Future of Health-Related Social Needs Programs ‘in Doubt’ as Funding Ends

CMS earlier this month revealed it will not approve or extend federal funding for certain state Medicaid health programs, saying the programs “distract from the core mission of Medicaid.” One expert tells AIS Health, a division of MMIT, that ending this funding could result in “serious setbacks” to addressing social determinants of health (SDOH) needs. At issue are designated state health programs (DSHPs) and designated state investment programs (DSIPs). Through Medicaid Section 1115 waivers, states can receive federal matching funds for DSHPs such as housing and nutritional support for Medicaid members. The matching funds free up state dollars to invest in other Medicaid programs and innovations. DSHPs began in 2005 under then-president George W. Bush and continued through 2017, when the first Trump administration ended the programs. The Joe Biden administration restarted the programs in 2022. Currently, eight states — Arizona, California, Hawaii, Massachusetts, New York, North Carolina, Oregon and Washington — have such waivers. But in its announcement, CMS called the programs an “overly creative funding mechanism to skirt state budget responsibilities.” Because the programs are unrelated to the “core mission” of Medicaid, they are “essentially a tap on the federal Treasury for programs that states have determined are priorities outside of the federal commitment to the Medicaid program,” the agency said. For instance, CMS noted that spending on those programs grew from $886 million in 2019 to nearly $2.7 billion in 2025. CMS named these examples: $241 million for a program in New York that provides housekeeping and other nonmedical in-home services; $20 million for high-speed internet in North Carolina for rural health care providers; and $11 million for a labor union in New York to reduce health insurance costs for some child care providers. While CMS plans to continue working with states on 1115 waivers, “those demonstrations should be focused on improving health outcomes for the most vulnerable dependent on Medicaid,” the agency said. The end of DSHP funding is a blow to efforts to address SDOH needs, one expert observes. “This is a significant setback to the effort to address health-related social needs in Medicaid,” says Katherine Hempstead, senior policy adviser with the Robert Wood Johnson Foundation. “It will be very difficult for states to make up lost federal funds, especially considering headwinds from potential Medicaid cuts. The future of these programs is very much in doubt.” Some States May Not See Immediate Impact The end of DSHP funding was “not entirely surprising” given the previous Trump administration ended it in 2017, says Jay Ludlam, deputy director for North Carolina Medicaid. One of North Carolina’s largest 1115 waiver initiatives is the Healthy Opportunities Pilot, which is running in 33 counties in the state and is focused on “buying health” by addressing underlying social needs in the four domains of housing, food, transportation, and the consequences and impact of personal violence, Ludlam tells AIS Health. Local communities in the 33 counties develop solutions to improve Medicaid enrollees’ health through addressing the four domains. Ludlam says the pilot saves almost $1,000 per Medicaid enrollee per year, with nearly 31,000 beneficiaries enrolled. It also led to a decrease in emergency department utilization and shortened inpatient days after surgery. In late 2024, CMS approved North Carolina’s application to extend the pilot statewide. The end of DSHP funding should not affect the Healthy Opportunities Pilot because it was renewed and is “grandfathered in,” Ludlam says. But future programs might be difficult to bring to life. “Anytime you remove the flexibility from states to be able to manage their program and the way that the program is financed, [that] has a real risk of affecting the sustainability of that program and the ability to either stand it up or run it in the way that it would be optimal or most efficient,” Ludlam says. “We take guidance from the North Carolina General Assembly, and unfortunately, if they come up with a really good, innovative idea that would have benefited from DSHP, that, of course, would likely not be approved under the Trump administration. But currently, there's no specific project or program that's at risk because of the changes at the federal level.” In 2022, Oregon’s 1115 waiver was approved for demonstration programs such as continuously enrolling children up to age 6 in Medicaid without families having to renew coverage. Those ages 6 and older can keep coverage for two years. The state also expanded coverage for social determinants of health needs, such as food assistance, housing support and “other interventions that are medically appropriate for individuals who are experiencing certain life transitions,” HHS said at the time. Oregon also invested in climate-related supports, such as air conditioning, air filters and quick replacement of medical equipment and prescription refills for those who have been displaced by wildfires or other emergencies. The waiver received $2 billion from the Oregon DSHP, some of which went to Medicaid managed care organizations such as PacificSource to handle the benefits. PacificSource, which manages Medicaid for nearly one-quarter of Oregon’s beneficiaries, said in 2022 that it will use the funds to invest in climate-related supports and other aspects of the 1115 waiver programs. PacificSource referred AIS Health to the Oregon Health Authority when asked for comment about the future of the state’s DSHP, while Blue Cross Blue Shield of North Carolina referred AIS Health to the North Carolina Department of Health and Human Services. The end of DSHP funding does not affect Oregon’s current 1115 waiver, which runs until Sept. 30, 2027, says Emma Sandoe, Medicaid director with the Oregon Health Authority. “The announcement does not have an immediate impact on Oregon Health Plan benefits or members.” The benefits under Oregon’s waiver help Medicaid members with complex conditions stay safe and healthy in their current housing, Sandoe explains. People who have received those benefits, such as rent assistance, air conditioning or air filters, have “expressed relief,” she adds. Oregon Health Authority won’t know which programs will continue until it has negotiated and received final approval from CMS. Hempstead says the end of DSHP funding is “consistent with a narrowing of the framework for the Medicaid program — who it is supposed to serve and what services it is supposed to provide. It remains to see in what other ways this will manifest itself, and what kinds of innovation in Medicaid will be encouraged.”