Section 1115 Medicaid Demonstration Waivers: The Current Landscape of Approved and Pending Waivers
Section 1115 Medicaid demonstration waivers provide states an avenue to test new approaches in Medicaid that differ from federal program rules. Waivers can provide states considerable flexibility in how they operate their programs, beyond what is available under current law. While there is great diversity in how states have used waivers over time, waivers generally reflect priorities identified by states and the Centers for Medicare and Medicaid Services (CMS) (see Appendix A). Marking a new direction for Medicaid waivers by the Trump Administration, on November 7, 2017, CMS posted revised criteria for evaluating whether Section 1115 waiver applications further Medicaid program objectives (see Appendix B)1 and on January 11, 2018, CMS issued new guidance for Section 1115 waiver proposals that impose work requirements (referred to as community engagement) in Medicaid as a condition of eligibility. As of March 5, 2018, there are 36 states with 44 approved waivers2 and 23 states with 24 pending waivers (see Appendices C and D for detailed tables).3,4 Our waiver tracker contains the most current updates. This brief discusses the current landscape of approved and pending demonstration waivers (Figure 1). Key recent developments include:
- Recent waiver approvals for Kentucky, Indiana, and Arkansas include work requirements. Other provisions approved for the first time include premiums at 4% of income, a premium surcharge for tobacco users, and coverage lock-outs for failure to timely renew coverage or report income changes, along with a lock-out for failure to pay premiums, for most adults. Several states have waivers pending at CMS with similar elements that would affect expansion and non-expansion populations.
- Other states have waivers pending that include provisions not approved before such as drug screening and testing, eligibility time limits, and use of the ACA enhanced match for partial expansions. Some of these policies in addition to work requirements align Medicaid more with welfare rules than other health coverage program rules.
- State interest in behavioral health waivers, including mental health and substance use disorders, remains high. As of March 5, 2018, there are 19 approved and 13 pending behavioral health waivers in 26 states.
What are Section 1115 Medicaid Waivers and How Do They Work?
Authority and Purpose. Under Section 1115 of the Social Security Act, the Secretary of HHS can waive specific provisions of major health and welfare programs, including certain requirements of Medicaid and CHIP. This authority permits the Secretary to allow states to use federal Medicaid and CHIP funds in ways that are not otherwise allowed under the federal rules, as long as the Secretary determines that the initiative is an “experimental, pilot, or demonstration project” that “is likely to assist in promoting the objectives of the program.” States can obtain “comprehensive” Section 1115 waivers that make broad changes in Medicaid eligibility, benefits and cost-sharing, and provider payments across their programs. There also are narrower Section 1115 waivers that focus on specific services or populations. While the Secretary’s waiver authority is broad, it is not unlimited. There are some elements of the program that the Secretary does not have authority to waive, such as the federal matching payment system for states, or requirements that are rooted in the Constitution such as the right to a fair hearing. Waivers are typically approved for a five-year period and can be extended, typically for three years. However, according to a CMCS Informational Bulletin released on November 6, 2017, CMS will consider approving “routine, successful, non-complex” Section 1115 waiver extension requests for up to 10 years.5,6
Financing. While not set in statute or regulation, a longstanding component of Section 1115 waiver policy is that waivers must be budget neutral for the federal government. This means that federal costs under a waiver must not exceed what federal costs would have been for that state without the waiver, as calculated by the administration. The federal government enforces budget neutrality by establishing a cap on federal funds under the waiver, putting the state at risk for any costs beyond the cap.
Transparency, Public Input, and Evaluation. The Affordable Care Act (ACA) made Section 1115 waivers subject to new rules about transparency, public input, and evaluation. In February 2012, HHS issued new regulations that require public notice and comment periods at the state and federal levels before new Section 1115 waivers and extensions of existing waivers are approved by CMS.7,8 The ACA also implemented new evaluation requirements for these waivers, including that states must have a publicly available, approved evaluation strategy.9 States have traditionally been required to submit quarterly reports and must submit an annual report to HHS that describes the changes occurring under the waiver and their impact on access, quality, and outcomes.10,11,12
What is the Current Landscape of Section 1115 Medicaid Waivers?
States have used waivers for many purposes, including to expand coverage, change delivery systems, alter benefits and cost-sharing, modify provider payments, and quickly extend coverage during an emergency. Increasingly, states are using Section 1115 waivers to combine programs under one single authority (e.g., including authorities otherwise available under Section 1915 (b) managed care waivers and/or Section 1915 (c) home and community based services waivers, along with Section 1115 authority for other eligibility, benefits, delivery system, and payment reforms).
As of March 5, 2018, 36 states had 44 approved Section 1115 waivers 23 states had 24 pending waivers (not including family planning or CHIP-only waivers13). Some states have multiple waivers, and many waivers are comprehensive and may fall into a few different areas. Major areas of focus of current approved state Section 1115 waivers include the implementation of alternative ACA Medicaid expansion models; eligibility and enrollment restrictions; work requirements; benefit restrictions, copays and healthy behaviors; delivery system reform initiatives, especially efforts that tie provider incentive payments to performance goals; integrating physical and behavioral health or providing enhanced behavioral health services to targeted populations; authorizing the delivery of Medicaid long-term services and supports (LTSS) through capitated managed care; and responding to public health emergencies and providing coverage for other targeted groups. These themes are discussed in more detail below (also see Appendix C).
ACA Expansion Waivers. As of March 5, 2018, eight states (AR, AZ, IA, IN, KY, MI, MT, and NH) have approved waivers to implement the ACA Medicaid expansion in ways that extend beyond the flexibility provided by the law. With the exception of Kentucky, which recently obtained approval to transition its Medicaid expansion from a traditional state plan amendment to a waiver, other Medicaid expansion waivers were originally approved during the previous Administration, in part because states could not otherwise secure political support to expand coverage under existing ACA rules. While the waivers are each unique, the waivers generally incorporate some eligibility and enrollment restrictions, benefit restrictions, and healthy behavior incentive programs. Generally, prior to the original approval of the Indiana waiver in January 2015, these provisions applied to the ACA expansion population and not to traditional Medicaid populations. (More details about the provisions are discussed in the relevant sections below.)
Eligibility and Enrollment Restrictions. To date, CMS has approved certain eligibility- and enrollment-related waiver provisions as part of ACA Medicaid expansion waivers, including charging premiums beyond what is allowed under federal law; eliminating retroactive eligibility; making coverage effective on the date of the first premium payment (instead of the date of application); and locking out certain expansion adults who are disenrolled for unpaid premiums (Table 1). When originally approved in January 2015, Indiana’s waiver was the first ACA expansion waiver to waive retroactive eligibility; make coverage effective on the date of the first premium payment instead of the date of application; and bar certain expansion adults from re-enrolling in coverage for six months if they are dis-enrolled for unpaid premiums. Some of these provisions were subsequently approved in other states. In addition, Indiana applied some waiver provisions to both expansion and non-expansion populations. The January 2018 Kentucky approval included additional eligibility restrictions approved for the first time, such as coverage lock-outs for failure to timely renew coverage or report income changes for most adult populations, and the February 2018 approval of Indiana’s waiver extension/amendment included the first ever approval of a premium surcharge for tobacco users.
Other states are seeking to apply recently approved and new restrictions to both expansion and traditional Medicaid populations. Pending waiver provisions that have never been approved include time limits on coverage, drug screening and testing, and allowing for the enhanced ACA federal match rate for limited expansion coverage to 100% FPL.14,15 Many of the approved and proposed eligibility and enrollment changes create complex documentation and administrative processes that could increase administrative burden for states and prove difficult for beneficiaries to navigate, potentially resulting in coverage losses among eligible individuals.
|Table 1: Approved and Pending Eligibility and Enrollment Restrictions|
|Waiver Provision||Expansion Population
Approved: 8 states
Pending: 4 states
Approved: 4 states
Pending: 6 states
|Premiums & Premium Assistance|
|Premiums/Monthly Contributions◊||Approved: AR, AZ, IAi, IN, KY, MI, MT
|Approved: IN, KY
Pending: ME, WI
|Disenrollment and Lock-Out for Non-Payment of Premiums||Approved: IN, KY, MT
|Pending: ME, WI*|
|Disenrollment (Without Lock-Out) for Non-Payment of Premiums||Approved: AZ, IA||N/A|
|QHP Premium Assistance||Approved: AR, MIii, NH||N/A|
|Tobacco Premium Surcharge||Approved: IN||Approved: IN|
|Coverage Effective Date & Time Limits on Coverage|
|Waive Retroactive Eligibility^||Approved: ARiii, IA, IN, KY, NHiv
|Approved: IA, KY, UT*v
Pending: ME, NM
|Waive Reasonable Promptness+||Approved: IN, KY
|Approved: IN, KY|
|Time Limit on Coverage||Pending: AZ||Pending: KS, ME, UT*vi, WI*|
|Eliminate Hospital Presumptive Eligibility||N/A||Pending: ME, UT*vi|
|Eligibility Determinations and Redeterminations|
|Lock-out for Failure to Timely Renew Eligibility||Approved: IN, KY||Approved: KY|
|Lock-out for Failure to Timely Report Changes Affecting Eligibility||Approved: KY||Approved: KY|
|More Frequent Eligibility Redeterminations||Pending: AZvii||N/A|
|Drug Screening and Testing||N/A||Pending: WI*|
|Asset Test for Poverty-Related Eligibility Pathways||N/A||Pending: ME|
|Waive MAGI Financial Methodology||N/A||Pending: TX*|
|Limit expansion eligibility to 100% FPL with enhanced match||Pending: AR, MA||N/A|
|Eliminate TMA Coverage Pathway for Parents/Caretakers||Pending: NM|
|*“Non-expansion” populations include traditional Medicaid populations (low-income parents, Transitional Medical Assistance for those moving from welfare to work, former foster care youth, medically needy, etc.) but may also refer to narrow/limited populations that gained coverage through the demonstration waiver. For example, *WI’s waiver covers childless adults ages 19 to 64 with income up to 100% FPL (without enhanced ACA matching funds). *UT’s waiver expands eligibility and provides a limited benefit package to certain nonelderly adults up to 100% FPL (the “PCN group”), and recently extended coverage to a limited group of childless adults who are homeless and have behavioral health needs up to 5% FPL. *TX’s pending waiver refers to its “Healthy Women” family planning waiver.
◊ NC’s amended Section 1115 application, submitted on November 20, 2017, includes provisions (premiums and work requirements) that would affect newly eligible adults only if proposed state legislation (“Carolina Cares”) is enacted. These provisions are not reflected in the table, as the state has not yet added this population to its Medicaid program.
^ Six other states (DE, MA, MD, RI, TN, and UT) have retroactive coverage waivers that pre-date the ACA and may have been associated with achieving the budgetary savings necessary to expand coverage before federal law authorized the use of Medicaid funds for childless adults. Some of these waivers apply to limited populations, and most have exceptions for seniors and people with disabilities.
+ Reasonable promptness waivers allow states to delay the start of coverage until after the enrollee’s first premium is paid or after the expiration of the 60-day payment period.
iIA: Premiums are waived for the 1st year of enrollment. In later years, premiums are waived if beneficiaries complete specified healthy behavior activities.
iiMI: Starting April 2018, beneficiaries with incomes above 100% FPL who are not medically frail must meet a healthy behavior requirement to remain in a Medicaid MCO; those who do not will receive Medicaid premium assistance for Marketplace QHP coverage.
iiiAR: State waives retroactive eligibility except for the 30 days prior to the date of application for coverage.
ivNH: Waiver was to be implemented only after CMS determined that retroactive coverage is unnecessary, based on state data showing no gaps in coverage for newly eligible adults prior to their Medicaid application date and upon renewal.
vUT: This provision applies to only the PCN group.
viUT: These provisions would apply to both the PCN and limited childless adult groups.
viiAZ: Proposes to redetermine eligibility every 6 months for all expansion enrollees and every 3 months for individuals who have a change in circumstance that results in non-compliance with waiver requirements.
Work Requirements. On January 11, 2018, CMS issued a State Medicaid Director Letter providing new guidance for Section 1115 waiver proposals that impose work requirements (referred to as community engagement) in Medicaid as a condition of eligibility. The guidance describes the potential scope of requirements that could be approved and presents the case for how these policies promote the objectives of the Medicaid program. On January 12, 2018, CMS approved the first work requirement waiver in Kentucky; two additional work requirement waiver approvals followed in Indiana (February 1, 2018) and Arkansas (March 5, 2018). Unlike in Kentucky and Indiana, where beneficiaries who fail to comply with the work or reporting requirements are able to regain coverage after coming back into compliance according to state rules,16 in Arkansas, beneficiaries deemed non-compliant with the work or reporting requirements for any three months within a plan year will be locked out of coverage until the next plan year, at which point they must file a new application to receive an eligibility determination. As of March 5, 2018, seven states (AZ, KS, ME, MS, NH, UT, and WI) have pending waiver requests at CMS that would require work as a condition of eligibility for expansion adults and/or traditional populations. Pending waivers in some of these states propose connecting work requirement provisions to lifetime limits on coverage (e.g., by counting months of non-compliance with work requirements against the lifetime limit on Medicaid eligibility), but these provisions have not been approved by CMS to date.
Medicaid work requirement proposals generally would require beneficiaries to verify their participation in approved activities, such as employment, job search, or job training programs, for a certain number of hours per week in order to receive health coverage. The proposals typically would exempt certain populations, but little detail is available about how the policies would be administered and how the exemptions would be obtained. Additionally, by placing new documentation requirements on all populations subject to the work requirement (including individuals who are working or should qualify as exempt), these proposals create barriers for eligible individuals to obtain and maintain coverage and increase administrative burdens and costs for states. Table 2 summarizes the covered populations and age-related exemptions for each state waiver.
|Table 2: Approved and Pending Work Requirement Waivers – Covered Populations and Age Exemptions|
|AR – approved||AZ||IN – approved||KS||KY – approved||ME||MS||NH||UT||WI|
(parents 0-38% FPL)
(parents 0- 27% FPL)
(parents 60-100% FPL; childless adults 0-100% FPL)
(childless adults 0-100% FPL)
|*Other groups such as Transitional Medical Assistance, family planning only, or former foster care youth, may be included in some states.
^ NC’s amended Section 1115 application, submitted on November 20, 2017, includes provisions (premiums and work requirements) that would affect newly eligible adults only if proposed state legislation (“Carolina Cares”) is enacted. These provisions are not reflected in the table, as the state has not yet added this population to its Medicaid program.
Benefit Restrictions, Copays, and Healthy Behaviors. CMS has approved waivers that eliminate non-emergency medical transportation (NEMT) and implement healthy behavior incentives (tied to premium or cost-sharing reductions). Kentucky has waiver approval to assess fees in excess of the federal maximum for non-emergent use of the emergency room,17 and Indiana previously had approval to charge these copays but this authority was dropped in the February 2018 extension approval.18 States are continuing to seek authority to implement similar provisions, with some states seeking to apply these provisions to traditional (non-expansion) populations. Available data about healthy behavior programs in Iowa, Michigan, and Indiana suggest that complex provisions require extensive administrative resources and beneficiary education to implement.19,20 Massachusetts also submitted a waiver amendment that requests permission to adopt a closed prescription drug formulary. Texas has a pending family planning waiver that includes a request to waive beneficiary freedom of choice for family planning services, a provision not approved by CMS to date. New Mexico seeks to waive the federal Early and Periodic Screening, Diagnosis and Treatment (EPSDT) requirement for 19 and 20 year old expansion adults and traditional adults covered under the “parent/caretaker” category. 21
|Table 3: Approved and Pending Benefit, Copay, and Healthy Behavior Provisions|
|Waiver Provision||Expansion Populations
Approved: 6 states
Pending: 2 states
Approved: 5 states
Pending: 6 states
|Healthy Behavior Incentives||Approved: AZ, IA, IN, KY,MI, NM||Approved: FL, IN, KY, NM
|Waive Required Benefits (NEMT)i||Approved: KYii,iii, IA, IN
|Copays above statutory limitsv||Approved: KYvi
Pending: ME, NM, UT*, WI*
|Fees for Missed Appointments||Approved: KYvi
|Waive EPSDT for 19 and 20 year oldsvii||Pending: NM||Approved: UT*viii
|Closed Rx Formulary||Pending: MA||Pending: MA|
|Restriction on Free Choice of Family Planning Provider||Pending: TX*|
|NOTES: *“Non-expansion” populations include traditional Medicaid populations (low-income parents, Transitional Medical Assistance for those moving from welfare to work, former foster care youth, medically needy etc.) but may also refer to narrow/limited populations that gained coverage through the demonstration waiver. For example, *WI’s waiver covers childless adults ages 19 to 64 with income up to 100% FPL (without enhanced ACA matching funds). *UT’s waiver expands eligibility and provides a limited benefit package to certain nonelderly adults up to 100% FPL (the “PCN group”), and recently extended coverage to a limited group of childless adults who are homeless and have behavioral health needs up to 5% FPL. *TX’s pending waiver refers to its “Healthy Women” family planning waiver.
i The NEMT waiver in AR applies to ESI premium assistance enrollees only and is not included in this table.
iiKY: All NEMT services are waived for the expansion population.
iiiKY: In addition to a blanket NEMT waiver for the expansion population, NEMT for methadone services only is waived for both expansion and non-expansion populations.
ivMA: NEMT waiver would not apply to substance use disorder treatment services.
vCopays exceeding statutory limits are for non-emergent emergency room (ER) use in all pending and approved waivers noted except WI, which instead would apply a copay at the statutory limit for all ER visits and ME, which would charge copays above statutory limits for certain diagnosis codes. NM also would apply a copay above statutory limits non-preferred prescription drugs.
viKY: Enrollees will have incentive account funds deducted for missed appointments and non-emergent use of the emergency room.
vii OR has an EPSDT waiver as part of its demonstration testing an alternative delivery system model that allows the state to cover treatment services according to a priority list; the OR waiver is not included in this table.
viiiUT: This provision applies to both the PCN and limited childless adult groups.
Behavioral Health. As of March 5, 2018, 19 states are using Section 1115 waivers to provide enhanced behavioral health services (mental health and/or substance use disorder (SUD) services) to targeted populations, to expand Medicaid eligibility to additional populations with behavioral health needs, and/or to fund delivery system reforms such as the integration of physical and behavioral health services. These waivers include states responding to CMS guidance issued in 2015, which describes a new Section 1115 waiver opportunity that supports states’ ability to provide more effective care to Medicaid beneficiaries with a substance use disorder, including the provision of treatment services not otherwise covered under Medicaid. For example, states may receive federal matching funds for costs (otherwise not matchable) to provide coverage for services provided to nonelderly adults residing in institutions for mental disease (IMDs) for short-term acute SUD treatment. CMS revised this guidance in November 2017.
As of March 5, 2018, 13 states (AK, AZ, FL, HI, IL, KS, MA, MI, NC, NJ, NM, NY, and WI) had pending waiver requests that include behavioral health initiatives. Most seek to waive the IMD payment exclusion to receive federal Medicaid funds for inpatient behavioral health services for nonelderly adults. States are also seeking waiver authority to fund other behavioral health or supportive services for people with behavioral health needs, such as supportive housing, supported employment, peer supports, and/or community-based SUD treatment services. A few states seek authority to add or expand coverage to targeted groups of adults with behavioral health needs who are otherwise uninsured or to implement delivery system reform initiatives, such as physical/behavioral health integration, value-based purchasing, and improved coordination between traditional health plans and those providing specialty behavioral health services.
|Table 4: Approved and Pending Behavioral Health Provisions|
|Waiver Provision||# of States with Approved Waiver||# of States with Pending Waiver|
|IMD Payment Exclusion||Approved for SUD: 10 States (CA, IN, KY, LA, MA, MD, NJ, UT, VA, WV)
Approved for MH: 1 State (VT)
|Pending for SUD: 9 States (AK, AZ, IL, KS, MA, MI, NC, NM, WI)
Pending for MH: 5 States (IL, KS, MA, NC, NM)
|Community-Based Benefit Expansions||Approved: 10 States (DE, HI, KS, MA, MD, NJ, NY, RI, VT, WV)||Pending: 8 States (AK, FL, HI, IL, MI, NC, NM, NY)|
|Eligibility Expansions||Approved: 6 States (AZ, MT, NJ, UT, VA, VT)||Pending: 3 States (IL, NJ, NYi)|
|Delivery System Reforms||Approved: 4 States (AZ, CA, MA, NH)ii||Pending: 4 States (IL, MIiii, NC, NM)|
|iNew York’s pending waiver amendment also would move its existing financial eligibility expansion for children with behavioral health and HCBS needs who currently meet an institutional level of care from Section 1915 (c) to Section 1115 authority.
iiWhile no specific waiver authority is granted, Maryland’s waiver commits the state to developing and implementing a physical/behavioral health integration model for individuals with substance use disorders by January 1, 2019 as part of its IMD payment waiver.
iiiMichigan’s integration model currently exists under Section 1915 (b)/(c) authority that the state is seeking to convert to Section 1115.
Delivery System Reform Waivers. Sixteen states have approved waivers that focus on delivery system reform initiatives, especially efforts that tie provider incentive payments to performance goals. These states are using Section 1115 expenditure authority to authorize spending of federal dollars on delivery system reforms that otherwise would not be available under current law.22 Ten of these states are using Section 1115 waivers to implement Delivery System Reform Incentive Payment (DSRIP) initiatives.23,24 DSRIP initiatives, which emerged under the Obama Administration, provide states with significant federal funding to support hospitals and other providers in changing how they provide care to Medicaid beneficiaries.25 DSRIP initiatives link funding for eligible providers to process and performance metrics. In December 2017, CMS approved a five-year renewal of Texas’ Healthcare Transformation and Quality Improvement Program Section 1115 waiver. The waiver renewal decreases federal matching funds for the state’s DSRIP program between year one and year four, eliminating federal funding for DSRIP in the fifth year.26
A few other states have approved Section 1115 waivers for federal investment in delivery system reform initiatives other than DSRIP, including Arizona’s initiative to integrate physical and behavioral health care, Oregon’s Coordinated Care Organizations (CCOs), and Vermont’s all-payer ACO model. Florida and Tennessee, as well as several states with other delivery system reform initiatives (AZ, CA, KS, MA, NM, and TX), also use Section 1115 authority to operate Uncompensated Care Pools (also called “Low Income Pools” in some states) to help defray the cost of uncompensated hospital care. Uncompensated Care Pool funding was being phased down according to post-ACA guidelines established by the Obama Administration, including acknowledging funding for direct coverage available under the ACA.27 However, the Trump Administration approved Florida’s Section 1115 waiver extension request in December 2017, which included an increase in funding for the state’s low income pool to $1.5 billion annually, reversing the trend toward reducing these funds.28,29 CMS also approved an increase in funding for Texas’ uncompensated care pool ($3.1 billion per year in the first two years, remaining years subject to new formula) as part of its December 2017 approval of Texas’ Healthcare Transformation and Quality Improvement Program Section 1115 waiver renewal.30
Managed Long-Term Services and Supports (MLTSS). Twelve states are using Section 1115 waivers to authorize the delivery of Medicaid long-term services and supports (LTSS) through capitated managed care. While various Medicaid state plan authorities enable states to expand beneficiary access to home and community-based services (HCBS), states are using Section 1115 waivers in efforts to streamline program administration, improve care coordination, and expand beneficiary access to HCBS. These states need waiver authority to require seniors and people with disabilities to enroll in managed care. Most Section 1115 MLTSS waivers include provisions designed to expand HCBS financial eligibility. Over half of states with Section 1115 MLTSS waivers expand HCBS eligibility to people with functional needs who are “at risk” of institutionalization.
Other Targeted Waivers. Section 1115 waivers have also historically helped states quickly provide Medicaid support during emergency situations. Currently, Michigan is operating a Section 1115 waiver to expand eligibility and provide additional services targeted to pregnant women and children affected by the Flint water supply crisis. Fifteen other states also operate narrow Section 1115 waivers that affect targeted populations (e.g., persons with HIV/AIDS, seniors and people with disabilities, or uninsured nonelderly adults in non-expansion states). These targeted waivers may provide limited benefit coverage and/or include cost-sharing.
What to Watch in Waivers Going Forward
Each administration has some discretion to approve waivers, although that discretion is ultimately limited by the Medicaid program purposes set out by Congress in federal law. The direction of recent waivers may test the bounds of administrative flexibility through waivers as litigation challenging CMS’s authority to issue the work requirement guidance and approve Kentucky’s waiver has been filed. As more waivers are submitted and approved, key questions include:
- What are the stated goals and objectives? What does research or experience in other states show about provisions in the waiver?
- What populations are affected by the proposal? What are the anticipated effects on enrollment?
- What is the implementation plan and timeline? What are the administrative costs and challenges? What new systems will be necessary to implement the waiver?
- What is the process to receive public input on new waivers, amendments and operational protocols?
- What are the requirements for reporting and evaluation? How often do states need to submit data?