The 2024‑25 Budget

In-Home Supportive Services

Summary

For 2024-25, the Governor’s budget proposes approximately $9 billion General Fund, an increase of $1 billion (13 percent) over estimated 2023-24 expenditures for In-Home Supportive Services (IHSS). This increase would bring total program funding to $24.3 billion total funds ($9 billion from the General Fund and $15.3 billion federal funds) in 2024-25. The primary drivers of this year-to-year General Fund cost increase include the expiration of the temporary increase to federal Medicaid funds that were used to offset General Fund costs in fiscal year 2023-24 and the expansion of full-scope Medi-Cal to undocumented adults, age 26 through 49, regardless of immigration status. Additionally, the Governor’s budget assumes continued year-to-year growth in the three primary IHSS cost drivers—caseload (4.6 percent), cost per hour (2.5 percent), and hours per case (0.7 percent). The administration does not include any major new IHSS related proposals as part of the Governors 2024-25 budget.

Background

Overview of the IHSS Program. The IHSS program provides personal care and domestic services to low-income individuals to help them remain safely in their own homes and communities. In order to qualify for IHSS, a recipient must be aged, blind, or disabled, and in most cases have income below the level necessary to qualify for the Supplemental Security Income/State Supplementary Payment cash assistance program (for example, about $1,183 a month for an aged and/or disabled individual living independently in 2023-24). IHSS recipients generally are eligible to receive up to 283 hours per month of assistance with tasks such as bathing, dressing, housework, and meal preparation. Social workers employed by county welfare departments conduct an in-home assessment of an individual’s needs in order to determine the amount and type of service hours to be provided. In most cases, the recipient is responsible for hiring and supervising a paid IHSS provider—oftentimes a family member or relative. The average number of service hours that will be provided to an estimated 691,075 IHSS recipients is projected to be 123 hours per month in 2024-25.

IHSS Costs Split Between Federal Government, State, and Counties. IHSS costs are shared by the federal government, state, and counties. Since IHSS primarily is delivered as a Medi-Cal benefit, the federal share of costs is determined by the Medicaid reimbursement rate, which typically is 50 percent. The state receives an enhanced federal reimbursement rate for many IHSS recipients who receive services as a result of the Patient Protection and Affordable Care Act expansion (90 percent federal reimbursement rate) and the Community First Choice Option waiver (56 percent federal reimbursement rate). Overall, the effective federal reimbursement rate for IHSS is 54 percent. The remaining nonfederal share of IHSS costs is covered by the state and counties. Historically, counties paid 35 percent of the nonfederal share of IHSS service costs and 30 percent of the nonfederal share of IHSS administrative costs. Beginning in 2012-13, however, the historical county share-of-cost model was replaced with an IHSS county maintenance-of-effort (MOE), meaning county costs reflect a set amount of nonfederal IHSS costs as opposed to a certain percent of nonfederal IHSS costs. The state is responsible for covering the remaining nonfederal share of costs not covered by the IHSS county MOE.

Budget Overview: Caseload, Cost Per Hour, and Hours Per Case Update

LAO Bottom Line: Growth in IHSS Caseload and Cost Per Hour Expected to Return to Close to Pre-COVID Rates, but Service Utilization Continues to Remain Below Historical Levels. Caseload growth, cost per hour (essentially driven by IHSS wages), and number of hours per case are key drivers of increasing IHSS costs. Under the Governor’s budget, hourly wages are expected to continue to grow at a rate generally similar to historical levels. In addition, after a period of slowed caseload growth, followed by a period of increased caseload growth, the IHSS paid caseload is expected to begin to grow at rates more similar to pre-pandemic levels. Although the caseload is expected to grow at rates more similar to average pre-pandemic levels, recent caseload data indicate that the percentage of authorized cases that are paid in any given month remains below historical averages. Below, we summarize our assessment of the paid caseload, hours per case, and hourly wage assumptions included in the Governor’s budget.

Caseload Growth Expected to Return to Close to Pre-COVID Rates… Prior to the start of COVID-19, the average number of IHSS paid cases had grown at an average rate of about 4 percent annually, reaching 555,000 cases in 2019-20. However, in 2020-21 and 2021-22, the caseload experienced a slower growth of 2.1 percent and 3.5 percent, respectively. This slowing in the growth of the IHSS caseload coincided with the start of the COVID-19 pandemic (March 2020). The next two years, 2022-23 and 2023-24, caseloads experienced historically high rates of growth at 6.2 percent and 6 percent, respectively. The Governor’s 2024-25 budget assumes caseload will grow at a rate that is closer to pre-COVID-19 levels, growing at 4.6 percent.

…But Still Lower Share of Authorized Cases Claiming Hours Each Month. Based on our analysis of caseload data, we observe a continued trend of fewer authorized cases claiming service hours in any given month since the start of COVID-19. Figure 1 shows that the average share of authorized cases that are paid every month slightly decreased from 91 percent to 88 percent from January 2019 through December 2023. This translates to roughly 22,000 fewer paid cases every month relative to pre-COVID-19 levels. Some of the reasons why authorized cases may not receive paid services includes recipients not yet hiring an IHSS provider or being temporarily hospitalized or admitted into a licensed care facility. Additionally, one possible COVID-19-related reason may be that recipients with non-live-in providers or non-live-in providers themselves may be hesitant to interact with individuals outside of their household due to public health concerns. Our office and the department are continuing to work to better understand this decrease in paid cases and will provide an update at the May Revision if necessary.

Hours Per Case Projected to Increase, but Still Lower Share of Authorized Hours Claimed. The 2024-25 budget projects the average monthly number of IHSS hours per case to increase slightly between 2023-24 and 2024-25 (0.7 percent), matching historical trends. However, our analysis of hours per case data reveals that for authorized cases that are paid, there was a slight decline in the percentage of authorized hours that were claimed since the start of COVID-19. Meaning, those cases that were claiming hours were claiming a lower share of their authorized hours than historical trends—declining from about 96 percent before COVID-19 to about 94 percent after.

Cost Per Hour Continues to Increase. The Governor’s budget assumes that the cost per hour of IHSS services will increase from $20.02 in 2023-24 to $20.52 in 2024-25. The majority of the cost per hour is associated with IHSS wages (estimated to be an average of $17.95 per hour as of January 2024), in addition to provider benefits and administration costs. As shown in Figure 2, the average IHSS hourly wage has increased by six percent annually since 2014. The growth in IHSS hourly wages in part is due to increases to the state minimum wage—from $8 per hour in January 1, 2014 to $16 per hour in January 1, 2024. Pursuant to current law, the state minimum wage will increase by inflation annually beginning January 1, 2024. Additionally, counties may establish IHSS hourly wages above the state minimum wage through local wage ordinances or, more commonly, collectively bargained agreements. The state, federal government, and counties share in the cost of IHSS wages.

Expiration of Temporary Increase to Federal Medicaid Funding

Expiration of Enhanced Federal Medicaid Funding Will Increase General Fund Costs in 2024-25. Under the Families First Coronavirus Response Act, the federal government increased the federal match rate for Medicaid services by 6.2 percentage points for the duration of the national public health emergency caused by COVID-19. This increased federal match lowers state costs for Medi-Cal, IHSS, and other programs that rely on federal Medicaid funding. However, in December 2022, federal legislation outlined a ramp-down schedule for the enhanced federal funding. As a result, in April 2023, the enhanced rate for most services dropped from 6.2 percentage points to 5 percentage points, then to 2.5 percentage points in July 2023 and 1.5 percentage points in October 2023. The enhanced federal funding was ultimately eliminated in January 2024. As a result of the enhanced federal Medicaid funding being eliminated in January 2024, the Governor’s budget projects IHSS General Fund costs increasing by about $200 million dollars in 2024-25.

Expansion of Medicaid to Remaining Undocumented Individuals

Historically, income-eligible undocumented immigrants only qualified for “restricted-scope” Medi-Cal coverage, which covers their emergency- and pregnancy-related service costs. In general, beneficiaries of restricted scope Medi-Cal are not eligible for IHSS. The state has expanded comprehensive, or “full-scope,” Medi-Cal coverage, including IHSS eligibility, to income-eligible undocumented children (effective May 2016), adults aged 19-25 (effective January 2020), older adults aged 50 and over (effective May 2022), and adults aged 26-49 (effective January 2024)—effectively covering all income-eligible undocumented individuals.

The 2023-24 and 2024-25 Budgets Include Funding for the Expansion of Medi-Cal to Undocumented Individuals Aged 50 and Over… The Governor’s proposed budget includes about $250 million General fund in 2023-24 to provide IHSS services to an estimated 8,000 average monthly cases. This is roughly $650 million General Fund less than what was originally appropriated for this component of the expansion in the 2023-24 budget (approximately $900 million General Fund). According to the administration, this lower-than-anticipated cost occurred because of an updated methodology, including actual caseload data from October 2022 to July 2023, which was used to better inform their estimate. At this time, we do not have any concerns with the administration’s estimates. For 2024-25, the proposed budget includes about $317 million General Fund to provide services to an estimated 11,300 average monthly cases. We will continue to monitor updated caseloads and provide updates in the May Revision.

…While Costs for the Expansion of Medi-Cal to Undocumented Individuals Aged 26-49 Are Expected to Phase-In in 2024-25. Although the expansion of IHSS to undocumented individuals aged 26-49 began January 1, 2024, the administration does not assume that there will be any costs in the IHSS program for this expansion in the 2023-24 fiscal year. This is because the administration estimates that those applying for full-scope Medi-Cal in 2023-24 will not begin to receive IHSS services until fiscal year 2024-25. As such, the 2024-25 budget includes about $77 million General Fund to provide IHSS services to an estimated 2,750 average monthly cases.

Administration Will Continue to Monitor and Report Back at May Revision. We understand that the administration will continue to monitor the expansion of Medi-Cal to those aged 26-49, along with its implications for the IHSS caseload. With this information, the administration may be able to better inform its estimate of when the expansion will begin to impact the IHSS caseload. We will provide updates at May Revision if necessary.

Implementation of Phasing in the Medi-Cal Asset Limit Repeal

Phasing in Medi-Cal Asset Limit Repeal Will Increase IHSS Caseload. Historically, seniors and persons with disabilities had to have assets at or below $2,000 (or $3,000 for couples) to be eligible for Medi-Cal. The 2021-22 budget included legislation to raise the Medi-Cal asset limit from $2,000 to $130,000 for individuals and from $3,000 to $195,000 for couples in July 2022. Moreover, the asset limit was fully eliminated January 1, 2024. The complete removal of the asset limit results in more seniors and persons with disabilities becoming eligible for Medi-Cal services, including IHSS. The proposed budget includes about $26 million General Fund in 2023-24 to provide services to the estimated 1,800 seniors and persons with disabilities who will become eligible for IHSS as a result of this policy change. For 2024-25, the administration estimates that about 3,900 seniors and persons with disabilities will become eligible for IHSS services with a proposed budget of about $48 million General Fund. We note, however, that the administration has indicated that they currently do not have a methodology in place to be able to track how many actual IHSS recipients enter the program as a result of this asset limit change. As a result, from an oversight perspective, our office will not be able to effectively assess whether this estimate is appropriate. As such, the legislature may wish to ask the administration additional questions regarding these estimates, including: how these estimates were derived and how the administration and the Legislature will know whether these estimates of caseloads and expenditures are accurate going forward.

Update on Medi-Cal Redeterminations Impact on IHSS Recipients

Resumption of Medi-Cal Redetermination Increases IHSS Residual Caseload. During the COVID-19 public health emergency, eligibility redetermination requirements for current Medi-Cal enrollees were temporarily suspended. This allowed some Medi-Cal enrollees who otherwise may have lost full-scope Medi-Cal coverage to continue receiving Medi-Cal-related services—including IHSS. Additionally, this meant that those who may have lost full-scope Medi-Cal coverage were no longer being placed into the IHSS Residual program (the state funded program that some IHSS recipients are added to if they lose their Medi-Cal eligibility or are deemed ineligible for Medi-Cal due to not meeting the Medi-Cal immigration requirements), resulting in General Fund savings. However, as of April 2023, counties have resumed Medi-Cal eligibility redeterminations and IHSS recipients have begun to be placed into the residual program once again. The Governors budget includes approximately $37 million to account for the estimated increase in residual cases.

Update on Provider Eligibility for Minor Recipients

Elimination of Minor Recipient Provider Eligibility Requirements Increases Authorized Hours. Historically, a parent could only become the paid IHSS provider for their minor child if the care needs of their child would prevent the parent from maintaining full-time employment. If the care needs of the child did not prevent the parent from maintaining full-time work, a provider other than the parent could be hired. It is our understanding from the department that this requirement particularly impacted minor recipients with parents who were undocumented. In these cases, parents were deemed unable to work due to their immigration status, not due to the needs of the child, and this resulted in children of these parents being unable to secure anyone, including their parents, to provide authorized IHSS services. By eliminating the minor recipient provider eligibility requirements, IHSS-eligible minor recipients will now be treated like all other IHSS recipients when it comes to the selection of a provider. To account for this increase in authorized hours for minor recipients, the Governor’s budget proposes approximately $33 million dollars in both 2023-24 and 2024-25. However, it is our understanding that the elimination of minor recipient provider eligibility requirements did not begin at the start of fiscal year 2023-24, and instead began to be implemented by counties between December 2023 and February 2024. As such, we believe that there could be roughly six months of General Fund savings in 2023-24. We will continue to work with the administration to better understand estimated expenditures for this policy change and will provide updates at May Revision if necessary.

Implementation of the IHSS Permanent Backup Provider System

Permanent Backup Provider System Established in 2022-23 Budget. The 2021-22 budget included $5 million General Fund to create a permanent IHSS backup provider system on January 1, 2022, contingent on a policy framework being adopted in statute. However, a policy framework for the permanent backup provider system was not adopted within the 2021-22 budget period, resulting in the initial $5 million allocation going unspent. The 2022-23 budget codified a policy framework for the permanent backup provide system. Under the permanent backup provider system, a recipient whose regular provider is not available, but who has an urgent need or whose health and safety will be at risk without a backup provider, can receive up to 80 hours (if recipient is non-severely impaired) or 160 hours (if recipient is severely impaired) of backup provider services per fiscal year. Additionally, backup providers are paid $2 above the local IHSS hourly wage rate. The proposed budget assumes roughly $19 million in General Fund costs to support the backup provider system in 2023-24 and 2024-25. This funding would support over 39,000 IHSS recipients receiving an average of 119 hours of backup care in a year.

Use of Backup Provider System May Be Lower Than Budgeted in 2023-24 and 2024-25. Utilization of the backup provider system for the first three months of 2023-24 is lower than expected—likely indicating there will be savings in 2023-24. Specifically, between July 2023 and September 2023, less than $100,000 worth of services have been claimed of the total $16 million General Fund ($36.6 million Total Fund) budgeted in 2023-24. Further, since the implementation of the backup provider system (October 2022) up to the most recent month of data (September 2023), less than $350,000 have been expended on services, averaging less than $30,000 in expenditures per month. For 2024-25, the Governor’s budget proposes over $16 million General Fund. We will continue to work with the administration to monitor expenditures and provide updates at the May Revision if necessary. However, by better aligning the budgeted amount with actual program expenditures, it is likely that for 2023-24 and 2024-25 combined, there could be savings of over $25 million General Fund.

Update on Paid Sick Leave Utilization

Paid Sick Leave (PSL) Established for IHSS Providers in 2018-19. PSL became available on July 1, 2018 for IHSS providers who worked a certain number of hours within a calendar year. In 2018-19, the maximum amount of PSL an IHSS provider could accrue was eight hours per year. This increased to 16 hours in 2020-21, 24 hours in 2022-23, and is set to increase to 40 hours on July 1, 2024.

Claimed PSL is below Accrued PSL, Meaning Potential Savings in 2023-24 and 2024-25. The budget includes around $70 million for PSL in 2023-24. The administration’s cost estimate assumes all providers who qualify for PSL will accrue and be paid for the maximum amount of PSL allowed. However, our preliminary assessment of the available data indicates that not all PSL hours that are accrued are claimed. This means there are potential savings in 2023-24. For 2024-25, the budget includes around $76.5 million for PSL. Similarly, if current utilization trends continue, there could be savings in 2024-25 as well. We will continue to work with the administration to better understand PSL utilization rates and their impacts on estimated expenditures, and will provide updates at May Revision if necessary.

IHSS-Related Home- and Community-Based Services (HCBS) Spending Plan Items: Career Pathways

Implementation of IHSS-Related Spending Plan Items Continues. The state’s HCBS spending plan includes two IHSS-related enhancements: (1) provide a one-time $500 payment to IHSS providers who worked at least two months between March 2020 and March 2021 and (2) create specialized training opportunities and fiscal bonuses for IHSS providers. We understand that the one-time $500 payments to IHSS providers were sent out to roughly 550,000 providers in the beginning of 2022. Additionally, the Department of Social Services began implementing the IHSS training opportunities initiative—known as IHSS Career Pathways—in October of 2022.

Providers participating in the IHSS Career Pathways program are paid for the time that they participate in the trainings and are eligible for incentive payments if certain trainings are completed. We note that, in order to be eligible for certain incentive payments, IHSS providers must continue to work for IHSS recipients for a certain amount of time after the completion of the training. To be eligible to receive the largest incentive payment (a one-time payment of $2,000), a provider must continue to work for a particular recipient for a minimum of 40 hours a week for six months after completing the training. Although the trainings have been slow to ramp up, the administration indicates that as of December 2023:

• 11,827 providers have participated in the program.

• Over 1 million training hours have been approved, with over $22.5 million paid to providers for time spent training.

• Over 13,500 provider incentive claims have been approved, with $7 million in incentives paid to providers.

  Despite the ramp-up in spending, roughly $227 million remains of the roughly $286 million that needs to be spent by December 31, 2024 (allowing for the timely close-out of all activities before the federally required March 31, 2025 deadline).

Key Issues for Legislative Consideration. We understand that the administration is currently in the process of introducing more training opportunities and expects all funds from the HCBS spending plan for the IHSS Career Pathways program (roughly $227 million remaining as of December 2023) to be expended by a December 2024 deadline. As such, we are working with the administration to better understand (1) the assumptions they are making to project that all funds will be spent by the December 2024 deadline, (2) how many providers they expect to go through the trainings and receive the incentives in order to expend all of the funds by December 2024, (3) how the administration will wind down the program in a way that ensures providers are aware of the deadlines they must meet in order to be eligible for the various training incentive payments, and (4) how the administration proposes to move forward should it be deemed unlikely for all the remaining IHSS Career Pathways Funds to be expended by the December 2024 deadline.