GenIC #53 (New): Section 1115 Substance Use Disorder (SUD) Demonstration: Guide for Developing Implementation Plan Protocols

DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
7500 Security Boulevard, Mail Stop S2-26-12
Baltimore, MD 21244-1850

SMD # 17-003
RE: Strategies to Address
the Opioid Epidemic
November 1, 2017
Dear State Medicaid Director:
The purpose of this letter is to announce a new direction in how the Centers for Medicare &
Medicaid Services (CMS) would like to work with states on section 1115(a) demonstrations to
improve access to and quality of treatment for Medicaid beneficiaries as part of a Departmentwide effort to combat the ongoing opioid crisis. This revised policy will take the place of the
initiative announced in the State Medicaid Directors’ letter issued on July 27, 2015.
CMS is now offering a more flexible, streamlined approach to accelerate states’ ability to
respond to the national opioid crisis while enhancing states’ monitoring and reporting of the
impact of any changes implemented through these demonstrations. As the opioid crisis
continues to raise alarm and highlight the need for better access to high quality, evidence-based
treatment, CMS would like to partner with states to support ways to progressively improve
outcomes for Medicaid beneficiaries struggling with addiction in the context of 5-year
demonstrations. In addition to these efforts, CMS will ensure states take significant steps to
prevent inappropriate prescribing of opioids for Medicaid beneficiaries.
The Administration’s March 14, 2017, letter to the Governors, expressed interest in exploring
“additional opportunities for states to provide a full continuum of care for people struggling with
addiction” and in developing “a more streamlined approach for section 1115 substance abuse
treatment demonstration opportunities.” This letter also pointed out the need “to properly
account for demographic and geographic considerations, as well as health system variables,
which vary in degree from one state to the next” and offered to support state efforts “to advance
the next wave of innovative solutions to Medicaid’s challenges – solutions that focus on
improving quality, accessibility, and outcomes in the most cost-effective manner.”
In keeping with these objectives, the new initiative described in this letter is aimed at giving
states flexibility to design demonstrations that improve access to high quality, clinically
appropriate treatment for opioid use disorder (OUD) and other substance use disorders (SUDs)
while incorporating metrics for demonstrating that outcomes for Medicaid beneficiaries are in
fact improving under these demonstrations. Further, through this initiative, CMS offers states
the opportunity to demonstrate how to implement best practices for improving OUD and other
SUD treatment in ways that take into account the particular challenges raised by the opioid
epidemic in each state. Participating states would also conduct rigorous evaluations of these

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demonstrations, with CMS approval of the evaluation design. Information on states’ progress
and the outcomes of these demonstrations and evaluations will be made public in a timely and
readily accessible manner on the Medicaid.gov website so that states can learn from these
programs. This cycle of evaluation and reporting will be critical to informing our evolving
response to the national opioid crisis.
Under the demonstration authority granted by section 1115 of the Social Security Act, CMS can
waive certain federal requirements so that states can test new or existing ways to deliver and pay
for health care services in Medicaid to the extent that the demonstration is likely to promote the
objectives of the Medicaid program. Section 1115 demonstrations must be budget neutral, which
means that the proposed demonstration cannot cost the federal government more than costs
would be absent the demonstration.
Through this new section 1115 initiative, states will have an opportunity to receive federal
financial participation (FFP) for the continuum of services to treat addiction to opioids or other
substances, including services provided to Medicaid enrollees residing in residential treatment
facilities. Ordinarily such residential treatment services are not eligible for federal Medicaid
reimbursement due to the exclusion in the Medicaid statute of services provided to patients in
institutions for mental diseases (IMDs). As part of this initiative, states should indicate how
inpatient and residential care will supplement and coordinate with community-based care in a
robust continuum of care in the state. CMS will closely monitor spending in these
demonstrations on services in IMDs to accurately capture the costs and ensure adherence to
budget neutrality requirements. CMS encourages states to maintain their current funding levels
for a continuum of services, and this initiative should not reduce or divert state spending on
mental health and addiction treatment services as a result of available federal funding for
services in IMDs.
States should continue to adhere to existing regulations intended to ensure Medicaid
beneficiaries are accessing high-quality treatment providers and to guard against fraudulent
practices. Specifically, states must screen all newly enrolling providers and reevaluate existing
providers pursuant to the rules in 42 CFR Part 455 Subparts B and E, ensure addiction treatment
providers have entered into Medicaid provider agreements pursuant to 42 CFR 431.107, and
establish rigorous program integrity protocols to safeguard against fraudulent billing and other
compliance issues.
To further support this initiative, the Medicaid Innovation Accelerator Program (IAP) will
continue to be available to states that would benefit from strategic design support related to
improving their treatment delivery systems. The IAP provides states with access to national
learning opportunities and technical expert resources, including strategic design support to states
planning targeted addiction treatment delivery system reforms and developing 1115 proposals.

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Background
Rates of drug overdose deaths have continued to increase rapidly over the past fifteen years, and
the rise in prescription and illicit opioid abuse has been the primary driver of this increase. In
2015, the rate of drug overdose deaths was more than 2.5 times the rate in 1999 with deaths from
heroin overdoses triple the rate in 2010, 1 and more recently, an influx of illicitly made fentanyl
and fentanyl analogs has fueled a substantial increase in synthetic opioid overdose deaths. 2
Despite the fact that there are effective evidence-based treatments for OUD, only about one in
five people who currently need treatment for this condition actually receive it. 3 Moreover,
Medicaid beneficiaries tend to have higher rates of OUD than the general population, comprising
about 25 percent of adults with OUD in 2015. 4 However, only about 32 percent of Medicaid
beneficiaries with OUD received treatment in 2015. 5
To improve access to OUD and other SUD treatment services for Medicaid beneficiaries, it is
important to offer a variety of evidence-based services at different levels of intensity across a
continuum of care since the type of treatment or level of care needed may be more or less
effective depending on the individual beneficiary. Moreover, treatment needs of individual
beneficiaries can greatly vary over time. States should demonstrate how they are implementing
evidence-based treatment guidelines, such as those published by the American Society of
Addiction Medicine (ASAM), including by covering critical levels of care including outpatient,
intensive outpatient (IOP), medication assisted treatment (MAT), residential, inpatient, and
medically supervised withdrawal management.
Medicaid beneficiaries who struggle with addiction to opioids or other substances have high
rates of comorbid physical and mental health conditions, resulting in higher spending for general
medical services. 6 Recent research has reaffirmed that most spending on individuals struggling
with addiction is not on treatment for those conditions, but instead on co-morbid physical
conditions. 7 Between 2010 and 2013, among adult Medicaid beneficiaries treated for a
behavioral health disorder, 75 percent of spending for these individuals was for treatment of comorbid conditions as opposed to their behavioral health condition. At least one state has found

Centers for Disease Control and Prevention (CDC), National Center for Health Statistics Data Brief, Drug Overdose
Deaths in the United States, 1999-2015 (Feb. 2017).
2
Katz J, Drug Deaths in America are Rising Faster than Ever, The New York Times, June 5, 2017.
3
Saloner B, Karthikeyan S, National Changes in 12-Month Substance Abuse Treatment Utilization Among
Individuals with 2 Opioid Use Disorders, 2004-2013, JAMA (Oct. 13, 2015).
4
Medicaid and CHIP Payment and Access Commission (MACPAC), Report to Congress on Medicaid and CHIP,
Chapter 2, Medicaid and the Opioid Epidemic (June 2017).
5
Ibid.
6
Freeman E, McGuire CA, Thomas JW, Thayer DA, Factors Affecting Costs in Medicaid Populations with Behavioral
Health Disorders, Med Care, 52: S60-66 (2014).
7
Thorpe K, Jain S, Joski P, Prevalence and Spending Associated with Patients Who have a Behavioral Health
Disorder, Health Affairs, 36 (1): 124-132 (2017).
1

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significant reductions in medical costs among Medicaid beneficiaries who accessed addiction
treatment compared to those who did not. 8
Moreover, many people who receive acute care for withdrawal management do not become
engaged in any form of treatment following discharge. 9 Among Medicaid beneficiaries
struggling with addiction (in 2008), over two-thirds (67.7 percent) did not receive any follow-up
services within 14 days following an inpatient stay or residential detoxification. 10 Common
consequences of not engaging in treatment are rapid readmission to an intensive care facility and
increased risk of overdose as an individual’s acquired tolerance is lessened by withdrawal
management therapies. Engaging in treatment for addiction within 14 days of discharge from
withdrawal management has been shown to reduce readmission rates. 11
In general, a lack of availability of treatment options is often cited as an important factor in the
low rate at which individuals receive treatment. In a 2013 report to Congress, SAMHSA
highlighted a widespread shortage of addiction treatment providers. 12 According to one recent
study, 40 percent of counties in the U.S. do not have an addiction treatment facility that provides
outpatient care and accepts Medicaid. 13 This lack of treatment capacity is most prevalent in rural
counties in Southern and Midwestern states and in areas with a higher proportion of racial and
ethnic minorities. 14
In recognition of these findings, CMS seeks to work with states through demonstrations
authorized under the section 1115 authority described in this letter to improve Medicaid
beneficiaries’ access to high quality, evidence-based treatment services for addiction to opioids
or other substances, ranging from acute withdrawal management to on-going chronic care for
these conditions in cost-effective treatment settings while also improving care coordination and
care for comorbid physical and mental health conditions.
Goals and Milestones to be addressed in State Applications and Implementation Plans
As the March 2017 letter to the Governors highlighted, we are interested in working with states
“to provide a full continuum of care for people struggling with addiction,” and in hearing stateWickizer TM, Krupski A, Stark KD, Mancuso D, et al, The Effect of Substance Abuse Treatment on Medicaid
Expenditures among General Assistance Welfare Clients in Washington State, Milbank Quarterly 84(3): 555-576
(2006).
9
Mark, TL, Dilonardo, JD, Chalk, M, et al, Trends in Inpatient Detoxification Services, 1992-1997, Journal of
Substance Abuse Treatment, 23(4):253-260 (2002).
10
Reif S, Acevedo A, Garnick DW, et al, Reducing Behavioral Health Inpatient Readmissions for People with
Substance Use Disorders: Do Follow-Up Services Matter?, Psych Services Advance On-line, April 18, 2017.
11
Lee MT, Horgan CM, Garnick DW, et al, A Performance Measure for Continuity of Care After Detoxification:
Relationship with Outcomes, Journal of Substance Abuse Treatment, 47 (2), 130-139 (2014).
12
SAMHSA, Report to Congress on the Nation’s Substance Abuse and Mental Health Workforce Issues, Vol. 24 (Jan,
2013).
8

Cummings JR, Wen H, Ko M, et al, Race/Ethnicity and Geographic Access to Medicaid Substance Use
Disorder Treatment Facilities in the United States, JAMA Psychiatry, 71(2): 190-196 (Feb 2014).

13

14

Ibid.

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proposed “solutions that focus on improving quality, accessibility, and outcomes in the most
cost-effective manner.” This initiative offers states the flexibility to design 1115 demonstrations
aimed at making significant improvements over the course of a five-year period on the following
6 goals and 6 milestones specific to addiction to opioids or other substances:
Goals:
1.
2.
3.
4.

Increased rates of identification, initiation, and engagement in treatment;
Increased adherence to and retention in treatment;
Reductions in overdose deaths, particularly those due to opioids;
Reduced utilization of emergency departments and inpatient hospital settings for
treatment where the utilization is preventable or medically inappropriate through
improved access to other continuum of care services;
5. Fewer readmissions to the same or higher level of care where the readmission is
preventable or medically inappropriate; and
6. Improved access to care for physical health conditions among beneficiaries.

Milestones:
1. Access to critical levels of care for OUD and other SUDs;
2. Widespread use of evidence-based, SUD-specific patient placement criteria;
3. Use of nationally recognized, evidence-based SUD program standards to set residential
treatment provider qualifications;
4. Sufficient provider capacity at each level of care;
5. Implementation of comprehensive treatment and prevention strategies to address opioid
abuse and OUD; and
6. Improved care coordination and transitions between levels of care.
Demonstration Application
States wishing to participate in this initiative can submit a demonstration application to CMS
outlining the state’s strategy for achieving the goals of this demonstration opportunity, including
a commitment to meeting the six milestones that are critical steps for achieving these goals over
the course of the demonstration. Given the magnitude of the opioid epidemic in the U.S. and the
increased focus by the Administration to combat the crisis, CMS strongly encourages states to
articulate in their demonstration application how their proposal will apply evidence-based
programs to meet the needs of people struggling with addiction to opioids in their state.
States’ applications should also describe the state’s capacity for regular reporting on progress
toward meeting these milestones as well as for collecting and reporting data on performance
measures. In addition, states’ applications should confirm their commitment to assuring the
necessary resources will be available to effectively support a robust monitoring protocol and
evaluation.

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Implementation Plan
Participating states will also develop implementation plans describing the various timelines and
activities the state will undertake to achieve the milestones listed above. States will have the
option of submitting their implementation plan as part of their application or as a post-approval
protocol. Either way, FFP for services provided in IMDs will be prospective only and contingent
upon CMS approval of the state’s implementation plan as a part of the application or in a postapproval protocol. If a state chooses to use a post-approval protocol, the timeframe for
submitting the post-approval protocol will be specified in the Special Terms and Conditions
(STCs) agreement between CMS and the state. Through this 1115 opportunity states may
receive federal matching funds for Medicaid-coverable services provided to individuals residing
in residential treatment facilities that are not ordinarily matchable because these facilities qualify
as IMDs; however, this 1115 opportunity does not allow for room and board payments in those
facilities unless they qualify as inpatient facilities under section 1905(a) of the Social Security
Act.
CMS will work with states through these demonstrations to establish residential treatment
provider qualifications that meet nationally recognized, SUD-specific, evidence-based program
standards (Milestone #3). Implementation of these program standards is identified as a critical
milestone that states will address as part of these demonstrations. While states are working
toward implementing nationally recognized SUD-specific program standards as provider
qualifications for residential treatment facilities, the STCs will specify the provider qualifications
states will use in the interim for residential treatment facilities that qualify as IMDs but would
receive FFP through these demonstrations. The STCs will also describe the states’ processes for
ensuring those qualifications are met. Offering states the flexibility to implement the nationally
recognized SUD-specific standards for residential treatment providers as the demonstration
progresses will promote the objectives of the Medicaid program by encouraging more states to
work with CMS on meeting the milestones and goals of these demonstrations outlined above,
thus expanding rapid access to these services while, ensuring adequate quality and safety
standards and incentivizing improvements in quality over time.
As a state’s demonstration progresses, the state will be expected to include, in its regular section
1115 demonstration monitoring reports, information on the state’s progress toward meeting the
milestones identified in Table 1 in accordance with the timeframes specified in the state’s
implementation plan and financial data to ensure compliance with budget neutrality
requirements.
Monitoring Protocol for Performance Measures Aligned with Initiative Goals
Over the course of these demonstrations, states will also include, in their regular 1115
demonstration reports, information on milestones and performance measures representing key
indicators of progress toward meeting the goals for this demonstration initiative. There will be a
core set of measures that all states that elect to implement this demonstration model will report
on, as well as additional measures specific to particular state demonstration parameters. CMS

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has been working with a contractor to identify measures for these demonstrations (see examples
in Table 2 below) and will seek additional input from states. Information about the specific
measures and reporting being finalized by CMS with state input will be detailed in a monitoring
protocol agreed upon by CMS and the state after approval of the demonstration.
CMS will also work with participating states to develop monitoring protocols that will identify
reasonable degrees of improvement on each of the agreed upon performance measures as well as
specifics regarding data collection, analytic methodology, and how the states will construct
baselines for each data point and performance measure against which the state’s progress will be
measured. If a state has not previously collected data on any of the finalized performance
measures agreed to, the first year of data collected for this demonstration may be used as a
baseline. CMS will also work with the states to determine the frequency of reporting on each of
these milestones and performance measures. This monitoring protocol, which will be a
collaborative effort between CMS and the states, can be developed after approval of the
demonstration, and a timeframe for finalizing the monitoring protocol will be included in the
STCs. States will submit quarterly financial data which CMS will review regularly to assure
states are in compliance with the budget neutrality requirements.
The data reported by the state will inform a mid-point assessment between years two and three of
the demonstration during which CMS will evaluate whether states are making sufficient progress
toward meeting the milestones and performance measure targets. In addition to its ongoing
monitoring of budget neutrality compliance, CMS will also assess whether states are on track to
meet the budget neutrality requirements as part of this mid-point assessment. States at risk of not
meeting these targets will submit modifications to their implementation plans, which shall be
subject to CMS approval. CMS may require states to provide corrective action plans if a state
fails to meet the required annual triggers indicating that waiver spending is diverting from the
expected trajectory under the budget neutrality requirements. In addition, FFP for services in
IMDs may be withheld if states are not making adequate progress on meeting the milestones and
goals as evidenced by reporting on the milestones in Table 1 and the required performance
measures in the monitoring protocol agreed upon by the state and CMS. States must be in full
compliance with the budget neutrality requirement at the end of the demonstration period or
CMS will recover the difference. In addition, achievement of the milestones and performance
measure targets will be taken into consideration by CMS if a state were to request an extension
of their demonstration.
States will also be required to conduct independent and robust interim and final evaluations that
will draw on the data collected for the milestones and performance measures, as well as other
data and information needed to support the evaluation that will describe the effectiveness and
impact of the demonstration using quantitative and qualitative outcomes. An evaluation design
will be developed by the state, with technical assistance from CMS, to be finalized within nine
months of the demonstration approval. The evaluation design will include detailed analytic
plans, data development, collection, and reporting details and will be subject to CMS approval.
States that fail to submit an acceptable and timely evaluation design as well as any required

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monitoring, expenditure or other evaluation reporting, are subject to a $5 million deferral per
item. The interim evaluation will be required one year before expiration of the demonstration or
when the state submits a proposal to renew the demonstration. The final evaluations will be due
eighteen months after the demonstration period ends.
Public Availability of Data on State Progress toward Meeting Milestones and Performance
Measure Targets as well as Evaluation Reports
CMS will regularly post information on the Medicaid.gov website regarding the states’ progress
in meeting the agreed upon milestones and performance measure targets. In addition, states’
regular 1115 reports, as well as their evaluation reports, will be posted, as required by section
1115 transparency rules.
Table 1: Milestones for 1115 Demonstrations Addressing Opioids and Other Substances
Milestones

Specifications and Proposed Timeframes

1. Access to Critical Levels of 1. Coverage of a) outpatient, b) intensive outpatient
Care for OUD and other
services, c) medication assisted treatment (medications
SUDs
as well as counseling and other services with sufficient
provider capacity to meet needs of Medicaid
beneficiaries in the state), d) intensive levels of care in
residential and inpatient settings, and e) medically
supervised withdrawal management
Proposed Timeframe: Within 12 to 24 months of
demonstration approval
2. Use of Evidence-based,
SUD-specific Patient
Placement Criteria

1. Implementation of requirement that providers assess
treatment needs based on SUD-specific, multidimensional assessment tools, e.g., the ASAM Criteria,
or other patient placement assessment tools that reflect
evidence-based clinical treatment guidelines
Proposed Timeframe: Within 12 to 24 months of
demonstration approval
2. Implementation of a utilization management approach
such that a) beneficiaries have access to SUD services at
the appropriate level of care, b) interventions are
appropriate for the diagnosis and level of care, and c)
there is an independent process for reviewing placement
in residential treatment settings.
Proposed Timeframe: Within 24 months of
demonstration approval

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Milestones

Specifications and Proposed Timeframes

3. Use of Nationally
Recognized SUD-specific
Program Standards to Set
Provider Qualifications for
Residential Treatment
Facilities

1. Implementation of residential treatment provider
qualifications in licensure requirements, policy manuals,
managed care contracts, or other guidance. Qualification
should meet program standards in the ASAM Criteria,
or other nationally recognized, evidence-based SUDspecific program standards regarding in particular the
types of services, hours of clinical care, and credentials
of staff for residential treatment settings
Proposed Timeframe: Within 12 to 24 months of
demonstration approval
2. Implementation of state process for reviewing
residential treatment providers to assure compliance
with these standards
Proposed Timeframe: Within 24 months of
demonstration approval
3. Requirement that residential treatment facilities offer
MAT on-site or facilitate access off-site
Proposed Timeframe: Within 12 to 24 months of
demonstration approval

4. Sufficient Provider
Capacity at Critical Levels
of Care including for
Medication Assisted
Treatment for OUD

1. Completion of assessment of the availability of
providers enrolled in Medicaid and accepting new
patients in the critical levels of care throughout the state
(or at least in participating regions of the state) including
those that offer MAT.
Proposed Timeframe: Within 12 months of
demonstration approval

5. Implementation of
1. Implementation of opioid prescribing guidelines along
Comprehensive Treatment
with other interventions to prevent opioid abuse
and Prevention Strategies to
Proposed Timeframe: Over the course of the
Address Opioid Abuse and
demonstration
OUD
2. Expanded coverage of, and access to, naloxone for
overdose reversal
Proposed Timeframe: Over the course of the
demonstration
3. Implementation of strategies to increase utilization and
improve functionality, of prescription drug monitoring
programs

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Milestones

Specifications and Proposed Timeframes
Proposed Timeframe: Over the course of the
demonstration

6. Improved Care
Coordination and
Transitions between Levels
of Care

1. Implementation of policies to ensure residential and
inpatient facilities link beneficiaries, especially those
with OUD, with community-based services and supports
following stays in these facilities.
Proposed Timeframe: Within 12 to 24 months of
demonstration approval

Table 2: Demonstration Performance Measures
Demonstration/SUD Goals

Performance Measures

Increased Rates of
Identification, Initiation and
Engagement in Treatment

Initiation and Engagement of Alcohol and Other Drug
Dependence Treatment (National Committee for Quality
Assurance; NQF #0004)* #

Improved Adherence to
Treatment

1. Continuity of Pharmacotherapy for OUD (RAND; NQF
#3175)
2. Follow-up after Discharge from Emergency Department
for Mental Health or Alcohol or Other Drug Dependence
(National Committee for Quality Assurance; NQF
#2605)*#
3. Percentage of beneficiaries with an SUD diagnosis
including those with OUD who used the following
services per month (multiple rates reported):
• Outpatient;
• Intensive outpatient services;
• Medication assisted treatment for OUDs and alcohol;
• Residential treatment (including average lengths of
stay (LOS) in residential treatment aiming for a
statewide average LOS of 30 days); and
• Medically supervised withdrawal management

Reduction in Overdose
Deaths Particularly Those
Due to Opioids

1. Use of Opioids at High Dosage in Persons Without
Cancer (Pharmacy Quality Alliance; NQF # 2940)*

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Demonstration/SUD Goals

Performance Measures
2. Number of overdose deaths/ 1,000 Medicaid
beneficiaries/month and specifically overdose deaths due
to any opioid
3. Number of overdose deaths, and specifically deaths due
to overdose of any opioid, among Medicaid beneficiaries
in the reporting year

Reduced Utilization of
Emergency Department and
Inpatient Hospital Settings

1. Emergency department visits for SUD-related diagnoses
and specifically for OUD /1,000 member months#
2. Inpatient admissions for SUD and specifically OUD
among Medicaid beneficiaries/1,000 member months#
3. Baseline and periodic updates on spending on
beneficiaries in residential treatment and outpatient
settings for SUD treatment and on inpatient and
emergency room services for beneficiaries with SUD
diagnoses including spending on physical health
conditions commonly associated with SUDs

30 day readmission rate following hospitalization for an
Fewer Readmissions to the
Same or Higher Level of Care SUD-related diagnosis# and specifically for OUD
for
Improved Access to Care for
Co-morbid Physical Health
Conditions among
Beneficiaries

Percentage of beneficiaries with an SUD diagnosis, and
specifically those with OUD, who access physical health care.

* Denotes measures that are part of the Medicaid Adult Core Set of Measures.
Denotes measures that states with preexisting SUD 1115 demonstrations are already required
to report on.

#

CMS will publish a technical specifications manual for a small set of required “core measures”
as well as optional measures from which states can choose. CMS will also provide technical
assistance to states in the collection and reporting of measures required for the demonstration.
Submission Process for Section 1115 Demonstration Projects
States should follow the usual process for submitting 1115 demonstration proposals as outlined
in the federal section 1115 demonstration project transparency regulations at 42 CFR 431.412

Page 12 – State Medicaid Director

and 42 CFR 431.408. As explained in these regulations, states should submit an application that
includes the following information:
•
•

•

•
•

•
•

•

•

A comprehensive description of the demonstration, including the state’s strategies for
addressing the goals and milestones discussed above for this demonstration initiative
(see request below);
A comprehensive plan to address opioid abuse, including aggressive preventive
measures and strategies to improve access to treatment and recovery support services for
Medicaid beneficiaries and an assessment of how this demonstration will complement
and not supplant state activities called for or supported by other federal authorities and
funding streams;
A description of the proposed health care delivery system, eligibility requirements,
benefit coverage and cost sharing (premiums, copayments, and deductibles) required of
individuals who will be impacted by the demonstration, to the extent such provisions
would vary from the State’s current program features and the requirements of the Social
Security Act;
A list of the waivers and expenditure authorities that the state believes to be necessary to
authorize the demonstration;
An estimate of annual aggregate expenditures by population group impacted by the
demonstration, including development of baseline cost data for these populations.
Specifically, CMS requests that states' fiscal analysis demonstrate how the proposed
changes will be budget neutral, i.e., will not increase federal Medicaid spending. CMS
will work closely with states to determine the feasibility of their budget neutrality
models and suggest changes as necessary;
Enrollment data including historical SUD coverage and projected coverage over the life
of the demonstration, of each category of beneficiary whose health care coverage is
impacted by the demonstration;
Written documentation of the state’s compliance with the public notice requirements at
42 CFR 431.408, with a report of the issues raised by the public during the comment
period and how the state considered those comments when developing the final
demonstration application submitted to CMS;
The research hypotheses that are related to the demonstration’s proposed changes, goals,
and objectives, and a general plan for testing the hypotheses including, if feasible, the
identification of appropriate evaluation indicators, and
Implementation Plan (if being submitted at the time of application).

CMS requests that these Section 1115 demonstration proposals describe, in as much detail as
possible the state’s strategy for improving access to and quality of addiction treatment through
the proposed demonstration and how the state’s proposed demonstration will further the goals of
the initiative described above. The application should include a description of the activities the
state plans to undertake to address the milestones specified in Table 1, and to report on the
milestone markers and performance measures. If it is not feasible to include in the application a
detailed implementation plan specifying how and when the state proposes to meet the milestone

Page 13 – State Medicaid Director
markers in Table 1, the state should propose a date by which an implementation plan will be
submitted by the state, this date will be included in the STCs. As a reminder, FFP for services in
IMDs will not be available through the demonstration until the implementation plan/protocol is
approved by CMS, at which time FFP will be available only prospectively. In addition, the state
should indicate what data sources and resources it proposes to use for reporting on performance
measures. CMS will work with states to develop a detailed monitoring protocol for these data
points and performance measures after the application is received from the state.
After states develop 1115 demonstration proposals that include the information listed above,
states must follow the minimum 30-day public notice and comment procedures outlined in 42
CFR 431.408, to allow opportunity for public input on the application prior to submission to
CMS. This includes consultation with Indian tribes and Indian health providers (to the extent
there are Indian tribes and Indian health providers located within geographic boundaries of the
state) to solicit advice from the Indian health providers on ensuring access for American Indian
and Alaska Native (AI/AN) individuals to the services that are part of the demonstration and that
these services meet the unique and cultural needs of AI/AN individuals.
CMS is available to provide technical assistance to states on how to meet federal transparency
requirements as well as to preview states' draft 1115 proposals and public notice documentation
to help ensure states successfully meet federal requirements.
Section 1115 demonstration applications may be submitted electronically to
[email protected] or by mail to:
Judith Cash
Acting Director
State Demonstrations Group
Centers for Medicare & Medicaid Services
Center for Medicaid & CHIP Services
Mail Stop: S2-26-12
7500 Security Boulevard
Baltimore, MD 21244-1850
As required by 42 CFR 431.416, when states submit section 1115 proposals to CMS we will
send written notice within 15 days of receipt to the state on whether its application met all
federal transparency requirements and is determined complete for purposes of initiating CMS'
review and the federal 30-day public notice and comment process.
CMS hopes states will use this opportunity to improve addiction treatment for Medicaid
beneficiaries. Questions regarding this guidance may be directed to Kirsten Beronio, Senior
Behavioral Health Policy Advisor, Disabled and Elderly Health Programs Group, at
[email protected]. We look forward to continuing our work together on these
important issues.

Page 14 – State Medicaid Director
Sincerely,
/s/
Brian Neale
Director

cc:
National Association of Medicaid Directors
National Academy for State Health Policy
National Governors Association
American Public Human Services Association
Association of State and Territorial Health Officials
Council of State Governments
National Conference of State Legislatures
Academy Health
National Association of State Alcohol and Drug Abuse Directors