Brief New Opportunities for Medicaid Funding to Ease Reentry

Reentry back into society can be a particularly difficult and dangerous time for people who are newly released from incarceration. The National Institute on Drug Abuse estimates that a substantial number of incarcerated people—65% of the United States prison population—have an active substance use disorder (SUD). People with SUD are at a higher risk for death and overdose following release from incarceration, specifically in the first two weeks following release. The factors that may contribute to higher overdose risk upon release include decreased tolerance, insufficient counseling prior to release, lack of post-release follow-up and barriers to accessing medication for treatment in the community. Data from the US Department of Justice shows that 95% of people in jails and prisons will eventually be released, highlighting an opportunity to address SUD prior to reentering society.

Access to treatment pre- and post-release can improve outcomes and save costs. Researchers with Western Carolina University and the University of Kentucky found in a review of 29 published and peer-reviewed studies on post-release outcomes associated with the use of MOUDs in correctional settings that treatment for SUD during incarceration—specifically medications for opioid use disorder (MOUD)—is associated with decreased substance use and overdose post-release. Treatment during incarceration has also been associated with continued treatment post-release, decreased criminal activity and decreased infectious disease transmission following incarceration. The National Institute on Drug Abuse reports that despite the cost, treatment in the criminal justice system saves money in the long run.

There are barriers to providing MOUD, both pre- and post-release. Jails and prisons are increasingly offering medications like buprenorphine for treatment of SUD. However, access to care for SUD and reentry planning and support continues to be limited, particularly in jails, and may vary by service or jail characteristics due to limited funding, staffing, and training.

States and localities have been solely responsible for bearing the costs of health care delivered in non-federal jails and prisons, which may contribute to funding limitations. However, a recent Medicaid policy change opens the door for states to receive federal funding for services provided to Medicaid-eligible people up to 90-days pre-release through Section 1115 waivers.

In 2018, Congress directed the Centers for Medicare and Medicaid Services (CMS) to issue guidance to states on how to use Medicaid Section 1115 demonstration waivers to partially waive the Medicaid Inmate Exclusion Policy and permit use of federal dollars to pay for Medicaid services provided to incarcerated people. Section 1115 waivers permit states to apply for waivers from CMS from certain federal requirements and continue to receive federal funding.

In January 2023, CMS approved the first Section 1115 waiver that covers pre-release services and issued guidance in April 2023. The guidance specifies how states can draw down federal funding for services provided pre-release and specifies state flexibilities and requirements in waiver design.

According to CMS guidance, states have flexibility to decide:

• Which populations are eligible for services ranging from a narrowly targeted population to all Medicaid-eligible beneficiaries.
• Which services are covered, ranging from the minimum required services to all services covered under the state plan.
• Which correctional facilities are included in the scope of the waiver, including local jails or state correctional facilities.
• Which providers furnish services, including providers in carceral settings.
• The geographic region of the waiver, which may extend statewide or to particular regions.
• To use federal financing for both services and infrastructure, including investment in IT systems and capacity building through training and workforce development to support the connections between correctional settings and Medicaid.

To receive CMS waiver approval, states must:

• Limit the duration of services to up to 90-days pre-release.
• Provide three minimum benefits:

• Case Management Services to assess and address physical and behavioral health needs as well as health related social needs.
• Medication Assisted Treatment (MAT) including medication in combination with counseling for all types of substance use disorder.
• 30 Day Supply of all Prescription Medications that have been prescribed for the beneficiary at the time of release.

More detailed information about approved reentry waivers (as of July 2, 2024) is available in the chart below.

Despite the opportunities for innovation that Section 1115 reentry waivers present and bipartisan state interest, waivers come with limitations. Section 1115 waivers can be time consuming and complex for the state agency to administer. Additionally, the application process can be time consuming and includes stakeholder outreach and drafting the official proposal. The negotiation process with CMS prior to approval can take months or years;  CMS is currently facing a bottleneck in waiver approval processing times (averaging over 15 months). Accordingly, states may look to other policy options – both in and out of Medicaid – to ensure continuity of care for individuals recently released from prisons or jails.

Alternatives to Medicaid Section 1115 Waivers to Ease Reentry

As described in more detail in the NCSL report Connecting Recently Released Prisoners to Health Care, states have a variety of non-waiver options to improve connections to Medicaid coverage and care post-release. For example, states may suspend, instead of terminate, an incarcerated individual's Medicaid eligibility to streamline reinstatement of benefits upon release. According to available data, 47 states suspend benefits upon entry to prison and 46 states suspend benefits upon entry to jail instead of terminating benefits. In January 2026, all states will be required to suspend, rather than terminate, benefits for incarcerated people under the Consolidated Appropriations Act of 2024.

To facilitate suspension and reactivation of benefits states have implemented policies to improve data-sharing and care coordination between Medicaid and correctional facilities. Arizona's Enrollment Suspense initiative uses electronic data sharing agreements with Arizona prisons, jails, and detention facilities to temporarily suspend the member's health plan during incarceration. Arizona also facilitates care coordination through the Justice System Reach-In Care Coordination program. To implement Washington state legislation mandating the suspension of benefits, the Washington Medicaid agency formed a partnership with the Department of Corrections (DOC) and the Washington Association of Sheriffs and Police Chiefs. This collaboration aimed to merge data from DOC, jails, and Medicaid to streamline changes in eligibility status.

Beyond the Medicaid program, states can take action to improve access to care in correctional facilities and following release. For example, Alabama HB 465 (2023) appropriated $1.5 million in opioid settlement funds to the department of corrections for opioid and co-occurring substance abuse treatment, including for FDA-approved medications and pre- and post-release services to justice involved individuals. Connecticut SB 448 (2022) requires correctional facilities to screen each person for drug and alcohol use history, ensure supervision of withdrawal by certain health care providers, offer substance use disorder counseling services and to refer an individual for treatment following release. Maine HB 490 (2021) created a comprehensive substance use disorder treatment pilot program for the incarcerated population that included screening, assessment, medically managed withdrawal, medication-assisted treatment, and individual and group counseling. Additionally, Maryland and New York require that state and county jails and prisons offer all three medications associated with MOUD.

Federal Action

Congress also continues to address reentry. Pursuant to the Consolidated Appropriations Act of 2023, states are required to cover certain services for incarcerated youth up to 30-days prior to release starting January 1, 2025, although CMS guidance is still pending. States will have the additional option to provide Medicaid covered services pending the disposition of charges.

In March 2024 Congress passed the Consolidated Appropriations Act 2024 which includes the following Medicaid policies regarding justice-involved individuals:

• Starting in 2026, all states will be required to suspend instead of terminating an incarcerated individual's Medicaid.
• Funds $113.5 million in state planning grants to address operational barriers and promote continuity of care for Medicaid and CHIP beneficiaries following incarceration. Grants will be awarded to states by March 2025.
• Within 18 months, CMS is required to provide states with detailed guidance on overcoming common challenges in ensuring access to high-quality, timely, and accessible care for individuals eligible for Medicaid, CHIP, or pregnancy-related assistance, before, during, and after incarceration. This guidance aims to address the operational and implementation issues states encounter in providing these services.
• Extended and increased funding for community health centers.