GAO Report Highlights Coordination Gaps in Disability Employment Funding

The Government Accountability Office reports that the Vocational Rehabilitation (VR) program and Medicaid home- and community-based services (HCBS) are the primary federal sources funding employment services for individuals with intellectual or developmental disabilities (I/DD). Providers are compensated either on a fee-for-service basis, such as billed time, or through milestone payments tied to outcomes like job placement. GAO interviewees said fee-for-service models do not incentivize skill development, while milestone models may fall short of covering actual costs.

In the three selected states - Georgia, Pennsylvania, and Washington - VR and I/DD agencies generally fund services sequentially, with VR payments preceding Medicaid HCBS reimbursements. State officials said this sequencing is more common than "braiding," which would apply multiple funding streams simultaneously to a single individual.

Employment service providers described the need to navigate two separate state agencies as an administrative burden that can create service gaps. A Pennsylvania provider noted confusion over whether a closure letter from the state VR agency was required before Medicaid HCBS could fund employment services, leading to unnecessary delays for some participants.

The Departments of Education, Health and Human Services, and Labor issued a joint letter in 2022 urging state agencies to coordinate funding streams and offering strategies such as sequencing and braiding to improve employment outcomes for individuals with disabilities.

GAO was tasked to assess how federal programs support I/DD employment and whether separate funding streams generate inefficiencies. The study examined agency documents, interviewed state officials and providers, and reviewed federal guidance. An estimated 2 million adults in the United States have I/DD, underscoring the importance of effective coordination.