What to Watch in Medicaid Section 1115 Waivers One Year into the Biden Administration

Section 1115 demonstration waivers provide states an avenue to test new approaches in Medicaid and generally reflect changing priorities from one presidential administration to another. The Trump Administration’s Section 1115 waiver policy emphasized work requirements and other eligibility restrictions, payment for institutional behavioral health services, and capped financing. The Biden Administration has signaled a shift in policy to emphasize waivers that expand, rather than restrict, Medicaid coverage and access to care (though still within the limits of budget neutrality). For example, CMS recently rescinded work requirement and premium authorities as part of a limited coverage expansion (at the state’s regular match rate for federal funding) in Georgia’s waiver—an action that the state is challenging in court. Additionally, several states have currently pending waiver requests that may align with these new administrative priorities. This issue brief summarizes waiver priorities and actions under the Biden Administration as well as pending waiver themes and other issues to watch. If the Build Back Better Act (BBBA) fails to pass or is narrowed significantly, Medicaid waivers and other administrative actions may be a key tool for the Biden Administration to advance policy priorities absent legislation.

In November 2021, the Biden Administration signaled that in line with its strategic vision for Medicaid, waivers can foster expanded coverage; improved access, quality, and equity; and value-based care and innovation. Prior to the November 2021 enumeration of these strategic Medicaid priorities, in a January 2021 executive order President Biden identified strengthening Medicaid and increasing health care access as key administrative priorities. The executive order directed relevant agencies to review waiver policies that may reduce coverage under or otherwise undermine Medicaid.

In line with early priorities, CMS began the process to withdraw Section 1115 work requirements and has since issued final withdrawals of these provisions in all states that had approvals. More recently, CMS took steps to withdraw or phase out the inclusion of Medicaid premium requirements above statutory limits. While other components of waivers with withdrawn work requirements or premiums remain intact, CMS has indicated that it may review additional policies. Finally, in April 2021 CMS rescinded the prior administration’s 10-year renewal of the Texas Healthcare Transformation and Quality Improvement Program (THTQIP) waiver because of failure to comply with public notice and comment requirements. However, Texas has challenged and a district court issued a preliminary injunction against the CMS recission. Separately, in July 2021 Texas submitted a new 10-year extension request with the same terms as the January approval. Negotiations between CMS and Texas over specific waiver provisions, including provider reimbursement for uncompensated care, may indicate how these broader policy issues align with current administrative priorities.

Recent waiver approvals and renewals emphasize alignment with broader Biden Administration priorities. One key theme has been approvals of waivers extending the Medicaid postpartum coverage period, highlighting a commitment to improving maternal health and reducing health disparities. In its recent approval of California’s CalAIM demonstration, CMS noted that the waiver advances policy priorities through its person-centered approach, health equity goals, and focus on addressing the health needs of high-need groups including those with behavioral health needs, homeless populations, and justice-involved populations. Similarly, CMS emphasized that its recent renewal of Maryland’s HealthChoice demonstration advances its priority to improve health coverage, access, and equity for Medicaid beneficiaries by expanding programs focused on maternal health, addressing health-related social needs, and enhancing behavioral health services.

CMS decisions on a number of pending waiver requests will inform how the Biden Administration may use waivers to advance stated priorities (Figure 1). In the year since President Biden took office, many states have requested targeted eligibility expansions that would increase coverage and access to care for certain populations, including justice-involved individuals. Though no states have received waiver approval to provide services prior to release from incarceration, CMS recently expressed support for pre-release services in correspondence with California. Recent pending waivers also propose to address health-related social needs and behavioral health needs, areas identified as key priorities by both CMS and states. As federal Medicaid rules prohibit expenditures for most non-medical services, it remains to be seen whether and how the Biden Administration may use demonstration waivers to encourage states to address enrollee social determinants of health.

Health equity is a key goal across pending waiver provisions as well as a priority for the administration both broadly and for Medicaid waivers specifically. In particular, states have highlighted that expanded coverage for high-need populations (including justice-involved individuals, postpartum individuals, and individuals with certain behavioral and/or social needs) and increased focus on social determinants of health will promote health equity. Especially in recent requests to extend and amend long-standing demonstrations, many states have identified equity as a foundational goal underlying all or most provisions. For example, Vermont noted in its extension request that “underlying all [demonstration] goals is Vermont’s commitment to leveraging its 1115 demonstration to advance health equity.” In addition to these overarching goals, some states have also requested specific expenditure authority for initiatives aimed at measuring or incentivizing equity (Figure 1).

Moving forward, Section 1115 waivers may be shaped by additional actions or guidance from CMS, federal legislation, and the future of the COVID-19 pandemic:

• CMS actions and guidance. CMS may continue to review currently approved waiver provisions and could withdraw or decline to renew policies that may reduce Medicaid coverage or access. CMS is also in the process of applying methodology changes to budget neutrality policies that will restrict the ability of states with long-running demonstrations to roll over “unspent” savings and to extend baseline spending assumptions for years without adjustments; it remains to be seen how these policy changes will affect future waiver spending. CMS may also release additional Section 1115 guidance to promote policy priorities and/or to strengthen transparency, public notice, and comment and evaluation requirements.
• Federal legislation. Potential passage of provisions included in the BBBA could affect coverage expansions states have requested in waivers—by requiring 12 months of postpartum coverage and allowing federal money to pay for Medicaid-covered services 30 days prior to release for incarcerated individuals—as well as Medicaid coverage for low-income people in states that have not expanded Medicaid under the Affordable Care Act (ACA), outside of waivers. The BBBA also includes provisions related to Medicaid financing, and benefit changes.
• Future of COVID-19 pandemic. The pandemic continues to challenge state Medicaid programs and to drive their priorities, and these ongoing challenges could hamper states’ capacity to develop and implement new waiver initiatives. At the same time, the pandemic has exacerbated and highlighted issues such as health disparities and health-related social needs; states increasingly identify these areas as top priorities and may address them in future Medicaid waiver requests.