"These demonstrations can effectively function as a technique to reduce states’ overall funding obligation by allowing federal funds to supplant existing state funds for services not otherwise covered by Medicaid," Snyder wrote. "Further, unlike traditional Medicaid matching funds, which are generally tied to claims for specific services provided to Medicaid beneficiaries, federal matching funds provided to support [designated state health programs and designated state investment programs] have not necessarily been tied directly to services provided to Medicaid beneficiaries."
In a news release, CMS cites a handful of programs it maintains don't uphold Medicaid's "core mission," including a North Carolina initiative that supports high-speed internet access for rural providers and a New York program to promote diversity in medicine
Federal spending on designated state health programs and designated state investment programs tripled between 2019 and 2025 to $2.7 billion, according to CMS. Technically, programs are funded entirely with state dollars but CMS gives states additional Medicaid funding based on the calculation that the initiatives reduce healthcare costs.
Although CMS is not withdrawing approvals for the underlying 1115 waivers, the agency is again signaling a pullback from efforts to address social determinants of health, health equity and myriad other priorities. CMS, like the rest of the Health and Human Services Department and the entire federal government, is also subject to President Donald Trump's "Department of Government Efficiency" drive to eliminate tens of thousands of jobs, scale back regulation and enforcement, and reduce spending.
CMS limited designated state health programs and designated state investment programs during Trump's first term in 2017, as well. After President Joe Biden took office, his administration, which was committed to social determinants of health interventions, restored funding but tightened the standards for approvals.
"Despite the safeguards implemented in the post-2022 approvals of [designated state health programs], CMS has renewed concerns about the same issues originally identified in 2017," Synder wrote.
If states want to continue these programs, they will have to come up with the money themselves. That's easier said than done, said Brock Slabach, chief operating officer of the National Rural Health Association. “If a state gets notice that they're not going to be able to provide these kinds of services any longer that are listed in these [designated state health programs], they're going to have to start undoing programs that are in place,” he said.
