Apr, 19, 2023

CMS Issues Guidance on Section 1115 Demonstration Opportunity to Support Reentry for Justice-Involved Populations

Kinda Serafi, Patricia Boozang, and Gini Morgan, Manatt Health


On April 17, 2023, the Centers for Medicare & Medicaid Services (CMS) released a State Medicaid Director Letter (SMDL), “Opportunities to Test Transition-Related Strategies to Support Community Reentry and Improve Care Transitions for Individuals Who Are Incarcerated.” The SMDL implements section 5032 of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities (SUPPORT) Act, which directed the U.S. Department of Health and Human Services (HHS) to issue guidance on how states can design section 1115 demonstrations to provide services to justice-involved individuals prior to release to support their reentry into the community.[1]

Until now, due to a provision of federal Medicaid law known as the “inmate exclusion,” inpatient hospital care was the only service that could be covered by Medicaid for individuals considered “inmates of a public institution.”[2] The SMDL outlines the opportunity for states to waive the inmate exclusion and receive federal financial participation (FFP) for expenditures for certain pre-release healthcare services provided to individuals who are incarcerated and otherwise eligible for Medicaid prior to their release (hereinafter referred to as Reentry 1115 Demonstrations). Prior to the release of this guidance, CMS approved California’s request to amend the California Advancing and Innovating Medi-Cal (CalAIM) 1115 waiver demonstration to provide reentry services to Medi-Cal-eligible individuals who are incarcerated. For more information on California’s waiver, please refer to State Health and Value Strategies’ expert perspective, CMS Approves First-In-Nation Justice-Involved Reentry Section 1115 Demonstration. Together, California’s demonstration Special Terms and Conditions (STCs) and CMS’ SMDL serve as a blueprint for other states requesting waiver authority to provide reentry services to justice-involved populations.[3]

Individuals leaving incarceration have disproportionately higher rates of physical and behavioral health diagnoses and are at higher risk for injury and death as compared with people who have not been incarcerated. Citing a 2020 issue brief, the SMDL highlights that individuals who are incarcerated have higher rates of mental illness and chronic/physical healthcare needs, including hypertension, asthma, tuberculosis, human immunodeficiency virus (HIV/AIDS), hepatitis B and C, arthritis, and sexually transmitted diseases, than the general population.[4] The SMDL also points to the high rate of substance use disorder (SUD) diagnoses in carceral settings, as high as 65% in prisons nationally.[5] These poor health outcomes contribute to an elevated risk of death following release, and CMS acknowledges an additional study showing that during the first two weeks after release from state prison the risk of death was 12.7 times that of other state residents.[6] Race disparities in incarceration further exacerbate health disparities for people of color upon release. Across the country, people of color are more likely to be incarcerated due to the criminalization of SUD and mental health issues and the systemic inequities in the criminal justice system.

To address the healthcare needs of justice-involved individuals, the SMDL lays out the following goals of Reentry 1115 Demonstrations:

  • Increase coverage, continuity of coverage, and appropriate service uptake of Medicaid.
  • Improve access to services prior to release and thereby improve transitions and continuity of care into the community upon release.
  • Improve coordination and communication between correctional systems, Medicaid systems, managed care plans, and community-based providers.
  • Increase additional investments in healthcare and related services aimed at improving the quality of care for enrollees in carceral settings and in the community to maximize successful reentry post-release.
  • Improve connections between carceral settings and community services upon release to address physical health, behavioral health, and health-related social needs (HRSNs).
  • Reduce all-cause deaths in the near-term post-release.
  • Reduce the number of emergency department (ED) visits and inpatient hospitalizations among recently incarcerated Medicaid enrollees through increased receipt of preventive and routine physical and behavioral healthcare.

Parameters for Reentry 1115 Demonstrations

Eligible Facilities. CMS gives states flexibility to provide coverage of prerelease services in state and local correctional facilities (e.g., state prisons, county jails, youth correctional facilities). States may seek to provide services in all eligible correctional facilities statewide or they can choose to only provide services in a subset of correctional facilities. For example, if a state elects to implement pre-release services in its county jails and there are 25 jails in the state, that state could choose to implement the demonstration in only 12 of the 25 jails. States may also develop a phased approach to add correctional facilities throughout the duration of the demonstration. States that seek to provide services to only a subset of facilities will need a waiver of the Social Security Act’s requirements that services be provided statewide.[7] CMS clarifies that Reentry 1115 Demonstrations will not be approved for services provided in federal prisons; however, CMS encourages state Medicaid agencies to develop processes to direct individuals to Medicaid application information for the state in which they will reside upon release. CMS guidance is silent on whether states may obtain expenditure authority to provide pre-release services for individuals in an institution for mental disease, indicating CMS is unlikely to approve such waiver requests at this time.

Eligible Individuals. States have the flexibility to define their populations of focus for pre-release services and eligibility criteria. For example, states can establish criteria to provide pre-release services to individuals with mental illness, SUD, and/or chronic conditions. In the alternative, states may make all Medicaid-enrolled individuals in participating carceral facilities eligible for pre-release services. States also need to define which Medicaid eligibility groups will be covered (e.g., expansion adults, pregnant individuals, children and youth, the aged, the disabled) and whether Children’s Health Insurance Program (CHIP) populations will be included.

Minimum Covered Services. CMS requires states to provide a minimum set of prerelease services—case management, medication-assisted treatment (MAT), and medications—upon release. States have flexibility to add services that support reentry into the community. A summary of the minimum set of pre-release services is as follows:

  • Case Management. Pre-release case management is a required reentry service to assess and address physical and behavioral health needs and HRSNs. The guidance provides significant detail on expected activities of the case manager that includes but is not limited to conducting a comprehensive needs assessment, developing a care plan, ensuring a warm handoff to post-release care manager (if different), ensuring the pre-release services are provided, conducting referral activities for post-release such as scheduling appointments and connecting individuals to services upon reentry into the community, and providing ongoing monitoring and follow-up activities to ensure the care plan is implemented.
  • Medication-Assisted Treatment. MAT is a required minimum service for all types of SUD as clinically appropriate, with accompanying counseling. For purposes of this demonstration opportunity, CMS defines MAT as medication in combination with counseling/behavioral therapies, as appropriate and individually determined, and should be available for all types of SUD (e.g., both opioid and alcohol use disorders) as clinically appropriate. Coverage of MAT under a state plan includes all U.S. Food and Drug Administration–approved medications for opioid use disorder, including buprenorphine, methadone, and naltrexone, and acamprosate and naltrexone for alcohol use disorder.
  • 30-Day Supply of all Prescription Medications. CMS also requires the facilitation of the provision of a 30-day supply of any prescription medication(s) (as clinically appropriate based on the medication dispensed and the indication) for physical and behavioral health conditions, including MAT prescription(s), in-hand upon release. These medications may be provided as a pre-release demonstration service or as a post-release Medicaid service furnished outside the demonstration’s scope. For example, if the medications are provided to an individual when they are released into the community and they are no longer an inmate and therefor such services do not necessitate expenditure authority and are covered under the state plan.

In addition to this minimum set of services, states have flexibility to cover other important physical and behavioral health services, such as family planning services; screening for common health conditions within the incarcerated population, such as blood pressure, diabetes, hepatitis C, and HIV; rehabilitative or preventive services, including those provided by community health workers; treatment for hepatitis C; and the provision of durable medical equipment and/or supplies.

States that seek approval of pre-release services beyond the minimum benefit package will need to provide justification in their Reentry 1115 Demonstration applications for how such services promote the objectives of the demonstration and support a smooth reentry into the community. For example, for California’s approved Reentry 1115 Demonstration, in addition to covering the minimum set of services, the state also intends to provide physical and behavioral health consultation, laboratory and radiology services, community health worker services, and coverage of medications during the prerelease period.[8] States that are seeking to provide medications during the pre-release period may cover the full state plan scope of medications or a targeted set of outpatient drugs. Of note, states that do not provide all covered outpatient drugs during the pre-release period may not seek federal or supplemental state-specific rebates under section 1927 for any of the pre-release drugs covered under the demonstration.

Eligible Providers. For the provision of prerelease services, states have flexibility to allow in-reach, community-based providers, or embedded carceral health providers to furnish such services. In-reach providers may provide services in person or via telehealth. If a state chooses to use carceral providers, the state will need to describe the handoff processes that will be conducted with community-based providers to support reentry. States will need to evaluate the experiences of carceral and community providers, including challenges encountered, as they develop relationships and facilitate the transition of individuals into the community. States that choose to allow embedded carceral health providers in this demonstration will also need to ensure that they comply with Medicaid provider participation policies as established by the state.

Time Period for Covering Pre-Release Services. States have the flexibility to provide coverage of pre-release services for up to 90 days before the incarcerated individual’s expected date of release. States that provide pre-release services for up to 30 days prior to reentry into the community will evaluate hypotheses related to improving care transitions for soon-to-be released individuals; states that provide pre-release services for a period greater than 30 days and up to 90 days will include one or more additional hypotheses related to the longer duration of services, to be approved at the HHS Secretary’s discretion. For example, California’s approved demonstration to provide services for up to 90 days includes the additional assessment of the relationship identified between the provision and timing of particular services with post-release outcomes.[9]

Medicaid Eligibility and Enrollment. As a threshold requirement, CMS requires states to establish pre-release eligibility and enrollment processes to all individuals eligible for Medicaid within the carceral facility upon the individual’s incarceration, throughout the period of incarceration, and no later than 45 days before expected release. For new enrollees who may have a short incarceration period (e.g., individuals who are in jail prior to sentencing), CMS encourages states to permit correctional facilities to serve as presumptive eligibility-qualified entities to make presumptive eligibility determinations prior to a person’s release. States that pursue this option will need to consider follow-up processes with this population once they are released into the community to ensure full eligibility determinations are completed and coverage is not lost. Importantly, states may not terminate Medicaid coverage upon entry into a correctional facility and must set up eligibility suspension processes.[10] States that do not have these pre-release eligibility and enrollment processes in place will be provided a two-year implementation glide path to either implement suspension processes or develop an alternative approach to ensure only pre-release services are provided during incarceration and full benefits are available as soon as possible upon release. The guidance is not clear on whether implementation of Medicaid enrollment and suspension processes is a condition of implementing pre-release services. Finally, CMS reminds states that they may request a 90/10 enhanced federal match for relevant system updates.

Enhanced Federal Financing for Information Technology System Upgrades. The guidance details potential opportunities for leveraging enhanced federal matching funds on information technology (IT) system expenditures necessary to implement Reentry 1115 Demonstrations. For example, states can claim enhanced federal financing for activities that establish new or enhance existing IT data systems that support eligibility and enrollment processes, facilitate communication between correctional staff and Medicaid providers and managed care plans, enable claims processing, and/or upgrade electronic health record systems to align with Medicaid regulatory requirements.

Capacity-Building Implementation Funds. Consistent with its approval of California’s Reentry 1115 Demonstration, CMS will consider state requests for time-limited financing for certain new expenditures that support implementation of the Reentry 1115 Demonstration. Allowable capacity-building activities include the development of new business and operational practices related to health IT systems; the hiring and training of staff to assist with implementing the initiative; and outreach, education, and stakeholder convening to advance collaboration across the Medicaid agency, correctional facilities, providers, managed care plans, and community-based organizations, among others.

Reinvestment Plan. CMS’ guidance states that the justice-involved reentry demonstration and Medicaid expenditure authority “does not absolve carceral authorities of their constitutional obligation to ensure needed healthcare is furnished to inmates in their custody and is not intended as a means to transfer the financial burden of that obligation from a federal, state, or local carceral authority to the Medicaid program.” To that end, as a condition of approving demonstrations that seek federal financing for any existing carceral healthcare services that are currently funded with state and/or local dollars, CMS is requiring states to reinvest the total amount of federal matching funds received through the demonstration.

As part of the demonstration’s implementation plan, states will need to submit a reinvestment plan that describes how funds that replace currently expended state or local dollars will be reinvested. Reinvestments that are focused on improving community-based physical and behavioral health services, health information technology and data sharing, and community-based provider capacity are all allowable. The amount a state pays to cover new, enhanced, or expanded pre-release services authorized under the demonstration may also count toward the state’s reinvestment obligation.

CMS will not approve a reinvestment plan under which funds would be used to build prisons, jails, or other carceral facilities, or to pay for prison- or jail-related improvements other than those for direct and primary use in meeting the healthcare needs of individuals who are incarcerated.

Implementation Plan. States will be required to submit an implementation plan that describes their approach to implementing the reentry initiative, including timelines for meeting critical implementation milestones. Federal financing for pre-release services is contingent upon CMS approval of the implementation plan, which is due after the approval of the demonstration’s STCs. California’s STCs require submission of an implementation plan within 120 days of the demonstration approval.[11] Required implementation plan milestones focus on how the state will:

  1. Increase and maintain Medicaid coverage through application, renewal, and suspension (not termination) processes.
  2. Cover and ensure access to the minimum set of pre-release services by setting up a process to identify individuals eligible for pre-release services, providing the minimum set of pre-release services, ensuring pre-release care managers have knowledge of community-based providers and services, and delivering quality healthcare services.
  3. Promote continuity of care by setting up a person-centered care plan prior to release; facilitating timely access to post-release healthcare medications and services; implementing processes, including contract modifications, if necessary, that reflect clear requirements for managed care plans; and ensuring pre-release case managers coordinates a warm handoff (a simple referral is not sufficient) with post-release case managers if they are not the same provider.
  4. Connect to post-release services by monitoring whether the individual received the services in the community as described in their care plan, including long-term services and supports and HRSNs such as housing and employment supports.
  5. Ensure cross-system collaboration by describing how the Medicaid agency and correctional facilities will confirm they are ready to ensure the provision of pre-release services; engaging stakeholders, including individuals who are incarcerated, probation departments, correctional facilities, providers, and community-based organizations; and monitoring the healthcare needs and services received through data sharing and monitoring.

Monitoring and Evaluation. Once the Reentry 1115 Demonstration STCs are approved, states will be required to submit a monitoring protocol as well as the following reports, consistent with other approved demonstrations:

  • Quarterly/annual monitoring reports shall include the administration of screenings to identify individuals eligible for pre-release services; participation in Medicaid among carceral providers; utilization of applicable pre-release and post-release services; the provision of health or social service referrals pre-release; participants with established care plans at release; and the take-up of data system enhancements among participating carceral settings. States will also be required to work with CMS to identify outcome metrics related to health equity.[12]
  • A mid-point assessment report describing the state’s progress in meeting implementation plan milestones and target measures, developed by an independent assessor between demonstration years two and three.
  • An evaluation design detailing analytic plans, data collection, and reporting details for the interim and summative evaluation reports to be submitted to CMS within 180 days of demonstration approval. CMS highlighted the following outcomes of interest to be included in the reports: measurement of cross-system communication and collaboration; connections between carceral settings and community services; provision of preventive and routine physical and behavioral healthcare; and avoidable ED visits and inpatient hospitalizations, as well as all-cause deaths. CMS also requests states to stratify analysis by subpopulations (e.g., sex, age, race/ethnicity, primary language, disability status, geography, sexual orientation/gender identity).

Budget Neutrality. Expenditures authorized under the Reentry 1115 Demonstrations are considered hypothetical for the purposes of budget neutrality calculations.


There are currently 14 states with pending justice-involved reentry demonstration requests before CMS, with other state proposals expected to follow.[13] While the demonstration requests vary as to whom they propose to cover, providers of services, and what covered services are included, all largely meet CMS’ stated objective to improve health outcomes and support reentry into the community. States with pending requests will need to review the guidance put forth in the SMDL and adjust their demonstration features to align with the federal guidance as needed. States that have pending Reentry 1115 Demonstration applications or are considering submitting new ones should look to the SMDL as well as California’s approved demonstration as a guide to the policy and STC language that CMS will approve.

[1] Pub. L. No. 115-271.

[2] Social Security Act 1905(a)(3); 42 C.F.R. 435.1009; 42 C.F.R. 435.1010.

[3] 11-W-00193/0, “California CalAIM Demonstration,” January 26, 2023.

[4] https://www.commonwealthfund.org/publications/issue-briefs/2020/nov/medicaid-role-health-people-involved-justice-system.

[5] https://www.drugabuse.gov/download/23025/criminal-justice drugfacts.pdf?v=25dde14276b2fa252318f2c573407966.

[6] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2836121/.

[7] Social Security Act Section 1902(a)(1).

[8] 11-W-00193/9, “California CalAIM Demonstration,” Attachment W, Table 2, January 26, 2023.

[9] 11-W-00193/9, “California CalAIM Demonstration,” STCs 15.5, January 26, 2023.

[10] Section 1001 of the SUPPORT Act, Pub. L. No. 115-271, prohibits states from terminating Medicaid eligibility when an eligible juvenile is an inmate of a public institution. “Eligible juveniles” are defined in the SUPPORT Act as juveniles who are under age 21 or individuals enrolled in the eligibility group for former foster care youth.

[11] 11-W-00193/9, “California CalAIM Demonstration,” STCs 9.11, January 26, 2023.

[12] More detail on health equity metrics will be provided in CMS’ upcoming guidance on the Health Equity Measure Slate.

[13] States include ArizonaKentuckyMassachusettsMontanaNew HampshireNew JerseyNew MexicoNew YorkOregonRhode IslandUtahVermontWashington, and West Virginia.