Editor’s Note: The United States is in the throes of a rapidly worsening opioid epidemic. The crisis is far-reaching: As of 2014, 1.9 million Americans had an opioid use disorder involving prescription medication, and an additional 19.6 million Americans had a substance use disorder (SUD) outside of addiction to prescription opioids.1 As the largest source of coverage for behavioral health services, including those related to SUDs, Medicaid can play a powerful role in addressing the opioid epidemic.2

In a new issue brief for the Robert Wood Johnson Foundation’s State Health Reform Assistance Network, Manatt Health reviews Medicaid strategies to combat the opioid epidemic. The brief is part of a continuing series examining the fiscal implications of Medicaid expansion. Click here to download the full brief.



As a major source of coverage and payment in all states, Medicaid programs are answering the charge to fight the opioid epidemic. Medicaid expansion under the Affordable Care Act (ACA) has amplified Medicaid’s role. In the 31 states that have expanded, 1.2 million individuals with SUDs have gained access to coverage.3 The expansion population has a higher prevalence of SUDs than populations previously eligible for Medicaid.4 Now, these adults have access to comprehensive insurance coverage, and states can thereby rely on Medicaid funds to cover the cost of prevention and treatment.5 In non-expansion states, at least 1.1 million uninsured adults with SUDs would have access to coverage if their states were to expand.6 Without expansion, states are forced to rely on limited state general funds to provide SUD services to these adults.

Medicaid agencies are enhancing coverage and benefits for those who are at the highest risk of or are already grappling with SUDs, implementing Health Homes to provide care management services, and leveraging Medicaid’s purchasing power to require Medicaid providers and plans to promote best practices in SUD treatment. To institute broader reforms, Medicaid agencies are applying for and implementing SUD-focused Section 1115 demonstration waivers to transform their entire SUD delivery systems. The Centers for Medicare and Medicaid Services (CMS) has matched and supported state efforts to address the opioid epidemic not only through waiver design and approvals but also through the technical assistance provided by the Innovator Accelerator Program (IAP).

State Plan Strategies

Through their State Plan Amendments (SPA), state Medicaid agencies can design and pay for a wide range of programs to address the opioid epidemic and other SUDs.

1. Coverage and Benefits

Under Medicaid law, states have the opportunity to tailor their benefit packages to improve SUD prevention and treatment. States may:

  • Implement prior authorization requirements, institute quantity limits and strengthen utilization review criteria for opioid prescriptions.7
  • Expand Medicaid’s access to and use of the state’s Prescription Drug Monitoring Program (PDMP), a state database containing information about prescriptions for controlled substances, to identify Medicaid-enrolled individuals who may be at risk of opioid abuse and providers with lenient prescribing practices.8
  • Improve timely access to medications used in medication-assisted treatment (MAT) by eliminating or modifying prior authorization requirements, as well as reviewing prescription drug policies to ensure they are evidence-based and do not impose lifetime, duration or quantity limits for MAT drugs that are not clinically indicated.9
  • Add all forms of naloxone, a drug that can reverse an opioid overdose, and other evidence-based medications for opioid overdose to their preferred drug lists.10

2. Health Homes

Under the ACA, state Medicaid programs can implement Health Homes to provide robust care management services to individuals with chronic conditions, including those with SUDs. In the first two years of an individual’s enrollment in a Health Home, states can access 90 percent federal matching funds. For expansion adults, Health Home services will always be eligible for an enhanced match. States are also customizing Health Home SPA design and eligibility criteria for enrollees with SUDs. Maryland, Rhode Island and Vermont have implemented Health Home programs specifically targeting individuals with opioid use disorders and are providing services including intensive care management, care coordination, and provider and workforce education on evidence-based treatment for opioid use disorders.11

3. Leveraging Medicaid’s Purchasing Power

States can accelerate changes to Medicaid SUD coverage and benefits by leveraging Medicaid’s purchasing power to ensure that providers and plans are meeting best practices for SUD prevention and treatment. Given SUD provider capacity and access barriers in most states, Medicaid agencies also can endeavor to expand SUD provider participation in Medicaid (and increase capacity among existing providers) by increasing Medicaid payment rates.

States can go further in SUD delivery system reform by enhancing payment rates for providers who meet core SUD prevention and treatment best practices. Notably, new Medicaid managed care regulations provide states with the authority to require health plans to contract with certain providers, pay providers for high-priority services, and offer incentives to plans that meet certain metrics.12 In addition, several states have designed special plans for individuals with serious mental illness and SUDs, providing services specifically targeted to the needs of these complex populations.

Demonstration Waiver Strategies

Section 1115 demonstration waivers provide states with funding to undertake more far-reaching transformation of their SUD delivery systems. In July 2015, CMS issued a State Medicaid Director letter encouraging states to apply for new 1115 demonstrations that would “promote both systemic and practice reforms in their efforts to develop a continuum of care that effectively treats the physical, behavioral, and mental dimensions of SUD.”13 In conjunction with implementing comprehensive SUD delivery reform, a state may obtain an “IMD exclusion” waiver, which would permit a state to obtain federal matching funds for covering residential treatment services delivered at an institution for mental disease (IMD).14

States are using 1115 waivers to focus their SUD payment and delivery system reform efforts, draw down additional federal funding to support reform efforts, and hold providers accountable for meeting clinical quality and performance measures related to SUD prevention and treatment. Waiver strategies in states such as California, Massachusetts, New Hampshire, New Jersey, and New York include:

  • Establishing integrated delivery networks of physical health, behavioral health and social services providers.
  • Strengthening behavioral workforce capacity.
  • Implementing targeted clinical programs for beneficiaries with SUDs.
  • Expanding SUD benefits, using 1115 waivers to offer coverage for services that may not be authorized under standard Medicaid benefit packages or to populations that would not otherwise be eligible for Medicaid.
  • Increasing access to care management and care coordination services.15


Medicaid is the most powerful tool available for states to fund coverage of prevention and treatment for residents at risk of or actively battling opioid addition. The greatest opportunity to address the opioid crisis is in states that have elected to expand Medicaid, given the greater reach of the program and increased access to federal funds.