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How States Are Utilizing Managed Care to Address Social Determinants of Health

Through Section 1115 waivers, ILOS, and managed care RFPs, states are using managed care to address SDoH


April 13, 2023 – Managed care presents a unique opportunity to address health-related social needs and social determinants of health (SDoH). Through managed care models, states can get creative and can tap into resources that are often underutilized or unavailable to traditional fee-for-service Medicaid programs in an effort to improve services and supports for members.

As the shift to managed care continues and states are rolling out RFPs for managed care contracts, the time is now to shine the light on SDoH. Centers for Medicare and Medicaid Services (CMS) even recently released guidance encouraging states to take a more proactive approach to addressing SDoH. It is essential that addressing social determinants of health is included in managed care plans moving forward if we are truly trying to improve health outcomes. 

But how can states do that? In this blog we are going to take a closer look at how states can address SDoH and health-related social needs through managed care. 

Section 1115 Waivers to Address Health Related Social Needs

Section 1115 waivers are one way that states can address SDoH through managed care. Under Section 1115, states can request federal matching funds to test SDoH-related services and supports that promote Medicaid program objectives. This allows states to try out wide-ranging changes in Medicaid eligibility, benefits, cost-sharing, payment, and delivery systems, provided they are deemed as furthering Medicaid program objectives. 

Through Section 1115, states can test services like one-time community transition services for those experiencing or at-risk for homelessness. They can also offer things like cleaning and chore services for those with poor asthma control. The great thing about Section 1115, is that is can be used to test services for a specific population or a certain geographic area so it provides some flexibility.

Some states, like North Carolina and Washington have successfully used Section 1115 waivers to address social determinants of health through innovative pilot programs. The North Carolina, Healthy Opportunities Pilots covers non-medical services addressing social needs tied to health outcomes, such as housing instability, transportation insecurity and food insecurity. Eligible beneficiaries must be enrolled in a managed care plan and must have at least one physical or behavioral health risk factor and at least one social risk factor. The program started in 2018 and CMS authorized $650 million in Medicaid funding for the pilot over five years. Pilot services include evidence-based enhanced case management and other services targeting housing, food, transportation, and interpersonal safety. Services launched in the spring and summer of 2022 and as of the most recent report, almost 40,000 services have been delivered

Washington’s Section 1115 Medicaid Transformation Project utilizes Accountable Communities of Health (ACHs) to transform the Medicaid delivery system. CMS authorized up to $994 million in federal financial participation over five years for performance-based incentive payments supporting delivery system transformation efforts. ACHs coordinate regional projects to improve care for Medicaid enrollees, emphasizing capacity building, care delivery redesign, prevention, health promotion, and preparing providers for value-based payments. The state is currently seeking a five-year renewal that would see the program through 2027.

These programs are great examples of how Section 1115 waivers can address social determinants of health including housing instability, food insecurity, transportation insecurity, as well as coordinating care among various stakeholders and sharing data among community-based organizations. SDoH have a huge impact on health so it is essential that they are addressed accordingly.

In Lieu of Services to Offer Non-Medical Supports

In January 2023, CMS issued guidance that opens up opportunities for states to allow Medicaid managed care plans to offer services that address non-medical needs as alternatives to standard Medicaid benefits. Known as “in lieu of” services (ILOS), this allows MCOs to provide alternative services that replace standard Medicaid benefits if the substitute service is medically appropriate and cost-effective. 

For instance, a state might offer medically appropriate, cost-effective meals for people with severe, chronic health conditions made worse by poor diet or not having access to nutritious food choices. OR they can offer home and community-based services (HCBS) for beneficiaries to transition or reside safely in their home or community. 

It is important to note that these alternative services must:

  • Advance the objectives of the Medicaid program
  • Be cost-effective
  • Be medically appropriate
  • Must be provided in a manner that preserves enrollee rights and protections
  • Must be subject to appropriate monitoring and oversight
  • Must be subject to retrospective evaluation, when applicable

The new guidance also sets financial boundaries and clarifies that the managed care payments spent on ILOS should be less than 5%. Overall, the goal of the ILOS initiative is to improve population health, reduce health inequities, and lower overall health care costs in Medicaid. These are the primary building blocks of value-based payments, from which managed care is derived. 

This CMS guidance comes on the heels of California’s successful proposal to use ILOS, known as Community Supports, to deliver a range of health-related services through managed care. What’s interesting is that this concept builds on California’s Whole Person Care pilots that were derived from a Section 1115 waiver. This shows the natural progression and intended purpose of the waivers, to test innovative methods to healthcare delivery that can be rolled out state wide. Through Community Supports, MCOs provide support services to high-need beneficiaries that include housing transition services, home modifications, medically tailored meals, asthma remediation, and sobering centers, among others.

Utilizing Managed Care Contracts to Require SDoH Initiatives

Another avenue for states to address SDoH and health-related social needs is through their managed care contracts. States can require MCOs to provide specific services or interventions aimed at addressing SDoH as part of their contractual obligations. This can include requirements for MCOs to coordinate with community-based organizations, incorporate SDoH screenings into their assessments, and more.

In a 2019 KFF survey of Medicaid directors, over 75% of the 41 MCO states reported using Medicaid MCO contracts to promote strategies to address social determinants of health. Three-quarters of MCO states reported mandating MCOs to screen enrollees for social needs, provide enrollees with referrals to social services, or collaborate with community-based organizations. Almost half of the states required MCOs to hire community health workers (CHWs) or other non-traditional health workers.

States can also take advantage of managed care quality requirements to address social determinants of health and may use incentive payments to reward plans for investments and/or improvements in SDOH. For instance, states can offer incentive payments to plans that enhance health outcomes and reduce costs. States can also require plans exceeding a specified profit margin threshold to reinvest excess profits into SDOH activities. 

Another innovative approach is to seek CMS approval to require MCOs to implement value-based purchasing models for provider reimbursement or participate in Medicaid-specific delivery system reform or performance improvement initiatives. For example, a state may require managed care plans to implement alternative payment models (APMs) or incentive payments to encourage providers to screen for socioeconomic risk factors. 

Some examples states doing this includes Arizona and Kansas. Arizona requires Complete Care plans to contribute 6% of their annual profits to community reinvestment. Kansas also has a unique approach and requires MCOs to implement value-based purchasing models designed to enhance service coordination that includes assisting members with accessing affordable housing, food security, and other social determinants of health measures that will improve health outcomes and increase independence. Both of these initiatives are unique and show how states can get creative when using managed care to address social determinants of health and improve overall health and independence of their members.

Advocates Perspective

As you can see, states have many tools at their disposal to utilize managed care as a means to address social determinants of health. By leveraging the flexibility and innovation of managed care models, states can promote health equity, improve community well-being, and ensure that all individuals have the opportunity to lead healthy lives. As more states are rolling out Medicaid Managed Care plans, the time is now to ensure that SDoH initiatives and requirements are included. This is the best way to ensure that non-medical needs are met and that individuals can obtain their best health outcomes.


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About the Author

Fady Sahhar brings over 30 years of senior management experience working with major multinational companies including Sara Lee, Mobil Oil, Tenneco Packaging, Pactiv, Progressive Insurance, Transitions Optical, PPG Industries and Essilor (France).

His corporate responsibilities included new product development, strategic planning, marketing management, and global sales. He has developed a number of global communications networks, launched products in over 45 countries, and managed a number of branded patented products.

mandy sahhar

About the Co-Author

Mandy Sahhar provides experience in digital marketing, event management, and business development. Her background has allowed her to get in on the ground floor of marketing efforts including website design, content marketing, and trade show planning. Through her modern approach, she focuses on bringing businesses into the new digital age of marketing through unique approaches and focused content creation. With a passion for communications, she can bring a fresh perspective to an ever-changing industry. Mandy has an MBA with a marketing concentration from Canisius College.