Alliance Alert: The federal government is intending to stop funding for New York’s groundbreaking 1115 Waiver program that connects Medicaid members with unmet health-related social needs to housing, nutrition, transportation, and care management services. This would amount to a huge loss for those members and to the commitment to recognize the essential impact that those needs have on promoting their health and quality of life in cost effective ways. See below for articles on this action relating to both NYS and the nation and learn more about New York’s waiver at the Alliance’s Waiver Community Connection page.
Next week’s Alliance Albany Executive Seminar will feature two presentations of note here, Navigating Unprecedented Federal Policy Challenges featuring some of the nation’s most prominent provider, rights and recovery advocates and Transforming Medicaid: Navigating the 1115 Waiver and Strengthening Community Connectionsthat will include both DOH and OMH officials who have been working on the Waiver.
The program is entitled Urgent Actions, Bold Solutions: Leadership in Unprecedented Times and will be held next Thursday and Friday (April 24-25) at the Albany Marriott
Come join us and register for the conference here and for the Marriott Hotel here.
State Could Lose Billions in Future Medicaid Dollars Amid Federal Policy Change
By Amanda D’Ambrosio Crain’s Health Pulse April 15, 2025
The federal government is planning to stop funding Medicaid programs that cover non-medical needs such as housing, transportation or food, putting billions of future dollars for New York’s Medicaid pilot programs in jeopardy.
The U.S. Centers for Medicare and Medicaid Services sent letters to state Medicaid directors on Thursday saying that it would no longer match funding for certain state health programs that request to spend Medicaid dollars on needs outside of the program’s original scope. Such programs, which are funded through the 1115 waiver mechanism, have sparked “renewed concerns” from CMS about whether they are an appropriate use of federal dollars, Drew Snyder, deputy administrator and director at the agency, wrote in the letter.
The announcement raises concerns for New York, which is in the middle of rolling out a three-year, $7.5 billion Medicaid pilot program that allows community organizations such as food banks or housing programs to get reimbursed through Medicaid for non-medical purposes. The program, which relies on $4 billion in federal matching funds over the next few years, was designed to reimburse needs like housing and food to address health inequities and ultimately help the state reduce its medical costs.
Though the federal government has not rescinded any funding for the Medicaid pilot program, future support for state initiatives to expand Medicaid is now in jeopardy. States have designed waiver programs under the assumption that the federal government would continue to invest in the health care workforce and social needs through future requests, said Adam Herbst, partner at the law firm Sheppard Mullin and former deputy commissioner at the Department of Health.
“I think there’s a lot of question marks now,” Herbst said, adding that the federal policy shift raises questions about the long-term sustainability of such efforts and how states will adapt going forward.
Danielle De Souza, a spokeswoman for the Health Department, confirmed that the agency received the letter from the federal government outlining a “prospective policy change that will affect future federal 1115 waiver approvals.”
“The state Health Department remains committed to using its current federally approved 1115 waiver authority to improve health outcomes for eligible New Yorkers, while working to assess the impact this change may have on future 1115 waiver renewals,” De Souza said.
States’ use of Medicaid dollars for social needs has been on President Donald Trump’s radar since his first term. In 2017, the administration phased out funding for some state Medicaid pilot programs, noting that such “demonstrations have not made a compelling case” that federal funding is necessary to continue and that they were inconsistent with state-federal relationships defined under Medicaid statute, according to CMS.
The Biden administration reinstated such funding in 2021, albeit with some guardrails. The administration limited the size and scope of 1115 waiver demonstrations and required states to contribute more funding.
Still, nationwide spending on the programs has grown. The federal government contributed $886 million to state Medicaid programs in 2019, but by 2025 that number jumped to $2.5 billion, according to CMS.
New York has several programs funded through 1115 waivers, including a workforce training program and diversity in medicine programs. The federal government’s move to cease funding could put the onus on the state to fill in the gaps.
“Clearly, the state is in a position to continue these programs if it wants to,” said Michael Kinnucan, senior health policy advisor at the think tank Fiscal Policy Institute, pointing to continued reimbursement rate increases for hospitals in the state budget. “But is it going to want to?”
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CMS to End Medicaid Health, Social Needs Programs
By Bridget Early Modern Healthcare April 11, 2025
So-called designated state health programs and designated state investment programs currently in operation under 1115 waivers may continue, but CMS will not extend them nor approve new applications, Center for Medicaid Director Drew Snyder wrote in a letter to state officials.
States have employed this funding for a variety of non-medical purposes, such as housing, nutrition and transportation assistance, that aren’t covered under Medicaid but may promote health and save money, said Larry Levitt, executive vice president for health policy at the research institution KFF.
Since 2005, CMS has provided money to offset state costs for designated state health programs and designated state investment programs that are funded with state revenues, Snyder wrote.
“These demonstrations can effectively function as a technique to reduce states’ overall funding obligation by allowing federal funds to supplant existing state funds for services not otherwise covered by Medicaid,” Snyder wrote. “Further, unlike traditional Medicaid matching funds, which are generally tied to claims for specific services provided to Medicaid beneficiaries, federal matching funds provided to support [designated state health programs and designated state investment programs] have not necessarily been tied directly to services provided to Medicaid beneficiaries.”
In a news release, CMS cites a handful of programs it maintains don’t uphold Medicaid’s “core mission,” including a North Carolina initiative that supports high-speed internet access for rural providers and a New York program to promote diversity in medicine
Federal spending on designated state health programs and designated state investment programs tripled between 2019 and 2025 to $2.7 billion, according to CMS. Technically, programs are funded entirely with state dollars but CMS gives states additional Medicaid funding based on the calculation that the initiatives reduce healthcare costs.
Although CMS is not withdrawing approvals for the underlying 1115 waivers, the agency is again signaling a pullback from efforts to address social determinants of health, health equity and myriad other priorities. CMS, like the rest of the Health and Human Services Department and the entire federal government, is also subject to President Donald Trump’s “Department of Government Efficiency” drive to eliminate tens of thousands of jobs, scale back regulation and enforcement, and reduce spending.
CMS limited designated state health programs and designated state investment programs during Trump’s first term in 2017, as well. After President Joe Biden took office, his administration, which was committed to social determinants of health interventions, restored funding but tightened the standards for approvals.
“Despite the safeguards implemented in the post-2022 approvals of [designated state health programs], CMS has renewed concerns about the same issues originally identified in 2017,” Synder wrote.
If states want to continue these programs, they will have to come up with the money themselves. That’s easier said than done, said Brock Slabach, chief operating officer of the National Rural Health Association. “If a state gets notice that they’re not going to be able to provide these kinds of services any longer that are listed in these [designated state health programs], they’re going to have to start undoing programs that are in place,” he said.