Financing Community Health Workers Through Medicaid

March 23, 2021|3:11 p.m.| ASTHO Staff

As the nation grapples with the ongoing COVID-19 pandemic, community health workers (CHWs) are being recognized for the role they play in improving health outcomes of our most vulnerable communities. In fact, the recently enacted American Rescue Plan Act of 2021 allocates funding for the recruitment, hiring, and training CHWs by public health departments.

Federal attention on community health workers comes after many years of state-level efforts to increase financing opportunities for CHWs. Some state and local agencies use grant funds (e.g., CDC 1815 funds, HRSA, state grants) to pay CHW salaries or contracted positions. Health systems and providers may also pay for CHW positions voluntarily through a core operating budget, which often begins with a pilot successfully demonstrating a return on investment for the provider.

CHWs are often paid for a broad range of services that are core to their work, like relationship-building and community outreach activities, that otherwise might not be reimbursed through insurance. Some states require their Medicaid managed care organizations (MCOs) to offer CHW-delivered services or employ CHWs as an administrative cost. Medicaid managed care financing mechanisms—which provide Medicaid health benefits and services through contracted arrangements between Medicaid agencies and MCOs—do not necessarily require increased payment but may shift how providers allocate capitated payments from the managed care plans. Indiana and South Dakota have submitted Medicaid state plan amendments to allow CHW reimbursement or other non-licensed providers for preventive services in fee-for-service settings. Alternatively, states could apply for a federal demonstration waiver to integrate CHWs into broader delivery system reform efforts.

Suffice to say, despite the effectiveness of CHWs in tackling social determinants of health, it has not been easy to figure out sustainable financing mechanisms for their work. So, states are also exploring opportunities to use Medicaid to fund CHWs. In the current legislative cycle, several states have introduced bills that would reimburse CHW services through Medicaid.

Minnesota introduced HF 69 to expand the range of CHW-delivered services covered by the current Medicaid reimbursement provisions. The bill provides a definition for care coordination provided by CHWs to include activities such as addressing a client’s mental health, social, economic, housing needs—as well as services such as dental care.

Indiana introduced HB 1147, which would allow the state to reimburse six types of Medicaid providers, including CHWs, for seven medically necessary telemedicine services. These telehealth services include conducting health assessments and providing consultation.

Illinois introduced HB 158, the Community Health Worker Certification and Reimbursement Act. Under this bill, CHW services are covered under the medical assistance program, a state-wide program providing healthcare related assistance to eligible residents. The Department of Healthcare and Family Services would develop services—like care coordination and diagnosis-related patient services—for which CHWs will be eligible for reimbursement through Medicaid.

Nevada introduced AB 191, which would direct the state to submit a Medicaid state plan amendment to CMS for coverage of CHW-delivered services. Provision of these services would be under the supervision of a physician, physician assistant, or an advanced practice registered nurse.

Texas introduced SB 136, which would allow each Medicaid MCO providing healthcare services under their Medicaid managed care program to categorize services provided by a community health worker as a quality improvement cost instead of as an administrative expense. Most people receiving Medicaid in Texas get coverage through the STAR managed care program which covers low-income children, pregnant women, and families who get their services through health plans they choose.

As states look to identify sustainable strategies for addressing disparities, CHWs will play an essential role in serving as bridges to communities where health and social inequities are prevalent. Expanding financing opportunities for CHWs will help strengthen the role of a community-based workforce in improving health outcomes. ASTHO will continue to track legislation and highlight new strategies that states can use to finance CHW programs.


Tequam Worku, MPH, is a senior analyst for clinical to community connections at ASTHO

The development of this blog is supported by the Health Resources and Services Administration of the U.S. Department of Health and Human Services under grant number 2 UD3OA22890-10-00. Information, content, and conclusions will be those of the author and should not be construed as the official position or policy of, nor should any endorsements be inferred by HRSA, HHS, or the U.S. Government.