Home care providers likely exhaled a sigh of relief when the American Rescue Plan passed last year, earmarking funds intended to enhance home- and community-based services (HCBS).

And they’re once again breathing easier now that the U.S. Department of Health and Human Services (HHS) – through the U.S Centers for Medicare & Medicaid Services (CMS) – announced that states would have an extra year to use funding from the American Rescue Plan.

“Overall, we’re grateful for this extension and appreciate it,” Jennifer Sheets, CEO and president of Interim Healthcare, told Home Health Care News.

Back in March 2021, President Joe Biden signed the $1.9 trillion American Rescue Plan into law. The COVID-19 relief package included a provision that raised the federal matching rate for Medicaid HCBS spending by 10 percentage points from April 1 of 2021 through March 31, 2024.

Last month, it was determined that the funding will be available for states to expend until March 31 of 2025.

Generally, the funds can be put towards beefing up states’ HCBS programs, but the specifics are murky, according to Sheets.

“CMS provided little guidance and standard to states on how the funding can be used, so the challenge is getting access to and using these funds as intended,” she said. “There are huge variations in program requirements and distribution from state to state.”

As far as managing the funds, some states have chosen to implement rate increases using the additional federal money to make this happen.

Other states have implemented grants, providing direct payments to providers to use for certain criteria, mostly around workforce development.

Of the states Addus HomeCare Corporation (Nasdaq: ADUS) operates in, there’s a pretty even split between the states that chose rate increases, and the ones that went the grant, or direct provider payments, route.

“In states where we got rate increases, it led to increased wages, and or other benefits,” Darby Anderson, chief strategy officer at Addus, told HHCN. “In the more direct payment states, it’s allowing us to be more competitive in the bigger recruitment market for employees by offering sign-on bonuses, recruitment bonuses of different kinds, and in some cases, paid training.”

In other words, the funds are a tool to address the home care industry’s most immediate pain point — staffing shortages.

Similarly, Interim is focused on how these funds will potentially alleviate the company’s workforce challenges. Still, Sheet notes that an extension – while positive – isn’t permanent.

“The pandemic exacerbated this need and want among consumers for home-based care, but because these increases aren’t permanent, we can’t make permanent changes to wages for our staff – impacting our ability to recruit and retain quality individuals to meet the growing need,” she said. “Instead, we will use it for things we can implement in the short-term, like bonuses and recognition, including non-monetary actions we can take to help our caregivers, such as flexible work schedules to navigate family obligations.”

Aside from not being permanent, Anderson pointed out the extension doesn’t mean additional dollars for providers — just more time to spend the original funds.

“So the simplest example is a rate increase. If you gave a 2 ½ % rate increase, you could technically fund that with the federal money for four years,” he said. “It didn’t mean 10% each year.”

One of the key benefits to this additional time, however, is that it addresses challenges that providers faced around getting access to the funds in the first place.

“The additional year is a good decision because state spending plans were not approved by CMS as timely as originally indicated,” Anderson said. “It took six months, sometimes eight months, to get all the plans approved. States got a slower start in implementing those plans.”

Another benefit that comes with the extra time is that it gives states enough time to pivot, if necessary.

“It could be that a state finds that a particular initiative they’ve put into their spending plan isn’t necessary, or isn’t going to work out, during the course of the next three or four years, Anderson said. “They can reallocate those dollars to other elements of their spending plan.”

One concern that looms large for many providers is the question of what happens in states where the American Rescue Plan funds were distributed through rate increases once March 31 of 2025 finally comes.

“If there’s a rate increase and it was funded with the [American Rescue Plan] funds, will the state go back and roll the rate back?” Anderson said. “That would be terrible, right? We’re paying wages, we’re increasing wages, et cetera. If they roll the rate back, then what do you do? There’s a cliff in this funding that’s coming.”

Anderson is speaking from the experience of operating under states cutting rates.

Nevada, for example, has been tricky for Medicaid-reimbursed providers to navigate. In fact, Addus left the state in 2020, in part, due to a 6% Medicaid rate cut.

Ultimately, home-based care stakeholders, including Addus, have been pushing for Congress to make additional investment into HCBS.

“I know the Build Back Better Act is dead, but there’s still a lot of bipartisan support for investments in HCBS, through whatever reconciliation bill may or may not get introduced,” Anderson said. “That’s what we’re fighting for now. It’s going to leave a hole in state budgets, from the 10% investments that they’ve been making, and we need to make sure that doesn’t happen.”