In this blog series, America’s Essential Hospitals forecasts the direction the administration might take on several aspects of Medicaid policy of importance to essential hospitals, including those related to expansion, social determinants of health, and program eligibility.

Essential hospitals have made significant advances in recognizing and treating social determinants of health (SDOH) — the conditions in which people are born, grow, live, work, and age. These factors are critical elements to improving individual and community health, but public policies to finance and support SDOH initiatives often lag behind.

Key Trump administration figures have signaled an increased interest in providing support for initiatives to address SDOH, but without new federal funding, states have sought their own innovative ways to finance SDOH work through Medicaid. Some states could (and have) leveraged Section 1115 waivers to fund this work; others might instead use managed care organizations (MCOs) through existing spending authorities. But states that have not laid groundwork for either of these methods might struggle to find a path forward and fund work in SDOH.

HHS Leaders Signal Interest

Health and Human Services (HHS) Secretary Alex Azar and Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma have publicly voiced support for developing new models that fund work to treat SDOH. Both Azar and Verma see opportunities to advance this work through the Center for Medicare & Medicaid Innovation (CMMI), a department created through the Affordable Care Act with broad authority to develop, test, and evaluate innovative delivery and payment models. Administration officials also have alluded to a new program — called Model One— that would use CMMI authority to advance SDOH work. CMS has not announced an official Model One description or timeline.

CMMI previously tested other innovative approaches related to SDOH, including the accountable health communities model, launched in 2017. In this model, participating providers screen high utilizing patients for certain social determinants and use navigators who help connect those who screen positive with community resources to meet their needs. The administration also leveraged CMMI to test new approaches to treat behavioral health and substance use disorders through the Maternal Opioid Misuse model and the Integrated Care for Kids model, both launched in 2018.

Azar and Verma have emphasized the importance of state flexibility — a common theme among many administration initiatives — in developing and funding models to treat SDOH. In November 2018 remarks, Azar advocated using the country’s decentralized health care system to allow unique solutions tailored to specific communities in need. A one-size-fits-all solution is not the answer to tackling SDOH; state- or community-level solutions likely will offer more tailored and effective solutions.

The administration also recognizes that many SDOH-related services are delivered outside the health care system, creating additional obstacles. For example, local nonprofits and social service agencies might be better equipped than a physician or hospital to help an individual facing housing instability or food insecurity. Since these agencies exist on the local level, approaches will vary by community and require extensive collaboration and community partnerships to succeed.

As HHS and states continue to use Medicaid financing mechanisms to pay for SDOH work, some stakeholders caution against medicalizing existing community services and supports. The use of Medicaid funding comes with the risk of added complexity and disruptions to existing programs. CMS must work in tandem with states and community partners to provide needed funding while ensuring services are delivered appropriately.

Innovation in North Carolina

North Carolina has deployed a Section 1115 waiver that presents an opportunity to test new approaches to treating SDOH in a state-specific, community-focused model.

CMS in October 2018 approved North Carolina’s waiver to transition its Medicaid delivery system from fee-for-service to managed care. As part of its transition, the waiver includes an innovative set of Healthy Opportunities Pilots to test evidence-based interventions to address key social determinants of health, including:

  • housing instability;
  • transportation insecurity;
  • food insecurity;
  • interpersonal violence; and
  • toxic stress.

During the five-year waiver, the state and CMS will provide up to $650 million to managed care plans, lead pilot entities, and local human services organizations to pilot and rapidly evaluate programs that target health needs via social determinants. For example, Medicaid pilot funds could be used to replace the carpet or fix the air conditioner in the apartment of a child whose asthma has led to repeated emergency department visits.

This waiver represents a new approach to leveraging expenditure authorities in support of addressing SDOH. In a blog post, Verma said the waiver drives toward the goal of helping “individuals live healthier, more complete lives by addressing the whole human need.” She also emphasized the vital role of state innovation to identify best practices that can be replicated elsewhere.

CMS’ approval of North Carolina’s waiver is significant, but much work remains as the state begins the long implementation and evaluation process. North Carolina anticipates that the pilots will begin delivering services in late 2020, and the state’s successes and setbacks will offer a new view into how states can best leverage their Medicaid programs to transform care that takes SDOH into account. States will watch North Carolina closely as they determine whether this model can be replicated elsewhere.

The Role of Managed Care

As demonstrated by the North Carolina waiver, managed care likely will play a key role in improving treatment of SDOH. Some states might seek similar waivers to achieve this goal, while others use existing payment authorities and MCOs to address SDOH.

Creating an expansive Section 1115 demonstration to address SDOH is costly and difficult for states, especially following recent guidance that more narrowly defines budget neutrality and the Trump administration’s emphasis monitoring and evaluation of waivers based on their return on investment. Absent new funding or the ability to shift funds through a larger demonstration, states that operate under managed care use existing authorities to innovate in the realm of SDOH.

A 2016 final rule overhauled Medicaid managed care by removing some administrative barriers that prevented states and MCOs from leveraging this mechanism to treat SDOH. For example, states now are permitted to provide incentives to MCOs that implement models meeting certain quality benchmarks, which can include treating SDOH in innovative ways.

States also now can use “in-lieu-of” authority to offer community-based services to treat SDOH in the place of traditional office visits or other services. Some states have begun including language in their contracts that require MCOs to invest in treating SDOH. More states will likely follow this trend if it proves effective in addressing SDOH without applying for a Section 1115 waiver.

Continuing This Vital Work

SDOH disproportionately affect the populations essential hospitals serve. As such, essential hospitals have been leaders in developing innovative tools and programs to improve SDOH.

But the question remains: what will happen in states with no plans to transition to managed care? Given the urgency of treating patients facing SDOH, these states might begin testing their own payment mechanisms for nonmedical services, but it is unclear whether or how they will receive federal reimbursement for those services.

The administration’s emphasis on state flexibility means more states likely will request new authorities to address SDOH, whether through managed care or broader Section 1115 waivers. As essential hospitals target SDOH in their communities, it is crucial that the Medicaid program continues to evolve to ensure this vital work can continue.