CMS updates budget neutrality rules for Medicaid 1115 waivers

KFF reported on recent changes in the Centers for Medicare & Medicaid Services (CMS) budget neutrality guidance related to Section 1115 Medicaid demonstration waivers. These waivers enable states to test new Medicaid approaches that differ from federal requirements if they promote Medicaid program objectives.

According to KFF, nearly all states have at least one active Section 1115 waiver, with some states holding multiple waivers. Historically, these waivers had to be budget neutral to the federal government, meaning federal spending under the waiver could not exceed what it would have been without the waiver.

The updated CMS guidance revises this long-standing budget neutrality policy, though KFF notes there remain open questions about how these changes will be clarified and how they will impact states with existing waivers or those seeking new ones.

KFF's analysis highlights the importance of these waivers in allowing states to innovate Medicaid programs while balancing federal costs. The policy changes could influence state decisions on waiver applications and program design moving forward.