January 11, 2023 – The Department of Health and Human Services (HHS) and Centers for Medicare & Medicaid Services (CMS) released a letter providing “Additional Guidance on Use of In Lieu of Services and Settings (ILOS) in Medicaid Managed Care”. This letter was sent to state Medicaid programs with the goal of improving their ILOS to boost the quality of Medicaid social determinant of health (SDOH) initiatives. 

This guidance addresses an innovative option that states may consider employing in Medicaid managed care programs in an effort to reduce health disparities and address unmet health-related social needs (HRSNs). These HRSNs include nutrition and housing insecurity, and they can be reduced through using a service or setting that is provided to an enrollee in lieu of a service or setting (ILOS) covered under the state plan.

ILOSs can be used by states’ managed care plans to improve access to care by expanding setting options and addressing certain Medicaid enrollees’ HRSNs. In doing so, the need for future costly state plan-covered services can be reduced. This results in improve quality of care and health outcomes, and a reduction in cost, which is a won for all parties. 

Prior to this updated guidance, there were four requirements for Medicaid plans to use ILOSs. The new guidance creates six principles to guide states’ ILOS efforts. These are: Medicaid program alignment, cost-effectiveness, medical appropriateness, protection of enrollees, oversight and monitoring, and a retrospective evaluation. 

States will have until January 1, 2024, to submit evidence for their ILOS costs to comply with the new direction. CMS and HSS have been very vocal about the need to address and improve social determinants of health and this is just one step that the agencies are taking. 

“In partnership with CMS, states have been working hard to better meet the health-related social needs of people with Medicaid coverage,” said CMS Administrator Chiquita Brooks-LaSure in the HHS press release. “Today’s announcement is the next step in CMS’ effort to use every lever available to protect and expand coverage for all eligible individuals as we work with our state partners to offer whole-person care.”

HHS Secretary Xavier Becerra added, “We are deeply committed to strengthening Medicaid for the millions of Americans covered by it. Today’s step ensures people with Medicaid receive the broader care they need to live safe and healthy lives. We call on all states to leverage these innovative options and stand ready to partner with them in providing essential health care services.”

To read the entire letter from CMS, click here.