California’s CalAIM (California Advancing and Innovating Medi-Cal) initiative is approaching a pivotal milestone as its federal waiver is set to expire at the end of 2026. Launched in January 2022 under a Section 1115 demonstration waiver, CalAIM represents a major reform effort aimed at transforming how Medi-Cal serves its most vulnerable populations. Operated by the Department of Health Care Services (DHCS) through Managed Care Plans, CalAIM focuses on delivering integrated, whole-person care to high-need members.

California’s CalAIM waiver expires December 31, 2026. The state has already begun the renewal process, with the Department of Health Care Services (DHCS) releasing a concept paper in July 2025 outlining its priorities for the next five years. Key priorities of the paper include continuing Enhanced Care Management (ECM) through current Managed Care Plan authority and Community Supports (CS) through waiver extension, expanding justice-involved reentry services, scaling contingency management for substance use disorders, and integrating traditional healer services. The paper also highlighted California’s commitment to value-based payment models, improved data infrastructure, and stronger accountability mechanisms.
With a formal waiver renewal application planned for 2026, stakeholders must understand how the state and federal policy landscape has shifted and how these changes may affect waiver extension approval.

1. CalAIM Delivered Results

ECM which operates within the broader CalAIM initiative but is authorized as a managed care plan responsibility under federal Medicaid regulations, has shown to have substantial impact on the member outcomes. Since launching in January 2022, there have been over 326,000 members enrolled in ECM and over 368,000 Medi-Cal members in CS.

Early data shows ECM members have experienced reduced emergency department visits, decreased hospital readmissions, and improved access to primary care and behavioral health services. The program’s whole-person approach addresses medical, behavioral health, and social needs simultaneously, filling critical gaps in traditional care delivery. CS are also beginning to exemplify some positive outcomes, with Housing Deposits showing a 31.6% decrease in hospital, emergency room, and long-term care costs, and Respite Care has demonstrated a 61.3% decrease in inpatient and long-term care costs.

2. California to Double Down on What Works

California’s renewal strategy focuses on sustaining and strengthening existing programs backed by data and evidence. Priority initiatives mimic what was highlighted in the concept paper including ECM, CS, the Justice-Involved reentry initiative, contingency management for substance use disorders, and other social services. The state’s guiding principles emphasize member-centered care, efficiency, scalability, and evidence-based approaches.

California is requesting funding through multiple mechanisms to support these programs. Managed care plans will continue to receive enhanced capitation rates to cover ECM and CS services, with rates adjusted based on member risk stratification and service utilization. The state is also requesting directed payment authority to ensure provider reimbursement for specialized services like justice reentry supports. Additionally, California plans to leverage state general fund investments combined with federal matching dollars to sustain infrastructure elements.

3. Waivers that Complement CalAIM

A separate behavioral health waiver, BH-CONNECT, doesn’t expire until 2029. The BH-CONNECT waiver was specifically called out in the concept paper as a complementary initiative that will continue alongside CalAIM’s renewed services, ensuring behavioral health infrastructure remains stable while CalAIM undergoes renewal. The state plans to submit its formal renewal application to federal regulators in 2026 for implementation beginning January 1, 2027.

4. The Federal Landscape Has Shifted

The federal administration has adopted a more restrictive approach to Section 1115 waivers, withdrawing previous guidance that supported addressing social determinants of health through Medicaid. Federal officials have indicated they won’t approve new funding for programs like rent assistance and medically tailored meals under future waiver applications. Additionally, the administration announced it will not approve or renew requests for federal matching funds, which previously helped finance CalAIM infrastructure investments.

Understanding this, California is taking a strategic and measured approach to its renewal application. Rather than proposing expansive new initiatives that might invite rejection, the state is building its case around proven programs with strong data demonstrating health outcomes and reduced costs. This strategy reflects California’s recognition that the CalAIM waiver is too critical to risk by overreaching. Providers should continue engaging fully with CalAIM programs, as the state’s evidence-based approach positions the waiver favorably for renewal.

5. Services Face Uncertain Futures

While most CalAIM initiatives are slated for renewal, some services may be at risk due to the changed federal stance on health-related social needs. The state conducting comprehensive evaluations of all CS to determine which services to continue, modify, or sunset based on updated cost-effectiveness data and outcomes. Providers should focus their efforts on CS services with the strongest evidence base and highest impact: Housing Transition/Navigation Services, Housing Deposits, Housing Tenancy and Sustaining Services, and Asthma Remediation have shown particularly strong cost savings and health improvements. Medical Respite, Sobering Centers, and Day Habilitation Programs also demonstrate solid outcomes.

Key Takeaways: Innovate, Optimize and Adapt to Succeed

The combination of federal funding restrictions and state budget pressures means organizations must adapt. COPE Health Solutions understands both California and national policy shifts affecting Medicaid programs, and our team can help your organization navigate these changes to ensure policy adaptability, prevent gaps in member care delivery, and protect your revenue streams.

How COPE Health Solutions Can Help:

• Policy Navigation: We’ll help you interpret the renewal’s implications for your specific programs and develop strategic responses to evolving state and federal requirements.
• Data and Outcomes Strategy: Our team can strengthen your data infrastructure to demonstrate the cost-effectiveness and health outcomes regulators demand for program continuation.
• Quality Performance Enhancement: We bring market-leading technology and expertise to enable enhanced quality performance, including care gap closure, to improve financial sustainability and ROI from ECM programs.
• Value-Based Payment Optimization: Our team helps organizations improve performance on value-based payment agreements, maximizing revenue opportunities in an increasingly outcomes-focused environment.
• CalAIM TA Marketplace Support: We guide organizations through securing ECM agreements via the CalAIM Technical Assistance marketplace, streamlining the contracting process.
• ECM Infrastructure Leverage: We support organizations in leveraging ECM infrastructure to deliver Community-Initiated Care Management (CICM) services and add strategic value to health plan partnerships.

To learn more about our services, contact us directly at info@copehealthsolutions.com.