicaid spending by $911 billion between 2025 and 2034, roughly a 14% reduction in federal funding for the program. During the last major reduction in federal Medicaid spending, all states reduced spending on home care by serving fewer people (40 states) or by cutting benefits or payment rates for long-term care providers (47 states).
Using data from the 23rd KFF survey of officials administering Medicaid home care programs, this issue brief describes the mechanisms states are currently using to limit Medicaid spending on home care and thier plans for adopting new mechanisms in state fiscal year (FY) 2026. The survey was sent to all home care programs in all 50 states and the District of Columbia, which states completed between April and July 2025. all states except Florida completed the survey, although response rates for specific questions may have been lower. States generally completed the survey prior to enactment of the reconciliation law,so changes to limit spending in FY 2026 are not attributable to the new law. Survey findings are reported by state and waiver target population, even though states frequently enough offer multiple waivers for a given target population. Key takeaways include:
* For most home care services, which are delivered through waiver programs, 44 out of the 50 responding states constrain spending through limits on either total enrollment (37 states) or on total spending (15 states, Figure 1). Most states (37) also cap waiver spending per participant for at least one waiver.
* Most states (44) reported using mechanisms in at least one waiver to restrain spending that applies to specific services, such as limiting the amount of spending for services.
States utilize two primary waiver types – 1915(c) and 1115 – to offer Medicaid home care. 1915(c) waivers are specifically for individuals needing an institutional level of care, while 1115 waivers allow for broader testing of Medicaid approaches. A survey of 50 states revealed that 15 impose caps on total waiver spending, 37 cap the number of participants, and 37 limit spending per person.
Differences Between Waiver Caps and Waiting Lists
Caps on spending or participants can lead to waiting lists if there aren’t enough waiver slots to meet demand, but they aren’t always the same. Many states use spending or enrollment caps without having waiting lists, or have waiting lists without caps.
Situations where states may constrain waiver spending without a waiting list:
* Caps are set high enough to accommodate all applicants.
* All applicants are enrolled but service amounts are limited.
* Services are prioritized for those with the greatest need, and others are referred to option programs.
Situations where states may have waiting lists without caps:
* Applicants haven’t yet been resolute eligible.
* Eligible individuals are awaiting level of care assessments or service initiation.
* Eligible individuals aren’t receiving services due to provider shortages.
Prevalence of Caps and Cost Neutrality
Forty-four states reported using caps on total spending, participation, or costs per participant. Both 1915(c) and 1115 waivers require states to demonstrate cost neutrality – that waiver costs per enrollee don’t exceed institutional care costs.This can be achieved by maintaining average costs below institutional levels or by establishing individual cost limits. States with individual cost limits must outline safeguards for addressing needs once those limits are reached.
The use of caps is consistent across waivers serving different populations,including those with intellectual or developmental disabilities (47 states) and those aged 65+ or with physical disabilities (45 states). Specifically, 8 and 6 states respectively cap total spending for these groups, 27 and 28 cap participation, and 2
Use of prior Authorization to Manage Spending on State Plan Home Care
For Medicaid home care provided through the state plan, states can’t use waiver-specific cost controls but generally use prior authorization. State Medicaid agencies often require approval of healthcare services or medications before care is delivered-a common insurance practice called “prior authorization.” Medicaid uses prior authorization for both mandatory services, like home health, and optional services, such as personal care. Medicaid managed care organizations widely employ this process. If a requested service isn’t deemed appropriate or medically necessary, the request can be denied (fully or partially). However, enrollees can appeal these decisions through specific appeals and exemption procedures. The appeals process can be challenging, and individuals may face care access delays while awaiting a decision. A KFF survey from July 2025 revealed that 79% of Medicaid enrollees under 65 and 67% of those 65 and older consider delays and denials of healthcare services a major problem.
Nearly all states (47) report using prior authorization to control costs for personal care or home health services. Over half of these states (26) use prior authorization for all home care services, while the remaining 21 states apply it to only some services. Home health is a mandatory benefit in every state, and 40 states use prior authorization for it.