CMS will stop approving or extending Medicaid funding for certain state health programs that fund nontraditional or nonmedical services, the agency said April 10.
Four things to know:
1. CMS notified states of the change April 10, which applies to funding for designated state health programs and designated state investment programs — initiatives that often require “creative interpretations” of federal law to secure Medicaid dollars, according to the agency. Examples of such programs include $20 million in grants for high-speed internet for rural healthcare providers in North Carolina and a $241 million New York program offering nonmedical in-home services.
2. CMS said the move aims to curb federal spending that duplicates other state or federal efforts or funds nonhealthcare-related services. Spending tied to DSHPs and DSIPs has increased from about $886 million in 2019 to nearly $2.7 billion in 2025.
“Mounting expenditures, such as covering housekeeping for individuals who are not eligible for Medicaid or high-speed internet for rural healthcare providers, distracts from the core mission of Medicaid, and in some instances, serves as an overly-creative financing mechanism to skirt state budget responsibilities,” the agency said in an April 10 news release.
3. Federal oversight bodies, including the Government Accountability Office, have previously raised concerns over the use of DSHPs and DSIPs, questioning whether these programs support eligible beneficiaries or align with Medicaid’s mission, according to CMS. The agency first began phasing out such expenditures in 2017.
4. The notice to states came the same day House Republicans approved the Senate’s fiscal 2025 budget plan, opening the door for potentially significant Medicaid cuts.
