Section 1115 Waiver Watch: Approvals to Address Health-Related Social Needs

Section 1115 demonstration waivers provide states an avenue to test new approaches in Medicaid and generally reflect changing priorities from one presidential administration to another. The Biden Administration has encouraged states to propose waivers that expand coverage, reduce health disparities, and/or advance “whole-person care,” including by addressing health-related social needs (HRSN), also commonly 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 insight into how states can use Section 1115 authority to address enrollees’ social needs by approving waivers in four states (AR, AZ, MA, and OR) that include specified HRSN services for targeted populations; these HRSN initiatives encompass a small share of the overall Medicaid population and Medicaid spending. In all four approvals, CMS writes that the 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 supplements to traditional medical services.” This issue brief provides an overview of how waivers have been used to help address social needs, including a summary of these recent approvals.

A number of states have used Section 1115 waivers to address the social needs of Medicaid enrollees (Figure 1). SDOH, also 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 behaviors, transportation, and personal safety. Outside of Medicaid home and community-based services (HCBS) authority, states have limited ability to use federal Medicaid funds to pay the direct costs of non-medical services like housing and food. However, in addition to state plan and managed care options, states can request Section 1115 waiver authority to add certain non-clinical services to the Medicaid benefit package. As of November 2, 2022, 18 states have approved Section 1115 waivers with SDOH-related provisions and 8 states have pending SDOH requests. The scope of services provided and populations targeted by these waiver provisions vary and are very narrow in some states; also, these may overlap with HCBS programs in some instances. Notable Section 1115 SDOH provisions approved prior to 2022 include:

  • North Carolina’s Healthy Opportunities 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 Leads” manage the network of human service organizations that deliver pilot services.
  • Washington’s Accountable Communities of Health (ACHs) are lead entities which 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 with the clinical delivery system.
  • California’s CalAIM initiative seeks to take the state’s whole person care approach statewide. Under CalAIM, managed care plans will provide Enhanced Care Management and Community Supports, also referred to as “in-lieu of services” (ILOS), to high-need beneficiaries. Community Supports include recuperative care and short-term post-hospitalization housing services (approved under Section 1115) and other ILOS approved under a 1915b waiver.

In addition to these and more recent approvals, 8 states are requesting CMS review of pending SDOH provisions. For example, New York recently requested a Health Equity Reform amendment that would establish regional organizations to coordinate health equity improvement initiatives and provide evidence-based interventions to address social care needs. The request includes a menu of transitional housing and respite services for certain high-need enrollees.

In fall of 2022, CMS approved Section 1115 waivers for AR, AZ, MA, and OR that authorize evidence-based HRSN services to address food insecurity and/or housing instability for specific high-need populations (Table 1). The target populations for HRSN services vary by state, but in all instances are narrowly-defined groups that must meet specified health and social risk criteria; these groups represent a small share of each state’s overall Medicaid population (the exact number of enrollees served by each state’s HRSN initiative will be measured in the state’s forthcoming monitoring and evaluation reports; see paragraph below for more information). Allowable HRSN services also vary by states and may include housing supports (such as short-term post-transition rent/temporary housing); nutrition supports; and case management, outreach, and education. The CMS approvals emphasize that authorized HRSN services must be clinically appropriate: to receive HRSN services, the enrollee must have a documented medical need for the services and the services must be determined medically appropriate, based on clinical and social risk factors.

For all four states, CMS approved expenditure authority for HRSN services and infrastructure, with states required to monitor and evaluate the impact of these services on program costs. While not set in statute or regulation, a longstanding component of Section 1115 waiver policy is that waivers must be budget neutral for the federal government (i.e., federal costs under a waiver must not exceed what they would have been for that state without the waiver). Budget neutrality calculations are complicated and reflect a combination of per-capita and aggregate expenditures. For the recent AR, AZ, MA, and OR approvals, CMS is applying annual aggregate budget neutrality spending caps to HRSN service expenditures for which each state may receive federal financial participation (Table 2). These caps indicate that HRSN expenditures are a small fraction of overall waiver expenditures and of total Medicaid spending: in year five of each demonstration, the HRSN services expenditure cap is less than 1% of total Medicaid spending (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 aggregate caps. Also, to maintain and/or improve access to quality care for enrollees, as a condition of approval for the HRSN expenditure authority in AZ, MA, and OR, the states are required to maintain base Medicaid payment rates of at least 80% of Medicare rates for primary care, behavioral health, and obstetrics providers (and must increase any rates that are below this 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 approved continuous eligibility provisions for MA and OR and is continuing to work with these and other states on pre-release requests. States can elect a state plan option to provide 12-month continuous eligibility (CE) to children in Medicaid but not other populations. The recent OR waiver approval included CE for children through age 6 and two-year CE for all enrollees above age 6. The MA approval included 12-month CE for enrollees upon release from correctional settings and 24-month CE for enrollees experiencing homelessness. CMS also recently approved 12-month CE for eligible parents and other caretaker relatives in KS. Additional states with pending CE requests include WA and NM (whose waiver recently completed state-level public comment), who are both pursuing CE for children through age 6, similar to OR. Another eligibility-related Section 1115 issue to watch is pre-release services: eleven states (including AZ, MA, and OR) have requested waivers of the Medicaid inmate exclusion policy to provide pre-release coverage to certain incarcerated individuals. Although CMS has not approved (or denied) any of these requests, the agency wrote to AZ, MA, and OR that it “is supportive of increasing pre-release services for the justice involved populations and of supporting individuals’ transitioning from institutional settings back into the community, and will continue to work with the state on this component of its proposal.”

Looking ahead, the results of required evaluations of HRSN initiatives could help inform future policy decisions about whether and how to use Medicaid to address enrollees’ social needs. 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 the HRSN initiatives; the prevalence and severity of the enrollees’ social needs; enrollee utilization of preventive and routine care as well as potentially avoidable, high-acuity health care; and the cost-effectiveness of the HRSN initiatives. The states must also evaluate the impact of the initiatives on overall access, quality, and health outcomes and on disparities in these outcomes. The evaluation requirements include a schedule of deliverables, including quarterly and annual monitoring reports as well as interim and final evaluation reports. The results of these ongoing evaluations could help inform operational challenges and provide early insight into the costs associated with these waivers and how effective they are in addressing the health-related social needs of Medicaid enrollees.

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