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States’ Influences on Medicaid Investments to Address Patients’ Social Needs

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Given evidence that social factors influence health outcomes, the Center for Medicare and Medicaid Innovation will be testing approaches for connecting Medicare and Medicaid beneficiaries to community-based social services. For a Commonwealth Fund–supported study, researchers interviewed leaders at Medicaid managed care organizations (MCOs) that have piloted similar interventions to help their members obtain adequate housing, stable employment, and other needed resources.

What the Study Found

Senior leaders at 17 Medicaid MCOs shared their views on how state regulations and policies can hamper investment in programs designed to address health-related social needs. Because social services are not typically considered a covered medical benefit under Medicaid, MCOs wishing to provide these services must either secure outside funding or pay for them out of their administrative budgets—which cuts into profits.

In fact, MCOs may see a decline in Medicaid revenues if they successfully reduce medical spending and improve member health through needed social services. That’s because state agencies base a Medicaid MCO’s rates primarily on submitted medical claims. If an MCO is submitting fewer or lower medical claims because members are healthier, its rates decline.

Medicaid MCO leaders cited philanthropic grants as a key to funding social services. Waivers from the Centers for Medicare and Medicaid Services also have been valuable. Under these waivers, state Medicaid agencies are able to reimburse MCOs for nonmedical services without jeopardizing federal matching funds.


To encourage the use of social service programs that improve health and lower total costs, Medicaid MCO leaders recommend that state agencies: 1) make Medicaid payment more flexible to allow for spending on social services; 2) involve the MCOs in discussions around state policy changes; and 3) encourage the evaluation of different approaches to providing social services and the sharing of data and best practices.

Publication Details



Mary Mahon, Former Vice President, Public Information, The Commonwealth Fund

[email protected]


L. Gottlieb, A. Quiñones-Rivera, R. Manchanda, et al., "States' Influences on Medicaid Investments to Address Patients' Social Needs," American Journal of Preventive Medicine, published online Sept. 19, 2016.