Laying the Groundwork to Sustain CalAIM: DHCS Concept Paper

The California Department of Health Care Services (DHCS) jump-started the CalAIM Section 1115 and Section 1915(b) waiver renewal process, over a year ahead of the waivers expiring, by reaffirming its commitment to Medi-Cal innovation and transformation currently underway with the release of a concept paper explaining the state’s approach to renewal requests. The current CalAIM Section 1115 and Section 1915(b) waivers will expire on December 31, 2026 unless renewed.

In the context of seismic shifts in priorities and funding at the federal and state levels due to the signing of H.R.1, the federal reconciliation bill, and a state budget deficit, respectively, the concept paper does not include new or expanded initiatives, programs, or covered populations. Instead, backed by data demonstrating both financial and outcomes-based achievements of CalAIM so far, DHCS intends to ask CMS to renew a majority of CalAIM initiatives to sustain the momentum of the state’s Medi-Cal transformation efforts.

While the concept paper also touches on transformation under way via BH-CONNECT, the BH-CONNECT Section 1115 waiver is approved through December 31, 2029, and will not be part of 2027 renewal discussions.

The concept paper is out for public comment through August 22, 2025.

Proposed Initiatives for Inclusion in 2027 Section 1115 and 1915(b) Waivers

DHCS intends to request approval from the Center for Medicare & Medicaid Services (CMS) to sustain a majority of initiatives and programs authorized in the current waivers.¹

Below is a list of the key programs and initiatives in the current Section 1115 waiver, indication of whether DHCS intends to request their inclusion in the 2027 waiver renewals, and considerations.²

DHCS does intend to request renewal for these programs and initiatives:

• Recuperative Care & Short-Term Post-Hospitalization Housing

  Given rescission of CMS Health Related Social Needs guidance in March 2025, approval of services that provide funding for room and board will likely face challenges at the federal level.

  DHCS will need to provide significant data demonstrating the cost-effectiveness of these services during waiver negotiations, but even with a demonstration of cost-effectiveness, DHCS notes that it may need to remove financing for room and board from these services and seek approval via another means.

  Link: https://www.dhcs.ca.gov/Documents/MCQMD/DHCS-Community-Supports-Policy-Guide.pdf

• Contingency Management

  A cost-effective program that combines motivational interviewing with behavioral health interventions  to treat stimulant use disorders.

  DHCS has strong data to support the effectiveness of this program (a ~10% increase in negative urine drug tests over average rate). In addition, its goals are generally in alignment with the Trump administration's Drug Policy Priorities.

  Link: https://www.dhcs.ca.gov/Pages/DMC-ODS-Contingency-Management.aspx

• Justice-Involved Reentry Services

  Aims to connect individuals exiting incarceration to community-based care, offering them services up to 90 days before release to stabilize health conditions.

  This initiative is in its first year of implementation. Services are available in 33 state prison sites and 19 county facilities across 10 counties with all counties required to implement by October 2026.

  Link: https://www.dhcs.ca.gov/CalAIM/Justice-Involved-Initiative/Pages/home.aspx

• Traditional Healer and Natural Helper Services (traditional health care practices)

  In California, traditional healer and natural helper services are currently limited to the Drug Medi-Cal organized delivery system. These services went live in March 2025. These are deeply rooted cultural practices provided by Indian Health Care Providers.

  DHCS did not include a request to expand into managed care or specialty mental health delivery systems in the concept paper but did not preclude expansion.

  Link: https://www.dhcs.ca.gov/Pages/Traditional-Health-Care-Practices.aspx

• Medi-Medi Plans

  Referred to as Exclusively Aligned Enrollment Dual Special Needs Plans federally, Medicare Medicaid Medi-Medi plans, or Medi-Medi plans, are Medicare Advantage Plans that combine Medi-Cal benefits. 

  Over 330,000 members are enrolled in Medi-Medi plans in 12 California counties, with 30 additional counties going live in 2026. 

  Implementation of Medi-Medi plans was a federal-state effort following the end of Financial Alignment Initiatives (FAIs), thus support for this initiative at the federal level seems likely.

  Link: https://www.dhcs.ca.gov/services/Documents/Joining-a-MMP-English.pdf

DHCS does not intend to request renewal for these programs and initiatives:

• PATH Enhanced Care Management and Community Supports Capacity Building Funds

  PATH funding was an initial investment to expand and sustain the successes of Whole Person Care and the Health Homes Program into the implementation of Enhanced Care Management and Community Supports. It also supports infrastructure development for pre-release services.

  As the transition from WPC and HHP to ECM and Community supports is complete and in-reach services have begun, this is an expected discontinuation.

  Link: https://www.dhcs.ca.gov/CalAIM/Pages/CalAIM-PATH.aspx

• Designated State Health Programs (DSHP)

  DHSP funding allows states to use federal matching funds for state-funded programs that do not otherwise qualify for Medicaid match.

  In the current CalAIM Section 1115 waiver, this funding was authorized to support PATH, which is not part of the State’s renewal request.

  Additionally, the Trump administration indicated it will not approve or renew requests for federal matching funds for DSHP.

• Post-Partum Benefits for Low-Income Pregnant Women

  Authorized postpartum benefits for pregnant women with incomes between 109% - 138% of the FPL, that includes all benefits that would otherwise be covered for women with incomes below 109% of the FPL.

  Waiver inclusion no longer necessary; included in the State Plan.

  Per the American Rescue Plan Act and effective April 1, 2023, California amended its State Plan to broaden the scope of coverage for eligible pregnant individuals to include all medically necessary services both during pregnancy and for 365 days postpartum. Given that this service is in the State Plan, it no longer needs approval via the CalAIM Section 1115 waiver.

Additionally, and as expected, DHCS intends to request continued approval of the following delivery system models via the Section 1915(b) waiver renewal. These requests are not likely to face significant federal scrutiny.

• Medi-Cal managed care, operated by commercial and local managed care health plans.

• Dental managed care, operated by dental managed care plans in Sacramento County.

• Specialty mental health, operated by California counties.

• Drug Medi-Cal Organized Delivery System, operated by California counties, at their option.

Spotlight: Community Supports

While DHCS will request approval of the two Community Supports currently authorized under the Section 1115 waiver, the remaining twelve community supports qualify under the In Lieu of Services (ILOS) authority, per 42 CFR § 438.3(e)(2). Since the implementation of Community Supports in California, CMS issued additional guidance and regulation, validating that California no longer needs STCs via the 1915(b) waiver to operate these Community Supports as ILOS. DHCS will request removal of the Community Supports 1915(b) STCs related to Community Supports. These services are allowable and memorialized in Managed Care Plan contracts and will continue to be available at the plan’s option.

Timeline and Next Steps

The concept paper is open for public comment through August 22, 2025. Comments should be submitted to 1115Waiver@dhcs.ca.gov. After DHCS reviews comments, it will finalize the paper and submit to CMS.

Once CMS reviews the paper, there will be a 30-day federal public comment period. Following that period, CMS and DHCS will begin negotiations, likely spanning a majority of 2026.

We can expect a waiver approval, reflecting the results of the negotiation, in late December 2026, for implementation on January 1, 2027.

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References

1. Note that this concept paper is focused on the renewal of the CalAIM Section 1115 and 1915(b) waivers and the BH-CONNECT waiver, which among other initiatives, authorizes Transitional Rent.

2. DHCS also plans to request, via Section 1115 Authority to continue to waive plan choice under managed care, waiver the IMD exclusion through DMC-ODS, approval for Indian Health Services and Tribal facilities to provide chiropractic services to Medi- Cal members, approval for Community-Based Adult Services, Medi-Cal coverage for out-of-state former foster youth, approval for the Global Payment Program, and an increase in the asset test for deemed SSI populations.

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Author

Lucy Pagel [Director]