Brief Medicaid Flexibilities 101

Exercising Flexibility Through State Plan Design 

The state plan is the agreement between the state or territorial Medicaid agency and Centers for Medicare & Medicaid Services that describes how the state administers the program within federal requirements. States and territories can exercise flexibility over Medicaid program activities through state plan design, including:  

• Beneficiary appeals and fair hearing processes. 

• The amount, duration and scope of covered benefits. States can also choose whether to cover optional benefits—like prescription drugs or home- and community-based services—in addition to federally mandated benefits.  

• Whether the state provides individuals with premium assistance to purchase employer-sponsored or marketplace exchange health insurance. 

• How the Medicaid program is structured, who is responsible for day-to-day operations, and how payments flow through the system through delivery system design. This includes whether the state agency administers the program itself or contracts with private commercial insurance organizations, known as managed care organizations, to administer the program.  

• Who is eligible for Medicaid benefits and the income, asset and functional thresholds for eligibility, including coverage of optional eligibility pathways. 

• Processes for enrolling and renewing eligibility for beneficiaries.  

• Whether the state requires premiums and cost sharing for certain covered benefits and beneficiaries and the amounts required. 

• The payment rates and methodologies for providers and managed care organizations, including value-based payments that incentivize providers to improve patient outcomes and control costs. 

When a state is planning to make a change to its program policies or operational approach, states send state plan amendments, or SPAs, to the CMS for review and approval. States also submit SPAs to adopt optional flexibilities in the program, request program changes, make corrections, or update their Medicaid state plan with new information. 

Exercising Flexibility Through Waivers 

While states and territories must generally comply with federal requirements to receive federal funding, waivers permit states and territories to waive federal requirements and continue to receive federal funding. Several types of waivers are available to states. However, all waivers require CMS approval, which may change based on the priorities of the current White House administration.  

The most common types of waivers are: 

• Section 1115 research and demonstration waivers permit states and territories broad authority to waive most state plan requirements to carry out a research or demonstration project that furthers the goals of the Medicaid program. CMS can also approve federal funding for services and populations not covered in the state plan. Section 1115 waivers can be comprehensive and cover the entirety of a state’s Medicaid program or narrow and used for a specific purpose.  
• All 50 states, D.C., the United States Virgin Islands and Guam have pending or approved Section 1115 waiver(s). 
• Section 1915(b) waivers permit states to adopt statewide managed care delivery systems. 
• Section 1915(c) waivers permit states to offer home- and community-based services to some, but not all, Medicaid beneficiaries as an alternative to institutional care.  
• 46 states and D.C. use Section 1915(c) waivers. 

Other types of specific or time-limited waivers may be used to give states flexibility to deal with emergencies or disaster relief, or provide administrative flexibility for large-scale, temporary projects like unwinding from the public health emergency continuous coverage.