A New HCBS Pathway—Without Institutional Level of Care (LOC)—Starts July 1, 2028
A practical playbook for HCBS & LTSS leaders (mapped to workforce, compliance, client support, and advocacy)
A major provision of the One Big Beautiful Bill Act lets states cover home- and community-based services (HCBS) for people without first proving they meet a nursing facility or other institutional level of care (LOC). The option begins July 1, 2028—and it comes with clear guardrails, reporting, and funding to help states stand it up.
What changed
New waiver lane under 1915(c), effective 7/1/2028. States may run a stand-alone HCBS waiver that does not require an institutional LOC determination. States must create state-defined needs-based criteria for the new group and specify which HCBS the group can receive. Initial term is 3 years, with 5-year extensions if requirements are met.
“Do no harm” to people who do meet LOC. Before approval, a state must show the new waiver will not materially increase the average wait time for individuals already eligible under traditional (LOC-based) HCBS waivers.
Cost discipline and transparency.
The state must attest that average per-capita spending for the new group won’t exceed average per-capita spending for comparable institutional care.
States must submit annual data: costs by service, time in service by type, comparisons to LOC HCBS and institutional cohorts, and number served.
Limits on paying third-party benefits. Waiver dollars cannot be used to purchase things like health insurance or skills-training benefits for a class of practitioners if Medicaid is the primary revenue source for that class. (This targets paying benefits on behalf of practitioners—not client services.)
Implementation support dollars. Congress appropriated $50M (FY2026) to CMS to implement the provision and $100M (FY2027) to states to bolster HCBS systems (1915(c) or 1115), allocated by each state’s HCBS-served population share.
Quick background: Traditional 1915(c) waivers cover people who meet an institutional LOC and need LTSS; this new track adds a needs-based, non-LOC on-ramp so states can support people earlier—at home and in the community—before needs escalate.
Why this matters to operators
Access can expand to people with earlier-stage needs—growing referral volume and diversifying acuity.
Operational rigor increases: you must document state-defined criteria, plan of care, and data elements that flow to annual reports.
Equity lens is essential: the “no longer requires LOC” standard is only a win if wait times for high-acuity individuals are protected and if rates align with real service costs.
Priority actions by lane
1) Workforce development
Design roles for lighter-acuity services you expect your state to include (e.g., personal care, ADL support, caregiver education/respite, dementia-friendly engagement). Map competencies and create micro-credentials (2–4 hours) to upskill quickly.
Build career pathways (Companion → Personal Care → Advanced Dementia/Behavioral Health aide) to attract new entrants and retain tenured staff as scope expands.
Plan training funding smartly. Because waiver dollars cannot buy third-party “employee-type” benefits for classes of practitioners where Medicaid is primary revenue, line up alternative funding (WIOA boards, community colleges, philanthropy) for benefits-like supports (e.g., tuition, certification fees).
2) Compliance adherence
Mirror the statute in your SOPs.
Eligibility: implement your state’s needs-based criteria (non-LOC group) in intake checklists and EHR fields.
Plan of care: ensure every covered service ties to an individualized, written plan of care (required).
Cost controls: stand up dashboards tracking average per-capita spend for the new group vs. your market’s institutional benchmarks.
Annual reporting pack: build data extracts now for the required elements (cost by service, duration, comparisons, member counts).
Wait-time guardrail monitoring. Track and share average wait times for LOC waiver applicants and participants to help your state prove “no material increase” over time.
3) Client support
Plain-language eligibility explainer. “You may qualify for services based on functional needs, even if you haven’t been told you need nursing-facility care.” Offer examples (falls risk, help with bathing or dressing, caregiver fatigue).
Person-centered planning refresh. Re-tool templates to emphasize independence, safety, and dignity for people with earlier-stage needs; include caregiver coaching and respite where approved.
Warm referrals (transportation, food, caregiver stress, dementia supports) reduce downstream risk and help people maintain eligibility and engagement as needs evolve.
4) Advocacy
Ask your Medicaid agency:
Which needs-based criteria are on the table for non-LOC eligibility—and how will equity be protected?
What service array is the state considering for the new group, and how will rates be set for sustainability?
How will the state document “no material increase” in LOC wait times and publish those metrics?
What’s the plan to use the FY2026–FY2027 funding (CMS and state dollars) and involve providers in pilots/readiness testing?
Bring evidence. Use your data on falls reduction, avoidable ED visits, and delayed institutionalization to support the waiver’s budget-neutrality and guardrail tests.
Operational checklist (start this quarter)
Draft a readiness memo with: projected non-LOC volumes, likely service mix, staffing model, and rate targets.
Add fields to your EHR for the state’s needs-based criteria; map report logic for the annual federal submission elements.
Stand up a wait-time tracker for your LOC clients/applicants; align with AAAs/ADRCs so data is consistent statewide.
Identify non-Medicaid financing partners (workforce boards, colleges) for training/benefits supports that the statute restricts.
References
Congress.gov. (2025). H.R. 1—One Big Beautiful Bill Act (Public Law 119–21): Sec. 71121—Making certain adjustments to coverage of HCBS under Medicaid (effective 7/1/2028; waiver terms, needs-based criteria, wait-time guardrail, per-capita cost test, annual data, third-party-benefit limitation; FY2026–FY2027 funding).
Congress.gov. (2025). H.R. 1—One Big Beautiful Bill Act: Summary (Health Subtitle; Sec. 71121 overview). (Congress.gov)
KFF. (2025). Implementation dates for the 2025 budget reconciliation law (timeline entry for the non-LOC HCBS waiver). (KFF)
Congressional Research Service. (2025). Medicaid Section 1915(c) Home- and Community-Based Services Waivers (program background). (Congress.gov)
