REFORM; SDH- A Look at Recent Medicaid Guidance to Address Social Determinants of Health and Health-Related Social Needs

MM Curator summary

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[MM Curator Summary]: CMS has opened up two major paths to use Medicaid dollars to pay for non-healthcare services (but healthcare “related”): The 1115 waivers they approved in states like AZ and the changes to the In Lieu of Services (ILOS) bucket that MCOs can use to provide alternative services.



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While there are limits, states can use Medicaid to address social determinants of health (SDOH), or associated health-related social needs. Health-related social needs (HRSN) are an individual’s unmet, adverse social conditions (e.g., housing instability, homelessness, nutrition insecurity) that contribute to poor health and are a result of underlying social determinants of health (conditions in which people are born, grow, work, and age). To expand opportunities for states to use Medicaid to address health-related social needs, CMS recently issued new guidance that builds on guidance released in 2021. This guidance supports the current Administration’s goal to advance health equity as well as end hunger by 2030 and stem increases in homelessness during the COVID-19 pandemic. This policy watch discusses the new opportunities available to states to address HRSN through managed care and through Section 1115 demonstration waivers.

How can states use managed care to address HRSN?

In January 2023 CMS released guidance that paves the way for interested states to allow Medicaid managed care plans to offer services, like housing and nutrition supports, as substitutes for standard Medicaid benefits (referred to as “in lieu of” services (or ILOS)). Under federal rules, states may allow Medicaid managed care organizations (MCOs) the option to offer services or settings that substitute for standard Medicaid benefits, if the substitute service is medically appropriate and cost-effective. For example, a state could authorize in-home prenatal visits for at-risk pregnant beneficiaries as an alternative to traditional office visits. These alternative services must be voluntary for the MCO (to offer) and for the beneficiary (to receive). Costs of the ILOS are built into managed care rates. The new guidance establishes financial guardrails and new requirements for ILOS and clarifies these substitute services can be preventive in nature instead of an immediate substitute (e.g., providing a dehumidifier to an individual with asthma before emergency care is needed). The share of total managed care payments spent on ILOS should not exceed 5%.

This guidance follows the approval of a California proposal to use ILOS to offer a range of health-related services through managed care. Managed care plans provide enhanced care management and “community supports” to targeted high-need beneficiaries. Community supports address social drivers of health and build on and scale work from previous pilot programs and waivers. Service examples include housing transition and navigation services, housing deposits, housing sustaining services (e.g., landlord coordination, assistance with housing recertification), home modifications, medically tailored meals, asthma remediation, and sobering centers.

How can states address HRSN through 1115 waivers?

In December 2022, CMS presented guidance about how states can address HRSN through Section 1115 demonstration waivers. HRSN services that will be considered under the new framework include housing supports, nutrition supports, and HRSN case management (and other services on a case-by-case basis). Under Section 1115, states may have more flexibility to define target populations and services compared to the ILOS option (e.g., states cannot cover rent/temporary housing under ILOS) as well as the ability to add the services to the benefit package and require that plans must offer the services to eligible enrollees. HRSN services must be medically appropriate (using state-defined clinical and social risk factors) and be the choice of the beneficiary. The new CMS guidance specifies spending for HRSN cannot exceed 3% of total annual Medicaid spend. State spending on related social services (before the waiver) must be maintained or increased. To strengthen access, in some cases, states must also meet minimum provider payment rate requirements (for primary care, behavioral health, and OB/gyn services). CMS indicates HRSN spending will not require offsetting savings (that may otherwise be required for services authorized/financed under Section 1115). Although states may gain some flexibility under Section 1115 authority not available under ILOS, 1115 waivers often involve long and complex negotiations between states and CMS and changes in Administration can affect the approval and direction of these waivers.

This guidance follows the approval of waivers in four states (Arizona, Arkansas, Massachusetts, and Oregon) that authorize evidence-based HRSN services to address food insecurity and/or housing instability for specific high-need populations. CMS approved Medicaid coverage of rent/temporary housing for up to 6 months for certain high-need individuals as well as other new/unique housing and nutrition supports (e.g., meal support, including for a household with a child or pregnant woman identified as high risk). CMS also approved federal expenditures to build the capacity of community-based, non-traditional HRSN service providers, that may require technical assistance and infrastructure support to become Medicaid providers.

What to watch?

Going forward, it will be important to follow how HRSN initiatives are funded, implemented, and measured in terms of outcomes. While health programs like Medicaid can play a supporting role, these initiatives are not designed to replace other federal, state, and local social service programs but rather to complement and coordinate with these efforts. The new guidance released by CMS expands opportunities for states to cover HRSN without seeking an 1115 demonstration waiver. While optional for plans to provide HRSN ILOS, the guidance creates a new pathway for states to finance HRSN services on an ongoing basis through managed care. For states pursuing the ILOS option, areas to watch include which health-related services states gain approval to integrate under managed care authority and whether / how many managed care plans opt to offer optional HRSN services. Under Section 1115, areas to watch include which HRSN services states obtain approval for, how states define target populations, as well as how states demonstrate compliance with accompanying Section 1115 requirements (e.g., maintaining state spending on related social services, meeting minimum provider payment rate requirements). Across initiatives/authorities, it will be important to track how states and plans work with community-based organizations and coordinate with relevant state and local agencies and to follow state and federal efforts to monitor and evaluate HRSN programs, including the utilization of HRSN services and the impact of these initiatives on health outcomes and Medicaid spending. Whether states are able to sustain funding streams for HRSN longer term and how future changes in Administration may affect the ability to pursue these initiatives through waivers will be important to watch.