CMS Gives States an Extra Year to Spend ARPA Home and Community-Based Services Funds

As we’ve previously written about here on Say Ahhh!, the American Rescue Plan included a number of provisions providing new opportunities for state Medicaid programs including temporary funding to enhance, expand, and strengthen home and community-based services for individuals covered by Medicaid. Under a CMS announcement made last week, states now have an extra year to spend those funds.

Under section 9817 of the American Rescue Plan Act (ARPA), states were provided with a 10 percentage point increase in their Medicaid matching rate (FMAP) for certain home and community-based services provided to Medicaid enrollees between April 1, 2021 and March 31, 2022. States may then use the state funds freed up by the higher Medicaid matching rate—also known as the “state funds equivalent to the amount of federal funds attributable to the increased FMAP”—to enhance, expand, or strengthen home and community-based services. The Congressional Budget Office estimated the provision would provide over $12 billion in additional funding.

Under May 2021 guidance from CMS, states were initially allowed to use the funds to enhance, expand, or strengthen HCBS from April 1, 2021 until March 31, 2024. However, in a release posted last week alongside a corresponding State Medicaid Director letter, CMS announced it was providing states with an additional year – through March 31, 2025 – to use the funds. According to CMS’s letter to state Medicaid officials, the additional flexibility is intended to address state statutory, regulatory, administrative, and other challenges identified by states when it came to meeting the original spending deadline. Importantly, as noted by CMS, states are not required to use the additional time and can fully expend the funds at any time prior to March 31, 2025.

As discussed in our February issue brief, a number of states plan to use the ARPA HCBS funds to support child and adolescent mental health along with other initiatives to advance behavioral health services and supports more generally. This is in addition to other activities states have reported plans to undertake to support home and community-based services with the ARPA funding – state summaries of which can be found on the CMS website here.

While this additional flexibility may give states more time to spend the ARPA HCBS funds, it is important to note that the funding provided under ARPA – whether expended by states by March 2024 or March 2025 – is still temporary and limited in nature. Building off ARPA, the Build Back Better Act would provide additional and longer-term support for home and community-based services by providing states with the option of permanently receiving a six-percentage point increase in their Medicaid matching rate for improving and expanding HCBS. Next steps on the Build Back Better Act or some version thereof remain unclear but we continue to watch closely and will keep you posted.

Anne Dwyer is an Associate Research Professor of the Practice at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.