Do Non-institutional Long-Term Care Services Reduce Medicaid Spending?

H. Stephen Kaye, Mitchell P. LaPlante and Charlene Harrington

Medicaid spending on home and community-based services (HCBS) has grown dramatically in recent years, but little is known about what effect these alternatives to institutional services have on overall long-term care costs. An analysis by the Center for Personal Assistance Services, University of California, of state spending data from 1995 to 2005 shows that for two distinct population groups receiving long-term care services, spending growth was greater for states offering limited noninstitutional services than for states with large, well-established noninstitutional programs. Expansion of HCBS appears to entail a short-term increase in spending, followed by a reduction in institutional spending and long-term cost savings.