CMS Sets Parameters for Optional Medicaid Health Home Benefit for Medically Complex Children

Health Highlights

On August 1, CMS released a State Medicaid Director letter (SMD) laying out a new option for states to cover “health home” services for Medicaid-eligible children and youth with medically complex conditions. This benefit was established in Section 1945A of the Social Security Act, as added in 2019 by the Medicaid Services Investment and Accountability Act (P.L. 116-16). States may adopt this optional Medicaid benefit beginning October 1, 2022, and will receive a 15-percentage-point increase in their federal Medicaid matching rate (up to a maximum rate of 90%) for the first six months the benefit is in operation. This SMD follows a January 2020 Request for Information (RFI) and an October 2021 Informational Bulletin (CIB) discussing the coordination of care across state lines for children with medically complex conditions.

The SMD outlines federal requirements and areas of state flexibility for this new health home benefit. Among other elements, the SMD discusses the following:

  • Eligibility. The health home benefit is available to Medicaid-eligible “medically complex children,” referring to individuals under the age of 21 with one or more serious chronic diseases 1 and/or a “life-limiting illness or rare pediatric disease,” as defined in the SMD and Section 1945A.
  • Health Home Services. CMS expects states to design the optional benefit in accordance with a “whole-person” philosophy that “considers all the medical, behavioral, and social supports and services needed” by a child with medically complex conditions. The benefit must cover the following services when offered by a qualified health care practitioner, institutional provider, or health team:
    • Comprehensive care management
    • Care coordination, health promotion, and the provision of access to the full range of pediatric specialty and subspecialty medical services, including services from out-of-state providers, as medically necessary
    • Comprehensive transitional care, including appropriate follow-up, from inpatient to other settings
    • Patient and family support (including authorized representatives)
    • Referrals to community and social support services, if relevant
    • Use of health information technology to link services, as feasible and appropriate
  • Provider Standards and Payment Methodologies. The SMD identifies several requirements that providers must satisfy in order to offer health home services, in addition to identifying options for state payment methodologies such as capitation (i.e., a flat “per member per month” payment) and/or tiered payments.
  • Beneficiary Choice. Eligible beneficiaries must be given a choice about whether to enroll in a health home. Those that elect to participate have the right to choose any willing and qualified health home provider, even if they are enrolled with a managed care plan that operates a restricted provider network.
  • Monitoring and Reporting. Section 1945A requires both states and health home providers to collect and report certain data, which will ultimately feed into required reports assessing usage of the health home benefit, quality measures, and the state’s implementation of best practices regarding coordinating care from out-of-state providers (per CMS’ October 2021 Informational Bulletin, noted above).

To adopt the optional health home benefit, states will need to submit a State Plan Amendment (SPA) in accordance with forthcoming CMS guidance. CMS’ “implementation guide” will include, among other things, definitions for the federally required health home services and minimum provider standards. States may be eligible for planning grants to support the development of a SPA for this new benefit.


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1 An individual who qualifies based on chronic disease must have one or more “serious, long-term physical, mental, or developmental disability or diseases” that “cumulatively affect three or more organ systems and severely reduces cognitive or physical functioning (such as the ability to eat, drink, or breathe independently) and that also requires the use of medication, durable medical equipment, therapy, surgery, or other treatments.” Section 1945A lists examples of conditions that potentially qualify, including cerebral palsy; cystic fibrosis; HIV/AIDS; blood diseases, such as anemia or sickle cell disease; muscular dystrophy; spina bifida; epilepsy; severe autism spectrum disorder; and/or serious emotional disturbance or serious mental health illness.

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