January 22, 2021 | Policy Cheat Sheet


By Diana Crumley, JD, MPAff

On January 7, 2021, the Centers for Medicare & Medicaid Services (CMS) released a state health official letter, Opportunities in Medicaid and CHIP to Address Social Determinants of Health (SDOH). The letter is the first comprehensive federal guidance on addressing social needs, with CMS only previously issuing guidance on housing-related services in 2015.

Does the letter announce new opportunities to address SDOH?

No, the letter only describes how states may address health-related social needs under current law. However, this step is significant! The 51-page guidance discusses categories of Medicaid benefits that can be used to address health-related social needs, as well as flexibilities under managed care programs and integrated care models. The letter also features some less-publicized flexibilities and funding, and highlights eligibility best practices. Notably, the letter includes numerous state examples.

So, what can Medicaid do to address health-related social needs?

Through 1915(i) and (k) state plan amendments, 1915(c) waivers, and 1115 demonstrations, states can incorporate many services related to social needs into Medicaid programs. Services that are often covered through home- and community-based services (HCBS) programs and other more traditional benefit categories include:

  1. Home accessibility modifications, such as ramps outside a home, grab bars in showers, or doorway modifications for wheelchairs;
  2. One-time community transition costs, such as security deposits, utility activation, and essential home furnishings;
  3. Non-medical transportation, such as travel to community activities and resources that facilitate community integration;
  4. Home-delivered meals for individuals who need added assistance with nutrition due to functional limitations or challenges with shopping or meal preparation;
  5. Employment services for people who require intensive support to obtain and maintain a job in an integrated work setting;
  6. Community-integration and social supports to assist individuals as they transition into a community and develop new relationships;
  7. Rehabilitative services, such as skill-building and peer supports that enable access to housing, transportation, employment, and nutrition services;
  8. Medicaid-covered rural health clinic and federally qualified health center services, which can include screening for social needs, collecting and analyzing SDOH data, and co-locating social services;
  9. Case management and targeted case management that includes activities to help link individuals to community-based medical, social, and education services; and
  10. Health home services, which by definition include referral to community and social support services.

What types of services can be provided to children?

The letter notes that health-related social needs services “help keep children on normative developmental trajectories in education and social skills.” The letter summarizes important services for children funded by Medicaid, including medically necessary services under the Early and Periodic Screening, Diagnostic and Treatment benefit, educational and related services in individualized education plans or individualized family service plans, and Medicaid services provided in the school setting.

CMS also places a spotlight on the lesser-known CHIP Health Services Initiatives (HSIs), noting that states have used HSIs for home lead abatement, home visits and environmental modifications (e.g., high-efficiency air filters to reduce asthma triggers), emergency food services, and youth violence prevention programs.

How else might states use 1115 demonstrations?

States can use an 1115 demonstration to test alternative payment methodologies designed to address SDOH. They can also test the impact of certain health-related services on outcomes. The letter provides two examples: (1) one-time supportive housing transition services for people experiencing or at risk of homelessness; and (2) recurring services to reduce asthma triggers in the home for individuals with poor asthma control.

CMS suggests a focus on services that will improve integration, care coordination effectiveness, and health outcomes, as well as reduce unnecessary or inefficient use of health care. The letter reminds states that 1115 demonstrations should have an “independent and robust evaluation,” and be budget neutral for the Federal government.

What about flexibilities under Medicaid managed care programs?

Managed care organizations (MCOs) can help states explore and test SDOH-related interventions. Although MCO capitation rates must be based on state plan and waiver services, MCOs have the flexibility to expand care coordination strategies, design incentives for providers, and offer additional services relating to social needs. The letter spotlights:

  • Procurement language. States may include questions on SDOH-related initiatives in their managed care requests for proposals to advance health plan adoption of these practices.
  • Care coordination. States can require MCOs to employ advanced care coordination strategies, such as: standardized SDOH assessments, closed-loop referral, and partnerships with community-based organizations and community health workers. Many of these activities can be included in the numerator of the medical loss ratio (MLR) as activities that improve health care quality.
  • Quality monitoring and improvement. States may require MCOs to report SDOH-related quality measures and conduct mandatory SDOH-related performance improvement projects. For example, MCOs can use their quality assessment and performance improvement programs to identify strategies to reduce health care disparities through targeted SDOH interventions.
  • State-directed payments. States can require MCOs to use alternative or incentive payments that encourage providers to screen for socioeconomic risk factors.
  • Managed care plan incentive payments. States can design incentive payments that reward MCOs that invest in or improve SDOH in line with performance targets, as well as achieve results like improved health outcomes.
  • Actuarial tools. States can employ actuarial tools, such as profit margins and efficiency adjustments, to advance investment in SDOH strategies. Per CMS, “some states have established caps on plans’ profit margins and required that profits beyond the cap be reinvested in SDOH efforts.” (See community reinvestment requirements in Arizona, Ohio, North Carolina, and Oregon for examples.)
  • In lieu of and value-added services. MCOs can provide additional, non-covered services to Medicaid members, and report those costs in the numerator of the plan’s MLR (note, in lieu of service costs can be used to develop capitation rates, but value-added service costs cannot). As an example, CMS states that MCOs can provide supportive housing as a value-added service for people with severe mental illness to prevent a cycle of hospitalization and homelessness — although the service may not be included in the capitation rate.
  • Special waiver authority for expanded services. States can use 1915(b)(3) waivers to share savings that result from cost-effective care with beneficiaries in the form of health-related services, like environmental modifications and home-delivered meals.

What opportunities are available for Accountable Care Organizations and Patient-Centered Medical Homes?

CMS uses the term “integrated care models” to describe these initiatives and emphasizes its interest in more holistic care delivery and the flexible payment models that support them. These models can support approaches that address health-related social needs (e.g., interdisciplinary care teams and comprehensive care coordination). States can also develop value-based payment approaches that support these models, including per member per month payments and shared savings and risk models. The letter provides Rhode Island’s Accountable Entities as an example.

What about opportunities that improve state capacity to address social needs?

Medicaid agencies can do a lot of work behind the scenes to facilitate better connections with other human service programs and tap into federal matching funds. For example, states can perform the following services, matched at a 50 percent federal medical assistance percentage (FMAP):

  • Develop agreements and working relationships with state and local housing and community development agencies to help beneficiaries access housing resources;
  • Participate in and contribute to state and local housing and community development planning efforts by providing demographic, housing need, and other data for Medicaid-eligible populations; and
  • Coordinate with housing locator or listing services and develop and/or coordinate with data tracking systems to include information on the availability of affordable and accessible housing.

Medicaid data systems are eligible for even more FMAP matching — 75 and 90 percent — to integrate data that can help states identify individuals with SDOH needs and link them to medical and social services. Agencies, however, must keep data systems interoperable with other human services programs, health information exchanges, and public health departments. Medicaid programs should also tap into state and federal investments in care coordination hubs, such as Area Agencies on Aging or Aging and Disability Resource Centers.

How can states help individuals get the care and services they need?

The letter summarizes opportunities to ease enrollment complexity for Medicaid and health-related social service programs through:

  • Multi-benefit applications (e.g., applying for SNAP and Medicaid at the same time);
  • Presumptive eligibility that allows individuals to access services before they are fully enrolled;
  • Reliance on eligibility from “express lane” programs (e.g., SNAP, WIC, TANF, Head Start, and school lunch programs) to streamline and simplify Medicaid enrollment;
  • Twelve-month continuous eligibility for children; and
  • Medicaid enrollment for inmates during incarceration to ensure quicker access to services upon reentry into the community.

Could this guidance change under the Biden administration?

CMS sent this letter to state health officials at the tail end of the Trump administration, right before President Biden took office. Yet, most of these concepts will remain relevant in a Biden administration. As the Biden administration takes over, we will likely see new types of 1115 demonstrations and initiatives from the Center for Medicare & Medicaid Innovation (CMMI).