1115 Waiver Guidance Introduces New Hurdles to State Medicaid Innovation

On June 11, the Centers for Medicare and Medicaid (CMS) issued guidance implementing Section 71118 of HR 1, which codifies budget neutrality requirements for Medicaid 1115 waivers. The guidance adopts a new process and methodology that will introduce additional administrative and budgetary pressures for states using 1115 demonstration waivers to innovate and test new models, including those that address health-related social needs (HRSN) such as housing and nutrition.
1115 Waivers

Section 1115 of the Social Security Act provides the Secretary of Health and Human Services with broad authority to approve state demonstration projects that waive certain portions of federal Medicaid law and authorize new expenditures to promote the objectives of the Medicaid program. 1115 demonstrations have been used to expand coverage or benefits, modify delivery systems, restructure financing, and make other changes. Some 1115 demonstrations are narrow and focus on a specific population, others are broad and comprehensive, even encompassing a state’s entire Medicaid program.

CMS has long held the policy and practice that 1115 demonstration waivers must be budget neutral to the federal government, meaning that the federal government should not spend more money than it otherwise would have without the waiver. According to CMS, nearly one-third of Medicaid spending flows through 1115 demonstration waivers. Currently, 23 states are using 1115 demonstrations to address HRSN. States most often use the waivers to address housing and nutrition, but some also address employment and other supports. Many of these demonstration waivers also include funding for the development of infrastructure (e.g., technology, outreach, education, etc.) to support successful implementation of the proposed HRSN services.

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