Coalition Recommends HHS Take Steps to Improve Medicaid Waiver Process

Section 1115 Medicaid waivers drive a large and growing share of Medicaid spending. Currently, 46 states and D.C. operate some or all of their Medicaid programs under section 1115 demonstration authority. Many of these waivers promote coverage; others undermine it, and in the process, the Medicaid program. Unfortunately, the federal regulations governing section 1115 waivers are unclear on the parameters of the Secretary’s authority, resulting in confusion among states and the courts on the proper role of demonstrations in Medicaid.

In response, 51 organizations representing patient, provider, and advocacy groups, among others, have sent a letter to Secretary Becerra urging him to strengthen the current regulations to ensure that section 1115 demonstrations promote coverage and improve the transparency of the process of approving, amending, and renewing demonstrations. The letter makes three requests.

First, CMS regulations should define the objectives of Medicaid based on the primary purpose of the program identified in the Medicaid statute: to furnish medical assistance, rehabilitation, and other services. This definition should explicitly affirm the Medicaid entitlement and open-ended matching structure. It should also prohibit misinterpretations of statutory phrases like “independence or self-care” that would reduce coverage or access to services – misinterpretations that were the basis for the “work requirement” waivers approved by the previous administration.

Second, CMS regulations should establish section 1115 “guardrails” to operationalize the defined objectives of Medicaid, similar to the section 1332 guardrails already in place. For example, a section 1115 demonstration could not be approved if it would likely reduce the number of individuals covered by Medicaid in a state, or otherwise reduce the number of individuals who have health insurance in the state, or if it would likely reduce the available services, or amount, duration, and scope of any services provided to Medicaid enrollees.

Finally, CMS regulations should do more to protect the integrity and transparency of the 1115 demonstration process. They should require the full transparency process (including notice and comments) for all 1115 demonstrations that would impact eligibility, enrollment, benefits, cost-sharing, or financing – including new applications, extensions, and amendments. (There are currently no transparency requirements for amendments to demonstrations). To prevent end runs around the notice and comment requirements, the current exception based on a public health emergency should be tightened. In addition, CMS regulations should set clear standards for the duration of demonstrations and extensions, not to exceed five years.

We have already seen the Biden Administration take important steps to undo some of the harmful section 1115 waiver policies approved by the previous administration that undermine Medicaid, like withdrawing work requirements and winding down premiums. CMS should now take the next step and strengthen its regulations to prevent misuse of section 1115 authority going forward. Section 1115 demonstrations should be a vehicle to enable states to improve Medicaid coverage, not undercut it.