Amid Unwinding of Pandemic-Era Policies, Medicaid Programs Continue to Focus on Delivery Systems, Benefits, and Reimbursement Rates: Results from an Annual Medicaid Budget Survey for State Fiscal Years 2023 and 2024

Benefits

Context

State Medicaid programs are statutorily required to cover a core set of “mandatory” benefits, but may choose to cover a broad range of optional benefits. States may apply reasonable service limits based on medical necessity or to control utilization, but once covered, services must be “sufficient in amount, duration and scope to reasonably achieve their purpose.”¹ State benefit actions are often influenced by prevailing economic conditions: states are more likely to adopt restrictions during downturns and expand or restore benefits as conditions improve. However, during the COVID-19 pandemic, despite an early and deep economic downturn, additional federal funds and the goal to maintain access to needed services resulted in states using Medicaid emergency authorities to temporarily expand or enhance benefits. In 2020, 2021, and 2022 permanent (i.e., non-emergency) benefit expansions continued to far outweigh benefit restrictions, consistent with prior years.

Recent trends in state changes to Medicaid benefits (both prior to and during the COVID-19 pandemic) reflect state priorities related to behavioral health, maternal and infant health, and reducing disparities in health—including increased interest in leveraging Medicaid to address enrollee social needs (e.g., housing stability, food security). Federal legislation, CMS guidance and technical assistance, and new funding opportunities can also affect state Medicaid benefits.

In August 2022, CMS released updated guidance that outlines state flexibilities and strategies for expanding Medicaid-covered mental health services in schools, and in May 2023, CMS issued guidelines to clarify Medicaid services and billing in schools, as mandated by the 2022 Bipartisan Safer Communities Act.

This section provides information about:

• Benefit changes
• Medicaid coverage or reimbursement of school-based health services

Findings

Benefit Changes

States were asked about benefit changes implemented during FY 2023 or planned for FY 2024, excluding telehealth, pharmacy, and changes made to comply with federal requirements. Benefit changes may be planned at the direction of state legislatures and may require CMS approval.

The number of states reporting new benefits and benefit enhancements greatly outpaces the number of states reporting benefit cuts and limitations (Figure 11 and Table 4). Thirty-four states reported new or enhanced benefits in FY 2023, and 34 states reported plans to add or enhance benefits in FY 2024.² One state reported benefit cuts or limitations in FY 2023 (Utah eliminated coverage of certain gender dysphoria treatments for youth),³ and one state reported cuts or limitations in FY 2024 (Texas limited the age range for dental space maintainer services).⁴  There are additional details about benefit enhancements or additions in select benefit categories below (Figure 12).

Behavioral Health Services. Mental health and/or Substance Use Disorder (SUD) services continue to be the most frequently reported category of benefit expansions. Consistent with trends in recent years, states reported expanding services across the behavioral health care continuum, including institutional, intensive, outpatient, home and community-based, peer supports, and crisis services. For SUD treatment, this includes expanded access consistent with American Society of Addiction Medicine (ASAM) levels of care. Many of these benefit expansions are targeted to specific populations, including notable expansions and programming for children and youth. States also continue to report benefits and other changes supportive of more coordinated integrated physical and behavioral health care, including collaborative care services and adoption or expansion of Certified Community Behavioral Health Clinics (CCBHCs).⁵

• At least twelve states reported expanding behavioral health and related services for children and youth,⁶ including those involved in the child welfare system. These services can prevent the need for more intensive treatment and include therapeutic foster care, respite, and parenting support services. For example, Maine’s Section 1115 “MaineCare” waiver includes a pilot program for parents with SUD involved with, or at risk of involvement with, Child Protective Services. The pilot covers Attachment Biobehavioral Catch-up (ABC), Visit Coaching, and Home-based Skills Development services to offer daily living skills development, increase caregiver knowledge of child development, improve parenting practices, strengthen parent-child attachment, increase child behavioral and biological regulation, and meet the child’s health and safety needs.
• Oklahoma (FY 2023) and Colorado (FY 2024) added safe, secure transportation for enrollees experiencing a behavioral health crisis. Connecticut added coverage for services provided in Mobile Narcotic Treatment Vehicles, which are an extension of the state’s brick-and-mortar Methadone clinics, in FY 2023.

Pregnancy and Postpartum Services. To improve maternal and infant health outcomes and address racial/ethnic health disparities, states continue to expand and enhance pregnancy and postpartum services. (These benefit enhancements are happening alongside the extension of Medicaid postpartum coverage in most states.) Thirteen states reported expanding coverage of doula services.⁷ Doulas are trained professionals who provide holistic support to individuals before, during, and shortly after childbirth. States also reported adding / expanding coverage of other postpartum supports including lactation services and home visiting programs that aim to support healthy pregnancies and teach positive parenting and other skills to promote self-sufficiency and child wellbeing. A few states report implementing or expanding programs caring for pregnant and postpartum individuals experiencing opioid use disorder or other SUD.

• Six states (Colorado, Illinois, Louisiana, New Hampshire, New Jersey, and Tennessee) reported new benefits to help parents initiate or maintain breast feeding, including breast pumps, human donor milk, and certified lactation counselors and consultants in FY 2023 and FY 2024. Tennessee is proposing to cover diapers for the first two years of a child’s life effective January 2024, pending CMS approval under its TennCare 1115 waiver. Rhode Island added coverage of the evidence-based home visiting program, First Connections in FY 2023. This program serves pregnant individuals and children up to age three with nurse home visits to support breastfeeding and infant feeding, promote healthy growth and development, and connect families with health, mental health, and social supports.

Preventive Services. States are required to provide comprehensive preventive care to children through the EPSDT benefit, and states must cover certain preventive services for adults eligible under the ACA’s Medicaid expansion; however, this coverage is not required for “traditional” Medicaid adults. States reported expanding preventive benefits including screenings, services to prevent and/or manage diabetes (such as continuous glucose monitoring and diabetes self-management training), and access to vaccinations.⁸

• Four states reported coverage of services provided by pharmacists, including immunizations, patient counseling, and medication therapy management.⁹

Dental Services. While EPSDT requires states to provide comprehensive dental services for children, states are not required to provide dental benefits to adults. States may choose to provide dental coverage for adults, and historically, some of the states that do include dental benefits provide only limited coverage (e.g., limited to extractions or emergency services). Similar to findings from last year’s survey, several states reported adding comprehensive dental services for adults or other groups, including pregnant individuals or people with disabilities. Other states reported adding or expanding coverage of specific dental services and removing annual dental benefit caps for certain populations.

• North Dakota added coverage of dental case management services in FY 2024, including services to address appointment compliance barriers, care coordination, motivational interviewing techniques, and patient education.

Services Targeting Social Determinants of Health (SDOH). Outside of Medicaid home and community-based services (HCBS) programs, state Medicaid programs have more limited flexibility to address enrollee social needs (e.g., housing, food, transportation etc.). Certain options exist under Medicaid state plan authority as well as Section 1115 waiver authority to add non-clinical benefits. In 2022, CMS released a new framework for covering health-related social needs (HRSN) services under Section 1115 waivers, expanding flexibility for states to add certain short-term housing and nutrition supports as Medicaid benefits (building on CMS guidance from 2021). In this year’s survey, states reported adding home-delivered meals, housing supports, and community violence prevention services.

• In late 2022, CMS approved waivers in four states (Arkansas, Arizona, Massachusetts, and Oregon) under the new HRSN Section 1115 framework. In 2023, CMS approved additional HRSN waivers in Washington and New Jersey.

Community Health Workers (CHWs) / Culturally Competent Care. Several states reported “other” benefit changes to support access to culturally competent care, including coverage of CHWs. CHW services may include culturally appropriate health promotion and education, assistance in accessing medical and non-medical services, translation services, care coordination, patient advocacy, home visits, and social support. Research evidence indicates CHW interventions can be effective in reducing health disparities in communities of color and promoting health equity.^10,11,12

• Six states (Arizona, Kansas, Michigan, Nevada, New York, and Pennsylvania) added or expanded coverage of services provided by CHWs.
• Three states (Arizona, California,¹³ and New Mexico) are requesting Section 1115 waiver approval to add or expand coverage of traditional native healing practices, which are not currently a Medicaid covered service, for American Indian/Alaska Native (AI/AN) populations. For example, New Mexico’s Turquoise Care Section 1115 Medicaid Demonstration Waiver Renewal Request seeks to expand member-directed traditional healing benefits to all Native American individuals enrolled in managed care.¹⁴ If approved, the expansion aims to increase access to culturally appropriate services and improve enrollees’ physical, emotional, and spiritual health. It would have a cap of up to $500 annually.

Box 1: Section 1115 Medicaid Re-entry Waivers

In April 2023, CMS released guidance encouraging states to apply for a new Section 1115 demonstration opportunity to test transition-related strategies to support community re-entry and care transitions for individuals who are incarcerated. This opportunity allows states to partially waive the statutory Medicaid inmate exclusion policy, which prohibits Medicaid from paying for services provided during incarceration (except for inpatient services). This guidance follows CMS’s approval of California’s request to cover a limited package of re-entry services for certain Medicaid-eligible individuals who are incarcerated 90 days prior to release. California will begin providing case management services in April 2024 but will phase in the other pre-release services over two years. In June 2023, CMS approved the second re-entry demonstration in Washington. Washington plans to begin phasing in pre-release services in July 2025.15 As of October 2023, fourteen other states have pending re-entry waiver requests under review at CMS. Waiver requests vary in scope regarding eligibility (all Medicaid-eligible incarcerated individuals or those with certain behavioral or physical health conditions), benefits, and the pre-release coverage period.

Medicaid Coverage or Reimbursement of School-Based Health Services

Schools can be a key setting for providing services to Medicaid-covered children. Medicaid programs may reimburse schools for medically necessary services that are part of a student’s Individualized Education Plan (IEP) under the Individuals with Disabilities Education Act. Medicaid can also reimburse school-based health centers (SBHCs) for services provided to Medicaid-covered children, including routine screenings, preventive care, behavioral health care, and/or acute care services. Since 2014, CMS has permitted payment for any Medicaid services delivered to covered children, regardless of whether the school provides these services to all students without charge. Federal agencies have in the past raised concerns about poor oversight and improper Medicaid billing for school-based services; these agencies also noted that CMS’s claiming guide had not been updated since 2003. On this year’s survey, states were asked if they took action in FY 2023 or plan to take action in FY 2024 to expand Medicaid coverage or reimbursement of school-based health services. In May 2023, CMS released an updated school-based services claiming guide.

About half of responding states (24 of 46) expanded coverage of school-based care in FY 2023 or planned to do so in FY 2024—a number that may increase as states absorb new CMS guidance (Figure 13). In addition to recent or planned changes, a few states (including Arizona and Nevada) expanded access to school-based care in FY 2022 or earlier. States reported the following types of coverage expansions:

• Expanding covered populations or services. Approximately half of the 24 states reported that they expanded or plan to expand coverage of school-based services beyond just students with an IEP or services covered in an IEP. Some states reported extending coverage to students with 504 plans or other special education plans, while other states were planning broader expansions. For example, Pennsylvania is planning to offer all Medicaid-covered school-based services to all Medicaid-eligible students. While most states focused on broadening the eligible populations, some states such as Oregon, New Jersey, and Texas added new coverage in schools for services such as eye exams, dental screenings, telehealth services, or school-based behavioral health services.
• Adjustments to reimbursement rates or methods. Several states reported changes to reimbursement rates or methods. For example, Illinois reported moving to a cost settlement reimbursement methodology, Oklahoma implemented a Medicaid administrative claiming program, and New York increased reimbursement rates for school-based services. Another state, Tennessee, focused on the administrative aspects of billing by extending the definition of timely filing from 120 to 365 days for some school-based care and requiring MCOs to contract with any school district that seeks a contract for medically necessary, covered school-based services based on the MCO’s standard fee schedule.
• Efforts to increase inter-agency coordination and local school agency participation. A few states reported efforts to improve collaboration between state agencies and local school districts through outreach and training sessions or other technical assistance. For instance, California has allocated $389 million to a school-based behavioral health initiative, aiming to enhance coordination among local education agencies, MCOs, and county behavioral health entities. Similarly, Kentucky has promoted school engagement by offering technical guidance on the implementation and billing of extended school-based care, with further outreach activities scheduled for FY 2024.

Of the 24 states that reported action to expand access to school-based care, half reported implementation challenges. Challenges reported included administrative complexity, confusion about billing and insufficient systems to ensure proper billing, Medicaid claiming and HIPAA compliant record-keeping. States also mentioned provider shortages and coordinating with local school agencies as implementation hurdles.