Section 1115 Medicaid demonstration waivers permit states to test innovative ways to design and improve their Medicaid and CHIP programs, beyond what is required under current law. Section 1115 of the Social Security Act authorizes the secretary of the Department of Health and Human Services to approve experimental, pilot or demonstration projects that test and evaluate program changes in their Medicaid and Children’s Health Insurance Programs (CHIP) to improve care, increase efficiency and reduce costs without increasing federal Medicaid expenditures.
Under the waivers, states have considerable flexibility to design and improve their programs:
- Providing coverage to otherwise ineligible populations.
- Providing services not typically covered by Medicaid.
- Experimenting with cost sharing and other payment reforms.
- Implementing changes to the delivery system.
Waivers vary considerably across states, from broad approaches that expand coverage, change delivery systems or alter benefits and cost-sharing to narrow approaches that focus on specific populations and services, such as allowing otherwise ineligible adults to access family planning services. Through the waiver process, states typically receive approval for a five-year period, after which they have the option of extending their demonstrations for an additional three years.
Key Facts: 1115 Waivers
Allows states flexibility to design and improve their Medicaid and CHIP programs.
State demonstrations must promote Medicaid program objectives and remain budget neutral to the federal government.
30 states, including the District of Columbia, are currently operating at least one Section 1115 waiver, according to CMS.
Subject to evaluation and typically receive approval for a 3-5 year period.
Each waiver application is unique, and states use them to achieve different purposes, including to expand Medicaid and implement delivery system reforms. As of January 2018, 35 states were operating at least one approved Section 1115 waiver, according to the Kaiser Family Foundation. Their analysis found that states were requesting waivers to test changes related to delivery systems and behavioral health (16 states each), managed long-term services and supports (12 states), Medicaid expansion and eligibility or enrollment restrictions (eight states each), and benefit restrictions or incentives for healthy behaviors (six states). As of January 2018, Kentucky was the only state with approval to require certain Medicaid beneficiaries to work or participate in community engagement as a condition for eligibility—although several other states have submitted requests.
Before passage of the Affordable Care Act, states typically used 1115 waivers to expand coverage to childless adults. The federal law’s expansion changes, however, enabled states to cover this population without first obtaining a waiver. As of March 2017, 31 states and the District of Columbia expanded their Medicaid programs under the law’s provisions. Seven states—Arizona, Arkansas, Iowa, Indiana, Michigan, Montana and New Hampshire—are using a Section 1115 waiver to implement their Medicaid expansion. State examples include:
- Arkansas was the first state to expand Medicaid under the ACA to childless adults by means of a waiver. The implications of its provision has been closely examined by policymakers.
- Indiana describes its demonstration as a “consumer-driven health plan,” which seeks to “reduce the number of uninsured, low-income Hoosiers and increase access to healthcare services; promote value-based decision-making and personal health responsibility; promote disease-prevention and health promotion to achieve better health outcomes; promote private market coverage …; and assure state fiscal responsibility and efficient management of the program.”
What are the waiver rules? Section 1115 waiver applicants must demonstrate that federal Medicaid expenditures will not exceed what would have occurred without the demonstration, and that the waivers will:
- Increase and strengthen overall coverage of low-income individuals in the state.
- Increase access to, stabilize, and strengthen providers and provider networks available to serve Medicaid and low-income populations in the state.
- Improve health outcomes for Medicaid and other low-income populations in the state.
- Increase the efficiency and quality of care for Medicaid and other low-income populations through initiatives to transform service delivery networks.
States are required to provide matching funds and rely on a variety of sources to finance Medicaid expenditures, including general funds, intergovernmental transfers (e.g., from public hospitals or local governments) or state-funded health programs.