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On July 27, 2015, the U.S. Centers for Medicare and Medicaid Services (CMS) issued a State Medicaid Director letter informing states of new service delivery opportunities for individuals with substance use disorder (SUD). The letter highlights a new opportunity for states to apply for Section 1115 Demonstration Waivers to test Medicaid coverage of a full SUD treatment service arrayin the context of comprehensive SUD delivery system transformation. The letter outlines CMS' expectations for a transformed SUD service delivery system and the submission process for a demonstration project application.  

In recognition of the fact that statutory payment exclusions for services provided in specific settings may limit states' abilities to offer a full continuum of evidence-based care to address the immediate and longer-term needs of individuals with SUD, demonstration projects are permitted to extend coverage for services delivered in short-term  inpatient (15 days or less) and short-term residential (an average of 30 days) settings otherwise prohibited under the Institutions for Mental Disease (IMD) payment exclusion. The letter states that inpatient and residential care should not supplant community-based care and must be clinically appropriate, and that coverage for services in IMDs should not reduce or divert existing state spending on mental and substance use disorder services.

View the full letter