Section 1115 Waiver Watch: Early Signs Point to New Directions Under Trump Administration
1115 waivers generally reflect priorities identified by states as well as changing priorities from one presidential administration to another. The Biden administration encouraged states to propose waivers that expand coverage, address health-related social needs (or “HRSN”), and assist individuals with reentry from incarceration. In contrast, the first Trump administration focused on work requirements and eligibility restrictions with a limited focus on enrollee social determinants of health; however, the administration approved a first-of-its kind waiver in North Carolina that allowed the state to provide limited housing and nutrition supports to targeted Medicaid enrollees. In addition, the Biden administration expanded waiver financing tools that had been limited under the first Trump administration.
While the future direction of demonstration waivers is uncertain, recent actions from the Trump administration could signal efforts to curtail waivers related to social determinants of health and to limit waiver financing tools and flexibility. Two major changes demonstrate this shift: (1) rescinding Biden-era guidance on covering health-related social needs (HRSN) services, and (2) phasing out federal funding for “Designated State Health Programs” (DSHP) in waivers. This waiver watch examines these recent actions in the context of the recent history of Medicaid waivers aimed at addressing enrollee social determinants of health and DSHP.
Use of 1115 Waivers to Address Social Determinants of Health Under Biden and Trump Administrations
The first Trump administration generally had a limited focus on enrollee social determinants of health. Historically states have had limited ability to use Medicaid to help address social determinants of health. Social determinants of health (SDOH) are the conditions in which people are born, grow, live, work and age. SDOH include but are not limited to housing, food, education, employment, healthy behaviors, transportation, and personal safety. Despite a limited focus in general on SDOH, in 2018 the first Trump administration approved North Carolina’s “Healthy Opportunities Pilots,” allowing the state to cover certain non-medical services that target social needs, including housing, nutrition, transportation, and interpersonal relationship supports to specific and limited enrollees. The Pilots operated in three regions of the state and did not go as far as to provide coverage of rent/temporary housing or meal supports equivalent to three meals a day. The Trump administration later released guidance in 2021 highlighting existing federal authorities and opportunities for states to use Medicaid to address enrollee social determinants of health, including under Section 1115 authority.
The Biden administration moved to a more expansive 1115 “health-related social needs” framework and approved 18 waivers authorizing evidence-based housing and nutrition services for specific high-need populations under this framework. (Figure 1). Under the Biden administration, the Centers for Medicare and Medicaid Services (CMS) released a series of guidance documents (which were updated in 2024) on a new waiver opportunity to expand the tools available to states to address enrollee health-related social needs (or “HRSN”). The guidance included federal guardrails and requirements related to expenditure limits, service delivery requirements, and monitoring and evaluation requirements. The HRSN framework allowed for coverage of rent/temporary housing and utilities for up to six months and meal support up to three meals per day, departing from longstanding prohibitions on payment of “room and board” in Medicaid. CMS indicated broadening the availability of HRSN services was “expected to promote coverage and access to care, improve health outcomes, reduce health disparities, and create long-term, more cost-effective alternatives or supplements to traditional medical services.” CMS stressed new HRSN initiatives were not intended to replace other federal, state, and local social service programs but rather to complement and coordinate with these efforts. One of the final Biden administration HRSN approvals was an extension of North Carolina’s waiver under the new HRSN-framework. Reflecting findings from the evaluations of the initial waiver (discussed below in Box 1), the renewal expands the Healthy Opportunities program statewide, introduces new HRSN-framework services (e.g., short-term rental assistance, nutrition supports that were equivalent to three meals a day), and includes new DSHP funding authority.
Box 1. Evidence from North Carolina
Evaluations of the North Carolina “Healthy Opportunity Pilots” waiver approved by the first Trump administration show lower costs over time and largely positive outcomes. At the time of the waiver evaluation study period (March 2022 – November 2023), over 13,000 individuals had been enrolled in the three pilot regions within the state (most recent state data shows enrollment has since increased to about 42,000 as of March 2025). Services are targeted; enrollees must have at least one qualifying behavioral or physical health condition and one qualifying “social risk factor” (e.g., housing insecurity, food insecurity) to qualify for covered housing, nutrition, transportation, or interpersonal violence services.
Nearly 200,000 services had been delivered at the time of the evaluation, with food services representing more than 85% of all services delivered. While housing services were a lower share of services delivered, the average amount billed per housing service was higher at $532, compared to $131 per food service, $199 per transportation service, and $105 per IPV/toxic stress service. Examples of covered services include home remediation services, one-time payment of first month’s rent, medically tailored home-delivered meals, and violence intervention services. Comparing those who received Pilot services to Medicaid enrollees who screened positive for social risks but lived in regions not covered by the Pilots, the interim evaluation found:
- Spending (including both Pilot service spending and spending for medical care) was, on average, $85 less per Pilot participant per month. Even with an increase in spending at enrollment, HOP participation resulted in lower overall spending over time.
- Emergency department visits decreased following Pilot enrollment (an estimated reduction of 6 emergency department visits per 1,000 beneficiary months). Inpatient hospitalizations also decreased for non-pregnant adults (an estimated reduction of two admissions per 1,000 beneficiary months).
- Participation in the Pilots reduced the number of unmet housing, nutrition, and transportation needs reported by enrollees.
- No significant change was found on the impact of Pilot enrollment on inpatient admissions for children and pregnant adults, outpatient visits, and prenatal and postpartum care use. Due to a lack of data on clinical outcomes, the interim evaluation was unable to investigate whether Pilot participation affected clinical outcomes (e.g., diabetes, hypertension); subsequent evaluations may provide more information.
Use of DSHP Under Biden and Trump Administrations
Spending on certain Designated State Health Programs (DSHP) have been used to draw down federal matching dollars, but support for this policy has varied across the Trump and Biden administrations. HHS has authorized states to access federal Medicaid matching funds for certain types of state-funded health programs in waivers pre-dating the first Trump administration. Generally, this policy may expand available resources by freeing up state funds to finance new Section 1115 waiver initiatives. These state health programs (called DSHPs) do not otherwise qualify for federal funding, must have existed prior to 1115 waiver implementation, and often provide safety-net health care services for low-income or uninsured individuals (such as addiction recovery treatment or support for individuals with intellectual and developmental disabilities). With DSHP authority, states can claim federal match (up to set limits) for state programs approved by CMS.
The first Trump administration announced in 2017 it would no longer accept state proposals for new or renewing 1115 demonstrations that rely on federal matching funds for DSHP. In the guidance, the administration noted oversight concerns and stated there was no “compelling case that federal DSHP funding is a prudent federal investment.” At the time, authority for DSHP in active / current demonstrations was not affected but they could not be extended or renewed. Prior to the Trump administration, DSHP was often used to help finance Delivery System Reform Incentive Payment (DSRIP) waivers, which provided states with significant federal funding to support hospitals and other providers in changing how they provide care to Medicaid beneficiaries. Along with phasing out DSHP funding, the first Trump administration reduced funding for DSRIP renewals and did not approve new DSRIP demonstrations.
The Biden administration rescinded the 2017 DSHP guidance and approved 1115 demonstrations in eight states (nine total demonstrations) that provide federal funding for DSHPs (Figure 1). CMS only approved DSHP expenditure authority in a subset of states with HRSN 1115 approval (in waivers including CalAIM, New York’s Medicaid Redesign, and MassHealth). CMS approved the use of “freed up” state funds for HRSN initiatives (in all states with DSHP expenditure authority) and approved limited other uses (e.g., reentry and workforce initiatives) that varied across state approvals. In waiver approvals, CMS notes that only new waiver initiatives that were determined to promote the objectives of the Medicaid program (such as by “improving access to high-quality covered services”) could be financed with freed up state funds; new DSHP-funded initiatives were expected to not supplant existing services or programs. DSHP authority was described as time-limited and states were expected to submit sustainability plans that describe the state’s strategy to fund and maintain these initiatives beyond the current demonstration approval period. With these DSHP approvals, the Biden administration also introduced new guardrails, including that federal funding for DSHPs could not exceed 1.5 percent of the state’s total Medicaid spending and that states must use non-federal funding sources for at least 15 percent of the state’s share of the cost of new waiver initiatives. Similar to its guidance for HRSN programs, as a condition of DSHP approval CMS required states to meet provider payment rate requirements for core Medicaid services.
Recent Actions Taken by the Trump Administration Related to Waivers
In recent months, the Trump administration rescinded HRSN guidance issued by the Biden administration and announced it would be phasing out DSHP funding authority. Neither action affects currently approved / existing waivers but both may limit new HRSN / SDOH state waiver requests or waiver extension requests. CMS indicates in its March 2025 letter that rescinding HRSN guidance does not nullify existing HRSN approvals but going forward they will consider HRSN / SDOH requests on a “case-by-case” basis. The Trump administration also announced in April 2025 that it does not intend to approve new or extend existing requests for federal matching funds for state expenditures for DSHP. The guidance also says it does not intend to renew a funding mechanism for state health programs specific to Tennessee’s waiver called “designated state investment programs” or DSIP, approved by the Trump administration in 2021 and renegotiated by the Biden administration in 2023. Similar to the 2017 letter, the 2025 letter notes that federal DSIP and DSHP funding have “appeared to serve primarily as a financing mechanism for states” rather than as an integral part of demonstrations. The CMS press release said that “DSHPs and DSIPs have grown from approximately $886 million in 2019 to nearly $2.7 billion in eligible expenditures in 2025, representing increasing costs to the federal government without a sustainable state contribution.” Phasing out DSHP authority may limit states’ ability to finance new 1115 initiatives.
Future waiver approvals and CMS guidance will provide additional insight into the waiver priorities and financing approach of the new Trump administration. With regard to waiver financing, in addition to phasing out DSHP the first Trump administration made other changes to 1115 waiver budget neutrality policy in 2018 designed to limit the amount of federal funds that could be used for waiver spending. Limits included changing the amount of savings states can carry over between demonstrations and establishing new rules on spending trend rates used in budget neutrality calculations. The Biden administration made changes to Section 1115 budget neutrality policies that provided greater flexibility for states to design and implement 1115 demonstration programs, including HRSN initiatives (such as not requiring offsetting savings for HRSN services). More broadly, the first Trump administration’s Section 1115 waiver policy emphasized work requirements – which were challenged in court – and other eligibility restrictions and capped financing. Since the Trump administration has taken office, some states are again pursuing Medicaid work requirements through Medicaid demonstration waivers. Work requirements in Medicaid are also being considered as part of a broader federal legislative package of potential changes to Medicaid designed to significantly reduce federal Medicaid spending. The future of work requirement waivers may depend on the outcome of these legislative debates, as legislation may mandate work requirements.