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Health Homes for the Chronically Ill: An Opportunity for States

By Sharon Silow-Carroll and Diana Rodin

As states look for ways to improve health care for people with chronic conditions in order to enhance outcomes and contain long-term costs, the Patient Protection and Affordable Care Act (ACA) offers an important opportunity. Section 2703 of the ACA provides enhanced federal funding for two years for "health homes" serving Medicaid beneficiaries with chronic conditions. This issue of States in Action defines health homes, discusses the ACA provision and the latest federal guidance to states, and presents opportunities and options for states to pursue. In our Ask the Expert column, senior officials at the Centers for Medicare and Medicaid Services (CMS) offer advice for states considering or planning to apply for health home funding. The Snapshots describe initiatives in Missouri and Minnesota to improve care for those with chronic conditions.

What Is a Health Home?
The Affordable Care Act does not define a health home but describes six core health home services provided by a designated provider or health team to individuals with chronic conditions:

  • comprehensive care management;
  • care coordination and health promotion;
  • comprehensive transitional care from inpatient to other settings, including appropriate follow-up;
  • support for patients, their families, and their authorized representatives;
  • referral to community and social support services, when needed; and
  • the use of health information technology to link services, as feasible and appropriate.

According to CMS, the goal of health homes is "to expand the traditional medical home models to build linkages to other community and social supports, and to enhance coordination of medical and behavioral health care, in keeping with the needs of persons with multiple chronic illnesses. Consistent with the intent of the statute, we expect states that provide this optional benefit, and the health home providers with which the state collaborates, to operate under a "whole-person" philosophy—caring not just for an individual's physical condition, but providing linkages to long-term community care services and supports, social services, and family services."[1]

The State Option to Provide Health Homes for Enrollees with Chronic Conditions, Section 2703 of the ACA, establishes that beginning in January 2011, states can use a State Plan Amendment to obtain, if approved by CMS, 90 percent federal Medicaid matching funds for eight consecutive quarters to reimburse the health home services delineated above. This offers states a strong financial incentive to expand or modify their medical home programs, or to develop a new approach to managing care for an expensive and challenging Medicaid population.

Under Section 2703, states can offer health home services to eligible Medicaid beneficiaries with chronic conditions who select a designated health home provider. The legislation defines chronic conditions to include a mental health condition, a substance use disorder, asthma, diabetes, heart disease, and being overweight (as evidenced by a body mass index over 25). States may elect to include other chronic conditions such as HIV/AIDS, subject to CMS approval. A state's designated health home population must include individuals who have at least two of these chronic conditions, one chronic condition and be at risk for another, or one serious and persistent mental health condition.

Even before CMS issued guidance, the health home initiative attracted great interest across states, with the majority of state Medicaid directors indicating on a nation-wide survey that they would likely establish health homes under this new authority. At least 39 states have already implemented or planned medical homes for their Medicaid or Children's Health Insurance Program (CHIP) populations.

Flexibility for States
Through a November 16, 2010, letter to state Medicaid directors and health officials and a December 6, 2010, conference call with representatives from nearly all state Medicaid programs and some other state entities, CMS has invited questions and offered guidance beyond the original language in the ACA statute. The ACA gives states considerable flexibility in designing and implementing health homes. CMS officials emphasize their interest in supporting and promoting variation across states, testing different approaches, and learning through evaluation what does and does not work. Only then will CMS issue specific health home regulations, though they plan to continue to work closely with states, provide technical assistance, and issue additional guidance throughout the process.

As a result of this flexibility, states are faced with options in choosing the key features of health homes, such as the target populations, providers, and payment methodology.

Target Population
A state may amend its plan to provide health home services to Medicaid beneficiaries with any of the defined chronic conditions, or it may target individuals with particular chronic conditions or specific combinations that meet the minimum criteria described above. For example, states may target a population based on a minimum number of chronic conditions or on the severity of chronic/mental health conditions. Although states may target by condition, they do not have the flexibility to limit services by eligibility category, and therefore must include those who are eligible for both Medicare and Medicaid as well as those eligible for home- and community-based services waivers. However, states could propose different health home delivery systems for different eligibility categories, subject to CMS approval.

When asked whether states may exclude or include health home participants based on setting (e.g., nursing home residents), CMS responded that they need to consult with counsel, though the program is envisioned, according to one official, for people in the community who may benefit from an array of community-based services.

Studies of disease management programs, targeted case management, and community mental health case management indicate that different populations are affected differently by these interventions, evidenced by a range of changes in utilization of health care services and returns on investment.[2] To select a health home population, states should conduct an analysis of their Medicaid beneficiaries and model their data to project the likely effect of comprehensive care coordination on medical spending for different populations that meet the Section 2703 chronic care criteria.

Health Home Provider
The health home's main function is to coordinate—not provide—the array of medical and behavioral health services needed to treat the "whole person." The health home is not required to have its own network of providers; most services will come from typical community-based Medicaid providers. However, state plan amendments are expected to describe the infrastructure in place to provide timely, comprehensive, high-quality health home services. Figure 1 describes three distinct types of provider arrangements that may deliver health home services under Section 2703.

Figure 1. Health Home Provider Arrangements: Three Options

1. A designated provider – may be physicians, clinical practices or clinical group practices, rural health clinics, community health centers, community mental health centers, home health agencies, another entity or provider (including pediatricians, gynecologists, and obstetricians, as well as other agencies that offer behavioral health services), or other provider deemed appropriate.

2. A team of health care professionals that links to a designated provider – such as physicians and other professionals that may include a nurse care coordinator, nutritionist, social worker, behavioral health professional, or other professionals. The team could operate in a variety of ways, including on its own, virtually, or based at a hospital, community health center, community mental health center, rural clinic, clinical practice or clinical group practice, academic health center, or any entity deemed appropriate.

3. An interdisciplinary, inter-professional health team – must include: medical specialists, nurses, pharmacists, nutritionists, dieticians, social workers, behavioral health providers (including mental health providers as well as substance use disorder prevention and treatment providers), chiropractors, licensed complementary and alternative medicine practitioners, and physicians' assistants.

Source: Affordable Care Act, Section 2703 and CMS Health Home Letter to States, November 16, 2010, pp 7 – 8. 

In selecting the optimal health home provider arrangement(s), states should consider their target population. To the extent possible, the designated provider type should include entities that are local, accessible, and familiar to the target population. For example, Missouri implemented an integrated mental/medical care coordination program for individuals with severe mental illness based in community mental health centers, where case managers already have frequent, face-to-face communication and personal relationships with a significant portion of this population (see the Missouri Snapshot).

Services Provided
There has been some confusion among states about which services are eligible for the 90 percent federal match. CMS clarified that the enhanced payment applies to the six health home services listed above (including care management, care coordination, and transitional care). All of the medical, behavioral health, and other services needed for addressing the "whole person" are reimbursed at each state's regular Medicaid rate. The services that must be coordinated by the health home are delineated in Figure 2. However, states have flexibility in defining health home services such as care coordination and in doing so may include additional, specific activities. CMS will gives states flexibility in defining the six core health home services delineated in the statute if they can explain how these definitions contribute to the health home model.  

Figure 2. Services Coordinated by Health Homes

  • High-quality health care services informed by evidence-based clinical practice guidelines
  • Preventive and health promotion services, including prevention of mental illness and substance use disorders
  • Mental health and substance abuse services
  • Comprehensive care management and care coordination
  • Transitional care across settings including appropriate follow-up from inpatient to other settings, such as participating in discharge planning and facilitating transfer from a pediatric to an adult system of health care
  • Chronic disease management, including self-management support to individuals and their families
  • Individual and family supports, including referral to community, social support, and recovery services
  • Long-term care supports and services

Source: CMS Health Home Letter to States, November 16, 2010, p. 9. 

Long-term care supports and services are among the array of services that health homes are tasked with coordinating. Long-term care, like behavioral health care, is not well integrated into the traditional health care system. Health homes are intended to foster greater integration, which CMS considers critical to the achievement of enhanced health outcomes. But this may take time. As states consider defining and expanding their health home services, they should carefully consider the coordination, care management, and transitional services most pertinent and helpful to the population they have selected. They should carefully describe in their state plan amendments how these services facilitate or implement the six core health home services, and how they meet the statute's intent of addressing the comprehensive needs of the targeted individuals. At the same time, states should be mindful that health homes are responsible for securing a full array of behavioral, medical, and long-term care services.

Payment Methodology and Managed Care
CMS envisions a health home model of service delivery with either a per member/per month (PMPM) or risk-capitated payment structure, but the agency will consider other payment methods or strategies. Specifically, CMS has said that it is open to states' integration of the health home with a Medicaid managed care environment, whether within capitation or through a separate funding arrangement. Within a managed care model, however, the state must be able to distinguish and quantify the health home services eligible for the 90 percent match (for more information on this issue, see the Ask the Expert column).

States interested in implementing a health home State Plan Amendment in conjunction with a capitated model are encouraged to work with CMS informally prior to developing an official submission.

Issues and Challenges
CMS acknowledges that it does not yet have answers on some issues of concern to states, but indicates that it is working to resolve them and will continue discussions with states. Following are some of these unresolved issues.

Dual Eligibles: States have expressed some concern with the health home requirement to include dual eligibles (beneficiaries of both Medicaid and Medicare) if they meet the state's other eligibility criteria. States are wary because Medicaid would fund the health home costs, but the expected savings—in reduced hospitalizations and other health care expenses—would primarily accrue to Medicare. CMS staff are holding discussions with its dual eligibility office to examine how to resolve this concern, as well as how Medicare can share data with states on the dual eligible population to facilitate effective health home services.

Build New or Adapt? States can apply for health home funding under Section 2703 for an existing medical home, disease management, or targeted case management program—even one that uses private insurance, Medicare, or multi-payer funding streams—or design a new program. Clearly, applying a 90 percent federal match to health home services that are currently drawing a smaller federal match could enable states to expand the scope and effectiveness of their programs.

States with existing medical home programs are encouraged to begin a dialogue with CMS about any necessary modifications that would bring their programs into compliance with the health home requirements. Many medical home models are providing components of the services described in the Affordable Care Act as health home services, though only the services delivered to individuals with qualifying chronic conditions would be eligible for the enhanced match. These programs may need to strengthen their linkages to long-term care services and supports as well as to primary care and behavioral health services, among other things, in order to achieve the standard of a health home.

One or Multiple Time Frames? CMS confirmed that the health home can take a phased approach, starting in one region or among a limited population, for example, and then expanding. It is not yet clear, however, whether the eight-quarter enhanced federal match period begins afresh for an expanded population that begins at a later date. CMS is consulting with counsel on this issue.

States can decide when to apply for health home funding and when to begin their eight quarters of enhanced funding. CMS does caution states against setting an early start date if there is a decent chance they will not be ready to begin at that time, because the clock will begin on the effective date of the State Plan Amendment.

Support for Planning and Submitting State Plan Amendments
States have an opportunity to apply for planning support of up to $500,000 (using Title XIX funding at the state's original matching rate, without the increase provided in the stimulus package) related to developing a State Plan Amendment. Those interested should submit a Letter of Request of up to two pages describing their health home planning activities and an estimated budget, via e-mail to [email protected].

While designing their health home approach and prior to submitting their State Plan Amendments, states are required to consult and coordinate with the Substance Abuse and Mental Health Services Administration (SAMHSA). SAMHSA will assist states in addressing issues of prevention and treatment of mental illness and substance use disorders for individuals who are low income and/or have one or more chronic illnesses, who are at greater risk of developing mental health and substance use disorders. States should send an e-mail to [email protected].

CMS invites states to send questions and comments via e-mail to [email protected], and to work with them prior to formally submitting a State Plan Amendment. States are also strongly encouraged to share drafts of their State Plan Amendments with CMS before submission to ensure their proposals meet ACA objectives and all applicable federal and statutory requirements.

In developing their health home model, states should work closely with their stakeholder and provider communities, and draw upon other states' experience with medical homes, in developing standards, payment models, and other features. Medicaid departments should invite their state's departments of mental health and long-term care services to participate in the planning process, as well as associations of federally qualified health centers and community mental health centers. Missouri's experience demonstrates the importance of building relationships across state departments and among other key stakeholders (see Snapshot).

Finally, states preparing a State Plan Amendment should use the CMS template, using a Web-based submission process, with instructions and technical assistance available.

Major Opportunity for States
The health home ACA provision offers critical financial support to states to implement a health care delivery model that has shown much promise in early pilots and programs. It can bring significant relief to the 39 states already implementing or planning some form of medical/health home in their Medicaid programs, and may provide incentive for other states to test the model as well.

Though states are required to contribute a 10 percent share toward health home services for the first two years, and a larger portion thereafter, health homes that facilitate, coordinate, and integrate medical care, behavioral health care, long-term care, and community-based social services and supports for those with chronic conditions could yield better health outcomes and produce savings in the long run. Further, the private insurance market often learns from Medicaid's experiences. A positive evaluation could help expand the model to the broader health care system.


For more information:
CMS letter of guidance to states, November 16, 2010;

CMS health home mailbox: submit questions or comments regarding CMS guidelines to [email protected] or contact Barbara Edwards, director of the Disabled and Elderly Health Programs Group, at 410-786-0325. 

SAMSHA technical assistance: For consultation send an e-mail to [email protected].

Web-based State Plan Amendment submission process (the application is available at, States can obtain log-in information and instructions by contacting Siani Kayani via e-mail at [email protected] or 410-786-6810.

National Academy for State Health Policy, Webinar resources: Health Homes for Medicaid Enrollees with Chronic Conditions: A Conversation with CMS and States Regarding the ACA State Plan Option,


[1]  Centers for Medicare & Medicaid Services, Letter to State Medicaid Director and State Health Official, SMDL#10-024, ACA#12, November 16, 2010.
[2] See, for example, R. Z. Goetzel, R. J. Ozminkowski, V. G. Villagra et al., "Return on Investment in Disease Management: A Review," Health Care Financing Review, Summer 2005 26(4) ; R. J. Ozminkowski, R. L. Dunn, R. Z. Goetzel et al., "A Return on Investment Evaluation of the Citibank, N.A., Health Management Program," American Journal of Health Promotion, Sept./Oct. 1999 14(1):31–43. 

The authors would like to thank colleagues Alicia Smith and Eliot Fishman of Health Management Associates for their expert advice and assistance on this issue.

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