Do Medicaid Home and Community Based Service Waivers Save Money?

This article estimates the potential savings to the Medicaid program of using 1915c Home and Community Based Services (HCBS) waivers rather than institutional care. For Medicaid HCBS waiver expenditures of $25 billion in 2006, we estimate the national savings to be over $57 billion, or $57,338 per waiver participant in 2006 compared with the cost of Medicaid institutional care (for which all waiver participants are eligible). When taking into account a potential 50% "woodwork effect" (for people who might have refused institutional services), the saving would be $21 billion. This analysis demonstrates that HCBS waiver programs present significant direct financial savings to Medicaid long-term care (LTC) programs.