Inside California’s New SUD Medicaid Program and Why Other States Are Watching

Deaths from substance use disorders (SUDs) continue to reach unfortunate milestones, and fewer places have been hit as hard as California. Now, more help is on the way to the nation’s most populous state, as America’s largest payor of behavioral health services has given the green light for providers to receive more addiction treatment reimbursements.

The Centers for Medicare and Medicaid Services (CMS) has approved California’s plan to make changes to the way it pays for SUD treatment for those with Medi-Cal. Medi-Cal is California’s Medicaid program, and with just under 14 million members, it provides insurance to roughly a third of the state’s residents.

The Medi-Cal changes began taking effect on the first day of 2022 and consist primarily of waivers to extend demonstration projects – courtesy of Section 1115 of the Social Security Act – along with modifications to services delivered across the health care spectrum.

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Currently there are 62 approved Section 1115 waivers across 46 states, as well as 33 waivers across 29 states that are pending.

“We’re in particular watching the Medi-Cal program, as we see many states pilot initiatives through 1115 demonstration waivers,” Elizabeth Hinton, an associate director at the Kaiser Family Foundation (KFF), told Behavioral Health Business. “This will be really [interesting] to watch them scale it and bring it statewide.”

The changes to Medi-Cal’s reimbursements were brought about through the work of California Advancing and Innovating Medi-Cal (CalAIM), a state effort that seeks to revamp health care delivery across a variety of areas including behavioral health.

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Among the changes, California’s 58 counties will now have the option to reimburse providers for services such as peer support specialists and contingency management. The changes have also led to the creation of a so-called “No Wrong Door” policy – the guidance of which is currently being worked out by the state’s department of health care services – which would reimburse providers for work performed during the patient assessment process, as well as covering for co-occurring disorders.

Further Medi-Cal implementations to SUD treatment reimbursement include requiring providers to have mechanisms in place to dispense medication-assisted treatment (MAT).

Additionally, SUD treatment services – which had previously been paid for through a demonstration project – are now an official part of Medi-Cal’s managed care system.

Indeed, in many ways, California is a policy trendsetter for the rest of the nation. In 2015, it became the first state to receive a Medicaid waiver for a demonstration project that expanded addiction treatment services.

Now, seven years later, the state is getting ahead of the SUD treatment pack by providing Medi-Cal reimbursement for contingency management and peer support.

Medi-Cal changes and contingency management, peer support

Contingency management is based on the idea of providing incentives and rewards to individuals who demonstrate positive behaviors. Various academic literature has touted the benefits of contingency management when applied to SUD treatment, which can involve awarding non-cash prizes to individuals for reaching certain benchmarks in their treatment journey.

“California is the first state in the country to receive approval for contingency management to be covered as a Medicaid benefit,” a representative for the California Department of Health Care Services (DHCS), which was behind the CalAIM effort, told BHB in an email. “It is possible that other states may follow California’s model to cover contingency management under Medicaid.”

The new Medi-Cal reimbursement changes also extend to peer support specialists, who are professionals that have gone through previous battles with conditions like SUDs, and who provide support services to patients during the course of their care journey.

Previously, peer support services were not reimbursed under Medi-Cal. Like contingency management services, studies have heralded peer support specialists as effective providers of care to patients, and who in doing so help lower treatment costs and hospitalizations.

KFF has previously estimated that nearly $82 billion is spent annually in California for Medicaid, which is more than any other state plus Washington, D.C. The spending – which also includes that for SUD treatment – has been occurring as yearly overdose deaths in the Golden State have soared by around 45%, according to the latest provisional data from the Centers for Disease Control and Prevention.

California’s overdose death rate is more than twice the national average. In looking for answers to the SUD epidemic among Medi-Cal enrollees – who comprise California’s low-income population – the state is welcoming the new developments.

“The coverage of Contingency Management and Peer Support Specialist services improves providers’ ability to deliver the SUD treatment services that are most appropriate to meet the individual clinical need of the beneficiaries they are treating,” the California DHCS representative added. “In addition, the No Wrong Door policy updates will ensure that individuals are able to access the care they need, regardless of co-occurring conditions.”

One addiction treatment provider’s hope

One California provider following the new changes with Medi-Cal addiction treatment coverage is Sun Street Centers, which is located in the central part of the state in Salinas.

Bob Brunson is the clinical director of Sun Street Centers, which provides SUD residential treatment – as well as outpatient assistance – for residents of Monterey, San Benito and San Luis Obispo Counties.

“In residential treatment, getting folks sober is one thing, and having them be sober in a structured environment is the easy part,” Brunson told BHB. “The tough part is when they head home again and get released back in the wild.”

Sun Street receives most of its funding from Medi-Cal. Brunson said that he and his staff – who oversee a roughly 100-bed residential program – welcome the new Medi-Cal changes, which he feels will allow them to provide more resources that can better equip Sun Street residents in their transition back into the community. He believes that one avenue to achieve that is through the use of, and reimbursement for, peer support specialists.

Currently, Sun Street cannot afford to hire multiple peer staff, according to Brunson.

“Let’s face it, it takes one to know one,” he said. “You walk a mile in those moccasins, and you’re never going to forget that. Being able to pay peers to provide that kind of support will be invaluable.”

Brunson says that Sun Street does not offer contingency management services but added that he and his staff could possibly give it some consideration with the reimbursement changes to Medi-Cal.

Peer support, he believes, is really where Sun Street can make a difference to its clientele and which the increased Medi-Cal funding can make a reality.

“What are the two most important things for sobriety,” he said. “One, you get a good environment to live in and then also some place where you can work and earn your own way. And, … [to also] have a sponsor or other people that are in recovery that you can depend on for that support. That’s where the peer folks are going to be really helpful.”

And as California makes changes to Medi-Cal, other states figure to check out how the new extensions perform given the policy influence of the state.

“They might have a different baseline with which to think about how they might apply lessons learned from other states,” said Hinton. “But certainly states are watching, and California has been on the cutting edge … over the years in terms of requesting 1115 waivers.”

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