CMS ends federal funding for state Medicaid DSHPs, DSIPs

CMS is putting an end to federal funding for certain state Medicaid initiatives, including designated state health programs (DSHP) and designated state investment programs (DSIP), the agency announced.

State Medicaid programs have historically used DSHPs and DSIPs to expand their Medicaid programming. DSHPs are usually part of 1115 Medicaid waivers and support non-Medicaid health-related services, such as a public health initiative aimed at bolstering mental healthcare. States use DSHPs to leverage federal matching money to free up Medicaid funds.

DSIPs are complementary, with state programs also working them into 1115 Medicaid waivers. State Medicaid programs have historically used DSIPs for non-medical services, such as social determinants of health and health equity initiatives.

CMS stated that "DSHPs and DSIPs are essentially a tap on the federal Treasury for programs that states have determined are priorities outside of the federal commitment to the Medicaid program. These programs do not tie directly to services provided to Medicaid beneficiaries."

Key examples of DSHPs and DSIPs include grants to labor unions to reduce the cost of health insurance for some childcare providers, non-medical in-home services such as housekeeping and grants to provide high-speed internet to rural healthcare providers, often used to address the rise of virtual and remote care.

DSHPs and DSIPs total around $.27 billion in eligible expenditures for 2025, up from $886 million in 2019, CMS added. The agency said such programs are state-funded programs that would not have met the threshold for federal Medicaid funding without "creative interpretations" of 1115 Medicaid waivers. To that end, the agency said it will end federal matching for these programs.

Sara Heath has reported news related to patient engagement and health equity since 2015.