Assisted Living Programs With Medicaid Waivers Skirting Compliance Rules

The number of Medicaid beneficiaries in assisted living facilities (ALFs) has grown in recent years, but programs receiving Medicaid waivers in several states haven’t abided by federal guidelines—and that needs to change if they want to keep getting federal funding, says the Office of the Inspector General.

Under the 1915(c) waiver, the Centers for Medicare & Medicaid Services (CMS) can waive certain requirements to allow state Medicaid program to cover home and community-based services (HCBS) for beneficiaries in ALFs.

However, not all states have played by the rules, and little information exists about the costs of HCBS appropriated for the care of those living in assisted living communities, the OIG says in a recent report.


In 2009, the 35 Medicaid programs studied by the OIG were found to have covered various HCBS for beneficiaries in ALFs at an annual cost of $1.7 billion. The services were provided to more than 54,000 beneficiaries living in approximately 12,000 ALFs.

Even though each state had federally mandated standards for Medicaid services, ALFs in seven of the 35 states—Georgia, Illinois, Minnesota, New Jersey, Oregon, Texas, and Washington—did not comply with the federal requirements. 

In these seven states with the highest numbers of beneficiaries receiving HCBS in ALFs, 77% of Medicaid beneficiaries received HCBS under the 1915(c) waiver in offense of state licensure. 


Additionally, OIG’s review of beneficiary medical records and plans of care in those seven states found that ALF care plans required under state licensure did not always exist. 

In five of the seven states, two-thirds of the mandatory care plans for beneficiaries receiving HCBS did not meet state requirements, notes OIG. 

In the other two states, 12 of 25 care plans for HCBS beneficiaries residing in ALFs did not meet requirements. 

Recommended SHN+ Exclusives

To further protect Medicare and Medicaid services and prevent further unlawful spending, the OIG suggests that CMS issue guidance to state Medicaid programs, emphasizing the need to comply with federal requirements under the 1915(c) waiver.  

Since waivers include a number of different settings in which care providers offer HCBS, the OIG recommends that CMS issue a State Medicaid Directors’ Letter stressing that Medicaid programs must meet state requirements to provide HCBS under the waiver. 

Written by Jason Oliva