Demystifying Federal Authorities: State Considerations for Addressing Social Needs in Medicaid

A growing body of research indicates that most of an individual’s health is driven by the underlying social and economic factors affecting their lives, including their housing, nutrition, access to transportation, education, employment, and exposure to violence. These factors are often called Health-Related Social Needs (HRSN).

States are increasingly pursuing interventions to address HRSN in their Medicaid programs to improve health outcomes for members and maximize the value of their Medicaid expenditures. The Centers for Medicare & Medicaid Services (CMS) has defined a range of options for states, which can be used in combination or staged over time, to cover HRSN services in line with their programmatic goals. These options include the following federal authorities, among others:

• 1115 demonstrations: flexible authority that allows states to test policies otherwise not permissible under federal rules
• In-lieu of services and settings (ILOS): an option under managed care to cover services or settings that are substitutes for standard Medicaid services
• 1905(a) state plan authority: the basic authority under which states administer their Medicaid programs
• 1915(c) Home and Community-Based Services (HCBS) waiver authority: flexible authority to provide individuals needing long-term care with services and supports in their home or community.

Navigating the patchwork of federal HRSN guidance can be challenging. With support from the Commonwealth Fund and Blue Shield of California Foundation, and in partnership with the National Governors Association, Manatt Health recently published an issue brief to demystify these options, outlining key considerations for states pursuing federal authority for an HRSN program.

Findings

1. Selecting HRSN Services: A gating issue for states evaluating the different HRSN authorities is often deciding which services to provide. Most food and housing supports have multiple authorization pathways, including managed care ILOS, state plan authority, and HCBS waivers. Coverage of rent, utilities, or more than 2 meals per day can only be authorized through 1115 demonstrations. Other HRSN services that have been approved by CMS include care management, transportation, employment supports, diapers for children, and services addressing interpersonal violence.
2. Defining Eligibility: Across all authorities, CMS requires states to define eligibility by both the clinical and social needs that each HRSN service will address. Clinical criteria that align with a diagnosis or disability are the most clear-cut for CMS approval. States can further refine eligibility by targeting services by age or eligibility group. Some authorities have more specific eligibility constraints, such as 1915(c) waivers that are limited to individuals who meet an institutional level of care and ILOS that are limited to managed care enrollees.
3. Scope of Coverage: A state’s chosen authority pathway can dictate the mandatory or optional nature of service provision, the delivery system(s) in which coverage is offered, and the geographic reach of services. Under state plan authority, states must generally cover services all eligible individuals across all delivery systems and geographies without a ramp-up period, while 1115 and 1915(c) authorities provide flexibility to phase in services over time by population, delivery system, and/or geography. ILOS authority is limited to managed care and cannot be mandated statewide, as services must be optional for plans to provide.
4. Financing HRSN Programs: HRSN services, like other Medicaid costs, require states to fund their share of costs. States financing HRSN services under 1115 authority may be able to use Designated State Health Program (DSHP) funding to offset state costs, but must also meet maintenance of effort and payment rate threshold requirements. Under ILOS, HRSN services are financed through managed care capitation rates, like medical services. 1115 and ILOS authority both come with CMS-directed caps on federal HRSN spending.
5. Investing in Infrastructure: 1115 demonstrations allow for investments in community-based organizations that provide HRSN services, in training and technical assistance to plans and providers, and in systems development (e.g., data exchange platforms). More limited options to support HRSN-related capacity building outside of 1115 authority include certain managed care strategies, such as community reinvestment programs, and regular Medicaid administrative matching.
6. Timing Program Launch: 1115 authority can sometimes require years of lead time prior to implementation, accounting for application development, submission processes, and federal negotiations. Alternatively, state plan amendments and 1915(c) waivers are quicker for states to submit and for CMS to approve. ILOS approval is contingent on CMS’s standard review of state managed care contracts, for which timing can vary.

States now have many options to integrate HRSN initiatives into their Medicaid programs and can stage, combine, and/or amend their HRSN authorities over time. Although selecting the right authority or authorities requires nuance, and no single authority may meet every state goal, careful consideration of the various authority options can help states address their highest priorities (and constraints) in operating an HRSN program.

For a more comprehensive analysis of state considerations for addressing HRSN in Medicaid, see the full issue brief.