CMS Encourages Medicaid MCOs and CHIP to Employ Section Waivers to Improve SDoH and Reduce Healthcare Costs

by  Aimee L. Wilcox, CPMA, CCS-P, CST, MA, MT
Aug 21st, 2022

In January of 2020, CMS published a State Health Official (SHO) letter, which describes, 

“...opportunities under Medicaid and CHIP to better address social determinants of health (SDOH) and to support states with designing programs, benefits, and services that can more effectively improve population health, reduce disability, and lower overall health care costs in the Medicaid and CHIP programs by addressing SDOH.”

The intent is to have individual states look to the efforts implemented within many value-based programs who are currently pursuing these goals within their programs, and have states, through their Medicaid and CHIP programs, employ similar programs centered around these guidelines of gathering, analyzing, and reporting SDOH with the goal to: 

• Effectively improve population health.
• Reduce disability.
• Lower health care costs in the Medicaid and CHIP programs.

There has been increasing evidence among these programs and other studies to indicate that better health outcomes are associated with certain SDOH outcomes such as:

• Access to nutritious food
• Convenient/efficient transportation
• Affordable housing in safe neighborhoods
• Quality education
• Strong social connections
• Opportunities for meaningful employment

Studies have shown that beneficiaries who do not have access to these "determinants of health," tend to have poorer health outcomes. With the current administration's focused intent to pursue health equity, enforcement of these goals is accomplished by incorporating specific requirements into the state, provider, and organization contracts for federal health programs, such as Medicare Advantage, Medicaid Managed Care Organizations (MCOs), and Children's Health Insurance Program (CHIP). For example, requiring each state to maintain a list of state-sponsored community programs and contract services in order to answer some of the identified beneficiary SDOH needs. By doing so, they believe they can better control how funding is used to meet the overarching administrative goal of health equity wherever possible.

In this letter, CMS also states, with various resources, authorities and guidance, including, but not limited to: 

• Medicaid Managed Care Rule Provisions: These can either encourage or require Medicaid MCOs to address SDOH among its beneficiaries.
• Section 1915 - Home and Community-Based Services (HCBS) Waivers: States can address the non-medical needs of their Medicaid beneficiaries by identifying opportunities for them to live and work in the community when they might otherwise require institutional care.
• Section 1115 - Demonstration Waivers: These provide states with the flexibility to address or incorporate interventions for the various social needs of its Medicaid program beneficiaries.

By employing and incentivizing Medicaid MCOs and CHIP, CMS believes states will have the best and most impactful reach among the communities of people most significantly impacted by poor SDOH, such as: 

• Disabled individuals
• Aging adults
• Pregnant and postpartum women and infants
• Children and youth
• Individuals with mental and/or substance use disorders
• HIV/AIDS patients
• Individuals living in rural communities
• Homeless individuals
• Racial/ethnic minority groups
• Individuals with limited proficiency in the English language

Certain SDOH factors have been shown to be drivers of significantly increased health costs. Examples of SDOH factors and how they may affect health include:

• Diabetes attributed to food insecurity
• Poor home environments leading to asthma
• Physical barriers or lack of space resulting in falls and accidents that require ambulance or emergency department treatments
• The common practice of using the Emergency Department (ED) as a primary care provider due to transportation issues or employment restrictions that prevent access during a regular work day week

By augmenting state funding for Medicaid MCOs and CHIP, these programs can incorporate access to services, supports, and home and community-based services (HCBS) that can help improve health outcomes of beneficiaries, while at the same time reducing the overall healthcare costs associated with caring for this population of low-income individuals. 

Educating healthcare providers on the value of gathering, reporting, and finding resources for SDOH factors in patient care will continue to be a point of focus for years to come. It will be interesting to see how each state incorporates new policies and incentives for identifying, documenting, and acting on the SDOH data acquired through these patient interactions, as well as how they implement new guidelines and regulations that require gathering, reporting, and servicing those SDOH issues. 

Since 2020, at least 15 states have consistently pursued the goal of using SDOH in their overall healthcare analysis and treatments and CMS has taken notice. Data and outcomes obtained from these state programs have essentially provided an outline of how the current administration  intends to pursue health equity through managed care contracts (MCOs) and Children's Health Insurance Program (CHIP), making us wonder how soon it will be before your state begins to implement these contract requirements as well. 

Editor's Note: The contents of the CMS State Health Official letter "do not have the force and effect of law and are not meant to bind the public in any way, unless specifically incorporated into a contract. This document (the letter) is intended only to provide clarity to the public regarding existing requirements under the law." The states mentioned in the letter include the following: Rhode Island, New York, California, Maine, New Jersey, Washington, Colorado, Maryland, Minnesota, Connecticut and Massachusetts.

About Aimee L. Wilcox, CPMA, CCS-P, CST, MA, MT

Aimee L. Wilcox is a medical coding, billing, and auditing consultant, author, and educator with more than 30 years of clinical and administrative experience in healthcare, coding, billing, and auditing. Medicine, including coding and billing, is a constantly changing field full of challenges and learning and she loves both. Aimee believes there are talented medical professionals who, with proper training and excellent information, can continue to practice the art of healing while feeling secure in their billing and reimbursement for such care.