Key Points
- States and managed care plans have the ability to cover services or settings that are substitutes for services or settings covered under the state plan as “in lieu of services and settings” (also known as ILOSs) in accordance with 42 CFR 438.3(e)(2) and 438.16.
- In January 2023, CMS provided additional guidance on use of ILOSs in Medicaid Managed Care and regulatory changes for ILOS were finalized in 2024 (SMD-2439-F). The final rule is the most up-to-date guidance on ILOSs.
FIM Opportunities
The guidance and regulatory changes address an innovative option states may consider employing in Medicaid managed care programs to reduce health disparities and address unmet health-related social needs (HRSNs), such as housing instability and nutrition insecurity, through the use of a service or setting that is provided to an enrollee in lieu of a service or setting (ILOS) covered under the state plan.
ILOSs can be utilized by states and their managed care plans to strengthen access to care by expanding settings options and address certain Medicaid enrollees’ HRSNs in order reduce the need for future costly state plan-covered services. An ILOS must comply with regulatory requirements, including those in 438.3(e)(2) and 438.16.
