Speak Up → HCBS → Protecting & Strengthening HCBS Toolkit → Unit 2

What You’ll Learn

✓ Why Medicaid-funded home and community-based services (HCBS) are especially at risk

✓ How historic federal Medicaid cuts are increasing pressure on state Medicaid programs, putting HCBS at greater risk

✓ The different ways HCBS can be limited, reduced, or changed

✓ How Medicaid waivers and optional Medicaid benefits contribute to Medicaid’s institutional bias

✓ Why moving people into institutions does not solve gaps in supports and services

✓ U.S. Department of Justice (DOJ), Section 504, and Olmstead developments

---

Threats to community living

1. Changes to Medicaid funding and program rules can affect whether home and community-based services are available.
2. Federal disability-rights protections that help people avoid unnecessary institutionalization are also being challenged.

Why are Medicaid-funded HCBS at risk?

HCBS have long been at risk because most Medicaid home and community-based long-term services and supports are optional for states, giving states more authority to limit, reduce, or change these services.

Why do pressures on the larger Medicaid program matter for HCBS?

HCBS are part of the larger Medicaid program.

What can put pressure on state Medicaid budgets?

Historic federal Medicaid cuts are creating the greatest new pressure on state Medicaid budgets right now. At the same time, states are already dealing with other pressures, including:

• federal matching dollars are reduced;
• federal financing rules change and states can draw down fewer federal dollars;
• states must implement new federal eligibility, reporting, verification, or administrative requirements;
• health-care and prescription-drug costs rise;
• more people need long-term services and supports as the population ages;
• economic downturns reduce state revenue while Medicaid needs remain high or increase; and
• other changes increase the number or complexity of people needing health and long-term services.

States have to absorb these pressures across the larger Medicaid program. Because states must continue to cover mandatory Medicaid benefits while most HCBS are optional, HCBS are particularly exposed when federal funding falls and states are forced to make difficult budget decisions.

Sources:

• MACPAC — Medicaid FinancingOpens in a new window
• CMS — Medicaid Community Engagement Requirement for Certain IndividualsOpens in a new window
• KFF — Medicaid Enrollment & Spending Growth: FY 2025 & 2026Opens in a new window

HCBS are part of the larger Medicaid program. Medicaid also pays for many other health and long-term care services. States and the federal government share the cost of Medicaid, with federal matching dollars helping states pay for covered services.

How can HCBS be limited, reduced, or changed?

HCBS can be affected in many ways. A state does not have to eliminate an entire program for people to lose access to services. Changes can include:

• Federal Medicaid funding cuts that leave states with less federal support.
• Changes to Medicaid financing rules that affect how states pay their share of Medicaid and how much federal funding they can draw down, including changes to provider-tax rules.
• Lower or frozen provider payment rates, which can make it harder for providers to recruit workers, maintain services, or stay open.
• Waiver enrollment or spending caps, which can limit how many people are served or how much a waiver can spend.
• Limits on individual services, such as caps on hours, visits, equipment, home modifications, or spending per person.
• Changes to eligibility, assessments, authorization, or other program rules that affect whether someone qualifies for services, how much support is approved, or how services can be provided.
• Reductions or elimination of optional benefits or waiver services.
• Provider and workforce shortages or losses, which can leave an approved service unavailable because there is no qualified provider or worker to deliver it.

Sources:

HCBS do not have to disappear all at once for access to shrink. A program can remain in place while fewer people are served, people receive fewer hours or services, waiting lists grow, or providers become unavailable.

• KFF — States’ Management of Medicaid Home Care Spending Ahead of H.R. 1 EffectsOpens in a new window
• MACPAC — Waivers Opens in a new window
• Congressional Research Service — Health Provisions in P.L. 119-21, the FY2025 Reconciliation LawOpens in a new window

How do Medicaid waivers fit into this?

Many HCBS are provided through Medicaid waivers. Because these waiver programs are optional, states can limit the number of people they serve and how services are provided. When Medicaid funding is reduced and state budgets are under pressure, states have historically responded by limiting waiver enrollment, reducing services, lowering provider payment rates, or otherwise reducing HCBS capacity.

Source:

• Health Affairs Forefront — History Repeats? Faced With Medicaid Cuts, States Reduced Support for Older Adults and Disabled PeopleOpens in a new window

Why does being “optional” matter?

Nursing-facility services are a mandatory Medicaid benefit for eligible adults age 21 and older, while most Medicaid home and community-based long-term services and supports are optional for states.

“Optional” does not mean these services are unnecessary. It means federal Medicaid law gives states more choice about whether and how they provide many community-based services.

Disability advocates call this imbalance Medicaid’s “institutional bias.” An eligible adult who needs nursing-facility-level care is entitled to the nursing-facility benefit, while access to services in the community depends on the state’s optional HCBS programs and available capacity.

Sources:

• CMS — Mandatory & Optional Medicaid BenefitsOpens in a new window
• CMS — Nursing FacilitiesOpens in a new window
• CMS — Home & Community-Based Services 1915(c)Opens in a new window

Moving people into institutions does not solve gaps in supports and services. It changes where people experience the shortages, delays, and unmet needs.

Sources for this graphic:

• National Academies of Sciences, Engineering, and Medicine — The National Imperative to Improve Nursing Home Quality: Honoring Our Commitment to Residents, Families, and Staff Opens in a new window
• Mukamel et al., JAMA Network Open — Association of Staffing Instability With Quality of Nursing Home CareOpens in a new window
• Bowblis et al., Health Affairs — Nursing Homes Increasingly Rely On Staffing Agencies For Direct Care NursingOpens in a new window
• American Health Care Association — Access to Care Report, August 2024Opens in a new window

Why are community-integration rights also at risk?

What is Olmstead?

Olmstead v. L.C. is a 1999 U.S. Supreme Court decision about the rights of people with disabilities to receive services in integrated community settings rather than being unnecessarily segregated in institutions.

The Court held that unjustified segregation of people with disabilities can be discrimination under Title II of the Americans with Disabilities Act (ADA). Under Olmstead, state and local governments may be required to provide community-based services when those services are appropriate, the person does not oppose receiving services in the community, and the services can be reasonably accommodated without fundamentally altering the public program.

In plain language: People with disabilities should not be forced to live in institutions simply because the services they need are not available in the community.

Source:

• ADA.gov — Community IntegrationOpens in a new window
• 28 C.F.R. § 35.130(dOpens in a new window) — ADA Title II Integration Regulation
• Olmstead v. L.C., 527 U.S. 581 (1999)Opens in a new window

What changed in 2026?

In June 2026, the U.S. Department of Justice (DOJ) issued a legal opinion taking a new position on the federal integration mandate. The opinion argues that Section 504 of the Rehabilitation Act and Title II of the ADA do not themselves require states to provide services in the most integrated setting appropriate, and that Olmstead did not establish such a statutory requirement.

The concern became more immediate on August 31, 2026. DOJ, acting for the U.S. Department of Health and Human Services (HHS), joined states in asking a federal court to remove references to community integration from HHS regulations implementing Section 504, including the regulation’s integration provision. That proposed resolution relies on the June DOJ opinion.

On September 3, 2026, governors from 18 states—including Pennsylvania—sent a letter to the U.S. Attorney General opposing federal actions that could weaken protections against unnecessary segregation. The governors emphasized that community integration means having the opportunity to live, work, attend school, build relationships, and participate in ordinary community life.

This does not repeal the ADA, Section 504, or the Supreme Court’s Olmstead decision. But it represents a major change in the federal government’s interpretation and enforcement of community-integration protections. Disability-rights organizations are challenging that interpretation and maintain that Olmstead and longstanding legal precedent remain in effect

Sources:

• U.S. Department of Justice — Application of the Rehabilitation Act and Americans with Disabilities Act to State Institutionalization of Patients with Severe Mental Illness or Disabilities — June 18, 2026Opens in a new window
• DREDF — Statement of National Disability Organizations on the Department of Justice’s Proposed Resolution of Texas v. Kennedy — September 1, 2026Opens in a new window
• Governors’ Letter on OlmsteadOpens in a new window — September 3, 2026

Explain it to your neighbors