Section 1115 Exemption supervision: Approvals to address health-related social needs

Section 1115 demonstration waivers provide states with an opportunity to test new approaches in Medicaid and generally reflect changing priorities from one presidential administration to the next. The Biden administration has encouraged states to offer waivers that expand coverage, reduce health disparities, and/or improve “whole person care,” including by addressing health-related social needs (HRSN), also often referred to as social determinants of health ( SDOH). In particular, both states and the federal government have identified addressing SDOH as a key Medicaid priority. The Administration recently provided more information on how states can use Section 1115 authority to address the welfare needs of enrollees by approving waivers in four states (Arizona, Arizona, Massachusetts, and Oregon) that include certain HRSN services for targeted populations; these HRSN initiatives cover a small share of the total Medicaid population and Medicaid spending. In all four approvals, CMS wrote that approved HRSN services “are expected to promote coverage, access to, and quality of care, improve health outcomes, reduce health disparities, and create long-term, more cost-effective alternatives or adjuncts to traditional medical care.” services.” This issue brief provides an overview of how the exemption has been used to address social needs, including a summary of these recent approvals.

A number of states have used Section 1115 waivers to address the welfare needs of Medicaid enrollees (Figure 1). SDOH, recently referred to by CMS as HRSN, are the conditions in which people are born, grow, live, work, and age that shape health; these include but are not limited to housing, food, education, employment, healthy behavior, transportation, and personal safety. Outside of Medicaid’s Home and Community-Based Services (HCBS) authority, states have limited ability to use federal Medicaid funds to pay for the direct costs of nonmedical services such as housing and food. However, in addition to state plan and managed care options, states may request Section 1115 waiver authority to add certain nonclinical services to the Medicaid benefit package. As of November 2, 2022, 18 states have approved section 1115 exemptions with SDOH-related provisions, and 8 states have SDOH requests pending. The scope of services provided and the population targeted by these exemption provisions vary and are very narrow in some countries; moreover, in some cases they may overlap with HCBS programs. Notable SDOH section 1115 provisions approved prior to 2022 include:

  • of North Carolina Healthy Options Pilots address housing instability, transportation insecurity, interpersonal violence, and toxic stress for a limited number of high-need managed care enrollees who meet health and social risk factors. “Network Leaders” manage the network of human service organizations that provide pilot services.
  • of Washington Accountable Healthcare Communities (ACH) are lead organizations that coordinate regional projects designed to improve care for Medicaid enrollees. CMS authorized funding for ACH-related performance incentive payments based on the premise that social health, public health, and community-based organizations play a role in the clinical delivery system.
  • of California The CalAIM initiative seeks to take the state’s approach to whole-person care across the country. Under CalAIM, managed care plans will provide enhanced care management and community support, also called “in lieu of services” (ILOS), to beneficiaries in need. Community supports include rehabilitative care and short-term residential services after hospitalization (approved under section 1115) and other ILOS approved under a 1915b exemption.

In addition to these and more recent approvals, 8 states are requesting CMS review of pending SDOH regulations. For example, New York City recently requested a health equity reform amendment that would create regional organizations to coordinate initiatives to improve health equity and provide evidence-based interventions to address health care needs. The request includes a menu of transitional housing and recreation services for certain high-need enrollees.

In Fall 2022 CMS approved Section 1115 exemption for AR, THE, M.Aand OR that enable evidence-based HRSN services to address food insecurity and/or housing instability for specific high-need populations (Table 1). Target populations for HRSN services vary by country, but in all cases are narrowly defined groups that must meet certain health and social risk criteria; these groups represent a small share of each state’s total Medicaid population (the exact number of enrollees served by each state’s HRSN initiative will be measured in upcoming state monitoring and evaluation reports; see paragraph below for more information). Eligible HRSN services also vary by state and may include housing benefits (such as short-term post-transition/temporary housing); food additives; and case management, outreach and education. CMS approvals emphasize that authorized HRSN services must be clinically appropriate: to receive HRSN services, an enrollee must have a documented medical need for the services, and the services must be determined to be medically appropriate based on clinical and social risk factors.

For all four states, CMS has approved spending authority for HRSN services and infrastructure, with states required to monitor and evaluate the impact of these services on program costs. Although not stated in law or regulation, a long-standing component of Section 1115 exemption policy is that the exemption must be budget neutral to the federal government (ie, the federal costs of an exemption must not exceed what would be this state without the exemption) . Budget neutrality calculations are complex and reflect a combination of per capita spending and aggregate spending. For recent AR, AZ, MA, and OR approvals, CMS applies annually aggregate cost-budget neutrality of expenditures for HRSN services for which each state can receive federal financial participation (Table 2). These caps show that HRSN costs are a small fraction of total waiver costs and of total Medicaid costs: in year five of each demonstration, the cost cap for HRSN services was less than 1% of total Medicaid costs (for FY 2021) in AR, AZ, and MA, and about 2% of total spending in OR. In addition to the services themselves, CMS also approved a smaller amount of funding for infrastructure investments to support the implementation and delivery of HRSN services in all four states; this funding is subject to separate general ceilings. Also, to maintain and/or improve access to quality care for enrollees, as a condition of HRSN spending authority approval in Arizona, Massachusetts, and Oregon, states are required to maintain baseline Medicaid payment levels of at least 80% of Medicare rates for primary care, behavioral health, and midwifery providers (and must increase any rates that are below that level). CMS notes that “research shows that increasing Medicaid payments to providers improves beneficiaries’ access to health care services and the quality of care received.”

In addition to HRSN services, CMS has approved continuing eligibility provisions for MA and OR and continues to work with these and other states on prerelease requests. States may elect a state plan option to provide 12-month continuous eligibility (CE) to Medicaid children, but not to other populations. Recent OR exemption approval included a CE for children up to age 6 and a two-year CE for everything enrolled over 6 years of age. MA approval included a 12-month CE for enrollees upon release from correctional facilities and a 24-month CE for enrollees experiencing homelessness. CMS also recently approved a 12-month CE for eligible parents and other relative caregivers in KS. Additional states with CE requests pending include WA and NM (whose denial recently completed public comment at the state level), both of which are pursuing CE for children up to age 6, similar to OR. Another condition-related section 1115 issue to watch is pre-release services: eleven states (including Arizona, Massachusetts, and Oregon) have requested waivers from the Medicaid inmate exclusion policy to provide pre-release coverage to certain indigent from free persons. While CMS has not approved (or denied) any of these requests, the agency wrote to AZ, MA, and OR that it “supports increasing pre-release services for justice-involved populations and to support individuals’ transition from institutional settings back into the community and will continue to work with the state on this component of its proposal.”

Looking forward, the results of necessary evaluations of HRSN initiatives could inform future policy decisions about whether and how to use Medicaid to meet the social needs of enrollees. Section 1115 waivers are subject to monitoring and evaluation requirements that were increased under the ACA. States must have a publicly available, CMS-approved evaluation strategy that includes measurement criteria related to coverage, access, and other outcomes. For example, states must regularly collect and report data that will answer questions about the number of enrollees served by HRSN initiatives; the prevalence and severity of social needs of enrollees; enrollees’ use of preventive and routine care, as well as potentially avoidable high-acuity health care; and the cost-effectiveness of HRSN initiatives. States should also assess the impact of initiatives on overall access, quality and health outcomes, and on disparities in those outcomes. Evaluation requirements include a schedule of results, including quarterly and annual monitoring reports, as well as interim and final evaluation reports. The results of these ongoing evaluations could help address operational challenges and provide early insight into the costs associated with these waivers and how effective they are in meeting the health-related social needs of Medicaid enrollees.

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