NC Medicaid Innovations Waiver Provider Rate Increase

Intended to Support Innovations Waiver Services Direct Care Worker Wage Increases

The NC General Assembly appropriated $176 million in state and federal recurring funding in the Current Operations Appropriations Act of 2023 (SL 2023-134, Section 9E.15) to raise NC Medicaid Innovations waiver services rates so that Innovations services providers can in turn raise the hourly wages of the direct care workers (DCW) they employ.

Though the legislation does not specify the amount or percentage of the rate increase that must be passed through to DCW wage increases, the General Assembly states an intention of increasing the average hourly wage for DCWs in Innovations services by $6.50 per hour to move those workers to an average wage of $18.00/hr. The funding appropriated for State Fiscal Year (SFY) 2024 does not enable quite that large of a wage increase, but it should support significant movement in that direction.

This bulletin describes the provider rate increases that the Divisions of Health Benefits (DHB) has determined can be supported by the appropriated funding. In determining the applicability and amount of the rate increase, DHB drew on input and collaboration from DHB policy experts and program managers, including 1915(c) waiver experts, along with others within the Department of Health and Human Services (DHHS) familiar with the service delivery modes of the impacted services.

While the increases vary by service type/payment methodology, they share a uniform unit increase of $1.13 per 15-minute increment of service. These rate increases will be effective July 1, 2023, and will be included retroactively in adjusted capitation rates for Local Management Entities/Managed Care Organizations (LME/MCOs). LME/MCOs will be required contractually to reprocess claims for dates of service on or after July 1, 2023, to ensure that providers receive the increased rates beginning on that date.

Contract amendments are in development that will require LME/MCOs to increase reimbursement levels by the posted Innovations DCW add-on amounts (see Table 1 below) relative to February 2020 pre-COVID reimbursement levels plus the HCBS DCW rate increases effective March 2022. See SPECIAL BULLETIN COVID-19 #239: Update on Temporary Rate Increases and HCBS DCW Rate Implementation for more information. Discretionary rate increases made by LME/MCOs since pre-COVID levels (in addition to the March 2022 increases) may be considered in the fulfillment of this requirement.

Per the legislation, Innovations waiver services providers must document to LME/MCOs their commitment to and use of the rate increases “to the benefit of its Innovations direct care workers, including in the form of an increase in hourly wage, benefits, or associated payroll costs.” DHB is directed to provide the standards for documentation, including verifiable methods of accounting, that LME/MCOs must require for verification that the provider used the rate increase in the manner required by legislation.

Providers receiving a rate increase shall keep documentation of the use of the rate increase and make the documentation available upon request by DHB or by the relevant LME/MCO. DHB is directed to recoup part, or all of the funds related to the rate increase received by a provider pursuant to this section if DHB determines that the provider did not use the increased funding to the benefit of its Innovations direct care worker employees.

Analysis and Allocation of the Funding

Similar to the approach used for distributing the Home and Community-Based Services (HBCS) DCW funding provided by the General Assembly in 2022, DHB identified the set of services that met the stated intent of the legislation, used historical data to estimate the total number of 15-minute units of service expected to be provided annually across that set of services, and then calculated how much of a uniform dollar increase could be supported per-15 minute unit to every included service type.

Based on several criteria, such as occupation types who already earn wages exceeding $18/hour, services not typically provided by a direct care worker, or services classified as goods for which hourly wages are not relevant, some service types were excluded. Thorough internal discussions of the criteria guided DHB to narrow the set of Innovations 1915(c) waiver services to be included in the uniform per 15-minute unit rate increase. The services excluded from and included in the rate increase are identified below.

Innovations Waiver Services Not Receiving Increases as Part of this Initiative

As noted above, based on one or more criteria, DHB determined that each of the following Innovations waiver services should not be included when allocating the funding:

  1. Individual goods and services
  2. Home-delivered meals
  3. Assistive technology
  4. Home and vehicle modifications
  5. Community navigator and community transition
  6. Natural support education
  7. Specialized and financial consultative services
  8. Crisis services and consultation

Innovations Waiver Services Receiving Increases

Applying the exclusions referenced above led to the following list of Innovations waiver services to include in the allocation of funding:

  1. Community Networking
  2. Residential Supports
  3. Supported Employment
  4. Respite Care
  5. Community Living and Supports
  6. Day Supports
  7. Supported Living

"Table 1" at the end of this document summarizes each of the included services by procedure code and notes key assumptions considered as part of this analysis.

The list of codes considered in this analysis are based on services offered under the State’s LME/MCO program; included codes are based on historical CY 2019 utilization and other State guidance of emerging services since CY 2019. Additional modifier combinations may exist beyond what is presented in the table. In these instances, the LME/MCOs will need to work with DHB to determine whether the service is eligible for the provider rate increases presented in these summaries. DHB will update LME/MCOs and providers through addenda to this bulletin, as needed, regarding any additional codes that are determined to be eligible to receive increases.

Estimated Provider Rate Increases by Type of Service

The calculations that follow in Table 1 summarize the development of the uniform $1.13 per 15-minute unit increase.

The allocation method uses the available budget divided by historical utilization of included services converted to a 15-minute, per direct care worker basis to calculate the uniform rate add-on that can be applied across all included services. Under this scenario, a service with a lower current rate will receive a bigger percentage change than a service with a higher current rate. For services delivered to multiple individuals at the same time, the add-on is divided by the group size to arrive at the amount to add to the current fee schedule rate.

For services with a unit of service other than 15-minutes, the ultimate rate add-on is derived by multiplying the per unit add-on by the number of 15-minute units assumed within a day along with consideration if it is a service delivered by a single direct care worker to multiple individuals (i.e., group).

Table 1

This table summarizes all services included for the purposes of the Innovations DCW rate increases along with assumptions made for purposes of this analysis. The services are split by program. Where applicable, self-directed and agency modalities of the included procedure codes are included and subject to the noted increase.

(A) (B) (C) (D) (E) (F) = $1.13 x (D) / (E)
Procedure Code Service Description Unit of Service Assumed Number of 15 min Units Assumed Group/ Home Size Innovations DCW 
Innovations Waiver Services
H2015 Community Networking – Individual 15 min 1 1 $1.13
H2015 HQ Community Networking – Group 15 min 1 3 $0.38
H2016 Residential Supports1 – Level 1 per diem 64 2.5 $28.93
H2016 HI Residential Supports1 – Level 4 per diem 64 2.5 $28.93
H2025 Supported Employment Services – Individual 15 min 1 1 $1.13
H2025 HQ Supported Employment Services – Group 15 min 1 2 $0.57
S5150 Respite Care – Community Individual 15 min 1 1 $1.13
S5150 HQ Respite Care – Community Group 15 min 1 3 $0.38
S5150 US Respite Care – Institutional per diem 64 3 $24.11
T1005 Nursing Respite 15 min N/A 1 $1.13
T2012 Community Living and Supports Community – Individual 15 min 1 1 $1.13
T2012 HQ Community Living and Supports Community – Group 15 min 1 2 $0.57
T2012 GC Community Living and Supports Live-in Caregiver – Individual 15 min 1 1 $1.13
T2012 GC HQ Community Living and Supports Live-in Caregiver – Group 15 min 1 2 $0.57
T2013 TF Community Living and Supports – Individual 15 min 1 1 $1.13
T2013 TF HQ Community Living and Supports – Group 15 min 1 2 $0.57
T2014 Residential Supports1 – Level 2 per diem 64 2.5 $28.93
T2020 Residential Supports1 – Level 3 per diem 64 2.5 $28.93
T2021 Day Supports – Individual per hour 4 1 $4.52
T2021 HQ Day Supports – Group per hour 4 3 $1.51
T2027 Day Supports – Developmental Day per diem 4 1 $4.52
T2033 Supported Living – Level 1 per diem 32 1 $36.16
T2033 HI Supported Living – Level 2 per diem 64 1 $72.32
T2033 TF Supported Living – Level 3 per diem 96 1 $108.48
T2033 U1 Supported Living – Periodic 15 min 1 1 $1.13
T2033 U2 Supported Living – Transition 15 min 1 1 $1.13 

1Note AFL settings were included in the DCW rate add-on analysis.

Retroactive Dates of Service Claims That Require Reprocessing

To reflect the changes noted in this bulletin, LME/MCOs are required to adjust rates for services covered in their plans that were delivered on or after July 1, 2023, and reprocess any affected claims, as applicable. As noted at the beginning of this bulletin, contract amendments are in development that will require LME/MCOs to increase reimbursement levels by the above listed Innovations DCW add-on amounts relative to February 2020 pre-COVID reimbursement levels plus the HCBS DCW rate increases effective March 2022. Discretionary rate increases made by the PIHPs since pre-COVID levels (in addition to the March 2022 increases) may be considered in the fulfillment of this requirement.


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