Updated April 2025

A federal program that has made it possible for more than 88,000 seniors and people with disabilities to make the transition they craved — moving from nursing homes back into houses, apartments, and group homes in their communities — is now being threatened with budget cuts and possible extinction.

The legislation was initially passed in 2005 because state spending of funds for Medicaid, called Medi-Cal in California, was out of whack. With the no-nonsense title of “Money Follows the Person” (MFP), the measure was authorized as a “rebalancing demonstration” to redistribute the money spent on long-term care in institutions and funnel it to pay for care in community settings.

Institutions — mostly nursing homes providing long-term care — were hogging a disproportionate share of Medicaid money. While only about 6.4% of the Medicaid population received care and housing in such facilities, nearly half the Medicaid budget was spent on it. The intent of MFP was not only to help make it possible for people to move out of nursing facilities, but to make fundamental changes in state policies so that Medicaid funds would “follow the person” to the new, more independent setting.

Federal funding for the original MFP expired on September 30, 2016, although some states were allowed to continue using their grant funds through 2020. Congress authorized short-term extensions of the program in 2019 and 2020. In 2021, Congress extended the program through 2023. The most recent extension took place in 2022, when Congress renewed funding for the program through 2027.

How and Why MFP Works

Initially, 30 states were provided federal grants to develop MFP programs. Over time, 45 states, the District of Columbia, and two territories have been awarded MFP grants. The short extensions in 2019 and 2020 created uncertainty about the program’s long-term stability and contributed to the decisions of some states to drop out. The number of states participating in MFP fell from 44 in 2017 to 34 in 2021. As of January 2025, 36 states and Washington DC are participating in the program.

The program does not provide cash assistance to disabled individuals. Rather, its funds are earmarked for services — including housing coordination, case management, and telehealth services — to help individuals move out of nursing facilities and then help manage their care in a more homelike setting.

A comprehensive evaluation of MFP was submitted to Congress in 2017. The evaluation covered the first six years of the program. In 2021, Congress directed HHS to conduct a second evaluation. That evaluation has not yet been completed.

A 2024 report by the Centers for Medicare & Medicaid Services (CMS) found that the number of transitions from institutions to home care under the program fell substantially in 2017 and 2018, but increased in 2019 and 2020. Transitions still remained 44% below 2017 numbers. Overall, more than 112,000 individuals have transitioned to home care through MFP since its inception.

The 2017 evaluation provided strong evidence that individuals’ quality of life improves when they transition from institutional long-term institutional care to home-based services. The effect lasts, as those improvements were largely sustained two years after the moves.

The evaluation also provided evidence that the program is cost effective. On average, monthly expenditures for those participating in the re-balancing demonstration declined by $1,840, or 23%, during the first year of transition from a nursing home to home and community-based care. By the end of 2013, the program had saved Medicare and Medicaid about $275 million.

Yays — and a Nay

Many of the MFP program participants are also pleased and proud to share their success stories.

Among them:

• Marie Cuthbertson of Kansas City, Missouri was in a nursing home for a year-and-a-half after suffering a stroke. She and another nursing home resident describe their feeling of imprisonment in the institutional setting. They experienced a new sense of freedom and empowerment after MFP facilitated their transition to a home in the community.
• Gladys Winn, of Suffolk, Virginia, a woman in her late 90s who became a resident in a local nursing home after she fell and broke her hip. When she got word that she had to move back into her home within 20 days or lose it completely, she became severely depressed and anxious. With help from an MFP program, she was able to make a quick move back home — and now enjoys fishing and participating in church and community activities.
• John Sims, of Grand Rapids, Michigan, who was admitted to a nursing home shortly after he had a stroke that left him paralyzed from the waist down. His inspiration for wanting to transition out was his eight-year-old son. He wanted the boy to live with him in an accessible apartment close to school — and the MFP program made that possible. “I felt that I was a productive citizen before the stroke, and now I feel I can be a productive citizen after the stroke,” Sims says. “And I actually feel I have something to offer — not just to my family, but to the community.”

But one group less than enthused about MFP is nursing home owners, many of whom claim they’re cash-strapped and have been forced to cut back services or even close their doors due to financial woes. To compensate, those that remain are changing the way they’ve customarily done business — admitting more short-term patients in need of rehab as opposed to long-term residents, as well as accepting individuals they would have rejected in the past: those with more complicated and compromised medical conditions. Some facilities have also morphed their offerings to include pharmacies or homecare services.

Two nursing homes based in Connecticut, Hebrew HealthCare and Affinity Healthcare Management, which both filed for bankruptcy recently, cited the MFP program as adding to their financial challenges.

Still, Matthew Barrett, CEO of the Connecticut Association of Health Care Facilities, cites a silver lining of sorts in the fact that his state has an above-average number of residents who have Alzheimer’s disease and receive federal money to help pay for their care. He believes nursing homes are the best option for many of them. “I have an optimism that skilled nursing will be considered part of the solution to Connecticut healthcare,” he says.

(This article was revised April, 2025 since it originally published October, 2018.)