Medicaid Section 1115 Waivers — State Experiments in Medicaid Policy
Section 1115 of the Social Security Act gives the Secretary of Health and Human Services sweeping authority to waive normal Medicaid rules for states that want to run "experimental, pilot, or demonstration projects" likely to promote the program's objectives. This one statute has become the primary tool through which states reshape their Medicaid programs — expanding eligibility (beyond what Medicaid expansion offers under the ACA), imposing work requirements, testing managed care arrangements, restructuring benefits, or limiting enrollment. Nearly every major Medicaid policy battle of the last thirty years has been fought, at least in part, over Section 1115 waiver approvals, renewals, and legal challenges.
Current Law (2026)
| Parameter | Value |
|---|---|
| Statutory authority | 42 U.S.C. § 1315 |
| Federal administrator | Centers for Medicare & Medicaid Services (CMS), HHS |
| Waiver term | Typically 5 years; renewable |
| Active § 1115 waivers (approx.) | 50+ across states |
| Cost-neutrality requirement | Federal spending must not exceed what would have occurred without the waiver |
| Public comment period | Minimum 30 days (state); 30 days (federal) |
| Related authority | § 1915(b) managed care waivers; § 1915(c) HCBS waivers |
| Judicial review | Available; federal courts review CMS approval/denial decisions |
Legal Authority
- 42 U.S.C. § 1315 — Section 1115 demonstration projects: grants HHS Secretary authority to waive requirements in §§ 302, 602, 654, 1202, 1352, 1382, and 1396a and to treat otherwise-non-matchable costs as federal expenditures, for experimental or demonstration projects likely to promote objectives of covered programs including Medicaid (subchapter XIX)
- 42 U.S.C. § 1396a — State plan requirements: the baseline Medicaid requirements that § 1115 waivers may waive, including mandatory eligibility groups, statewideness, freedom of choice of provider, and comparability of services
- 42 U.S.C. § 1396n — Section 1915 waivers: allows states to require managed care enrollment (§ 1915(b)) and to provide home and community-based services to populations otherwise requiring institutional care (§ 1915(c) HCBS waivers) as complementary waiver authorities
- 42 U.S.C. § 1396b — Federal financial participation: defines reimbursable state Medicaid expenditures; under § 1115, CMS can treat otherwise non-matchable costs as reimbursable for demonstration purposes
What Section 1115 Can Waive
A standard § 1115 waiver can suspend almost any provision of the Medicaid state plan requirements under § 1396a. In practice, states have used § 1115 to:
Expand eligibility: Before the ACA, states could not generally extend Medicaid to able-bodied adults without children except through § 1115. Massachusetts' 2006 demonstration was a direct predecessor to the ACA expansion. Several states that have not enacted the standard ACA expansion have instead applied for partial expansions through § 1115.
Impose work and community engagement requirements: The Trump administration approved multiple state waivers conditioning Medicaid eligibility on work, job training, volunteering, or education ("community engagement requirements"). Arkansas implemented one in 2018, disenrolling nearly 18,000 people before federal courts blocked the waiver as inconsistent with Medicaid's statutory objectives. The Biden administration rescinded all work requirement approvals. The first Trump 2.0 approvals of new work requirements resumed in 2025.
Create premium and cost-sharing structures: Some states have imposed monthly premiums and copays through § 1115 for populations not otherwise subject to mandatory cost-sharing under the Medicaid statute. Lock-out periods for non-payment of premiums have also been approved and then challenged.
Restructure benefit design: States have used § 1115 to create tiered benefit packages, limit coverage categories, implement benefit time limits, or test alternative service delivery systems such as health homes, patient-centered medical homes, and accountable care organizations within Medicaid.
Finance uncompensated hospital care: Some of the earliest § 1115 waivers were "DSH restructuring" waivers allowing states to redirect Disproportionate Share Hospital payments into broader delivery system reform funds. Many state hospital financing arrangements — including California's large PRIME waiver — operate under § 1115 authority.
How the Waiver Process Works
A state seeking a § 1115 waiver must submit a formal application to CMS with a detailed description of the demonstration project, evaluation plan, and budget neutrality analysis showing that federal costs over the waiver period will not exceed what they would have been without the waiver.
The state must first conduct a public notice and comment process of at least 30 days. CMS then reviews the application, often asking for revisions, and conducts its own 30-day federal public comment period. Waiver negotiations between a state and CMS can take months to years. Approved waivers are published in the Federal Register with "Special Terms and Conditions" (STCs) — a legally binding document running hundreds of pages that sets specific requirements the state must meet.
Waivers run for five-year terms and must be renewed. Renewals have historically been routine, but the Trump administration used waiver renewals in 2017–2020 as leverage to insert new conditions. Approved waivers may also be amended at any time through a negotiated process that again requires public notice.
Budget Neutrality — the Hidden Ceiling
The cost-neutrality principle has no statutory basis — it is an administrative policy CMS established to prevent § 1115 waivers from becoming vehicles for states to extract more federal matching money than they would otherwise receive. CMS calculates a "without-waiver" baseline (what the state would have spent and claimed in federal match absent the demonstration), then caps aggregate federal expenditures at that level over the waiver period.
In practice, budget neutrality calculations are enormously complex and contested. States often argue that their demonstration generates savings (through managed care efficiencies, prevention, reduced hospitalizations) that should be credited against the baseline. CMS has historically allowed "savings offsets" that effectively expand the baseline. Critics argue this makes budget neutrality a legal fiction for large state demonstrations. The Government Accountability Office and HHS Inspector General have periodically questioned whether CMS's budget neutrality methodology is rigorous.
Section 1915 Waivers: Managed Care and HCBS
Two other waiver authorities are closely related to § 1115 but have specific statutory homes:
Section 1915(b) managed care waivers allow states to mandate Medicaid enrollment in managed care organizations (MCOs), which the baseline Medicaid statute (requiring freedom of choice of provider) would otherwise prohibit. Over two-thirds of all Medicaid beneficiaries are enrolled in managed care arrangements — mostly through § 1915(b) authority combined with § 1115 demonstrations.
Section 1915(c) home and community-based services (HCBS) waivers (see also Medicaid LTC Spend-Down) allow states to provide home care and community-based services to people who would otherwise need nursing home or institutional care, waiving the statewideness requirement so a limited number of slots can be available. HCBS waivers are how most states fund personal care aides, adult day services, and supported living for people with intellectual disabilities. There are over 300 active § 1915(c) waivers nationwide. Waitlists are common — states are not required to fund enough slots to serve all eligible individuals.
How It Affects You
If you receive Medicaid in a state with work requirements: Under approved § 1115 waivers in states like Georgia (Pathways program) and Indiana, Medicaid eligibility can be conditioned on reporting work, job training, volunteering, or other "community engagement" activities for a specified number of hours per month (typically 80 hours). Failure to report on time can result in disenrollment — even if you're actually working. The administrative burden is real: you must log into a state portal and submit hours, verify qualifying activities, and respond to notices within short deadlines. Exemptions typically exist for people with disabilities, caretakers of young children, students, and people over 55 — but you must apply for the exemption, it's not automatic. If you receive a disenrollment notice, you generally have the right to appeal within 30 days; a pending appeal often stays the disenrollment. The Trump administration approved several new work requirement waivers in 2025; check your state Medicaid agency's website (or call 1-800-MEDICARE for referrals) to determine if your state has this requirement.
If you need home care as an alternative to nursing home placement: Your path runs through the § 1915(c) HCBS waiver program — the primary federal funding source for personal care aides, adult day programs, and supported living for people who are eligible for nursing home level of care but prefer to remain at home. Every state has at least one HCBS waiver, but almost all have waiting lists — often measured in years, particularly for people with intellectual disabilities. The critical step: apply now, regardless of how urgent your need feels today. You can be on the waitlist while still managing with current care arrangements. Apply through your state Medicaid agency or your local Area Agency on Aging (eldercare.acl.gov). If you cannot wait for the waiver, ask whether "emergency slots" exist, whether a § 1915(b) managed care plan covers some home care services, or whether any state-funded (not Medicaid) home care programs exist as a bridge. Document all contacts with your state Medicaid office — if your application is denied or your slot is not provided, you have appeal rights.
If you're a Medicaid beneficiary whose benefits or copayments recently changed (and particularly if you are close to the Medicaid income limits): Changes to your Medicaid coverage — new premiums, cost-sharing requirements, benefit package modifications — often happen through § 1115 waiver renewals or amendments, with limited public notice. Indiana's HIP 2.0 waiver, for example, requires monthly payments to a "POWER Account" (an HSA-like structure); failure to pay can result in loss of some benefits. If your state has implemented new cost-sharing, check whether you qualify for an exemption (many states exempt pregnant women, children, and people with certain conditions). If you believe a change was implemented without adequate notice or violates your waiver's Special Terms and Conditions, file a complaint with the CMS regional office for your state or contact a local legal aid organization.
If you are a healthcare provider billing Medicaid: Most states operate Medicaid through managed care organizations (MCOs) under § 1915(b) authority — which means you're likely billing the MCO, not the state directly. MCO rates are negotiated within CMS guidelines and may differ significantly from fee-for-service rates. If you're being denied prior authorization or facing arbitrary claim denials under a managed care arrangement, you can appeal through the MCO's internal process and then to the state Medicaid agency's external review. CMS has issued guidance limiting MCOs' ability to impose additional prior authorization requirements beyond standard Medicaid rules.
State Variations
Section 1115 waivers are, by definition, a vehicle for state variation. Key differences across states as of 2026:
Work requirements: Several states (Arkansas, Georgia's "Pathways" program, South Carolina, Indiana) have approved or pending work requirement demonstrations. Georgia's Pathways waiver — the first new-expansion waiver conditioning Medicaid on work compliance — enrolled only a few hundred people in its first year despite projections of tens of thousands, due to administrative complexity.
Premium/cost-sharing experiments: Indiana's HIP 2.0 waiver charges premiums and has a "POWER Account" (HSA-like structure). Failure to pay results in lock-out from some benefits.
Partial expansion states: Some states that declined full ACA Medicaid expansion have pursued § 1115 waivers to expand to some subset of adults — using the more restrictive waiver process rather than the automatic federal match available under the ACA.
DSH and financing waivers: California's "Medi-Cal Managed Care" system operates heavily under § 1115 authority, covering roughly 14 million Californians in a highly complex multi-waiver structure involving PRIME investments, Whole Person Care pilots, and CalAIM transformation.
Pending Legislation
The Medicaid expansion debate intersects heavily with § 1115. Several non-expansion states have proposed § 1115 applications as politically viable alternatives to standard ACA expansion. Congress periodically considers legislation that would limit waiver authority — for example, to prevent work requirements — or expand it (block grants). The 2025 budget reconciliation process included discussions of a per-capita cap Medicaid financing model that would operate as a de facto § 1115-like restructuring at a federal level.
Recent Developments
The Biden administration released comprehensive § 1115 waiver guidance in 2023 emphasizing that waivers must further Medicaid's core objective of providing health coverage — effectively disqualifying work requirements as not meeting this test. The guidance also clarified that community engagement requirements must not result in coverage loss. The Trump administration in 2025 rescinded this guidance and resumed approving work requirement waivers, signaling a return to more permissive waiver policy. Federal courts continue to scrutinize work requirement waivers under the Administrative Procedure Act, and the litigation is ongoing as of 2026.
- Work requirement waivers approved (2025): The Trump CMS approved work requirement § 1115 waivers for Georgia and other states that had previously been granted and then halted through litigation. Georgia's "Pathways" program — requiring 80 hours/month of work, job training, education, or volunteering for non-disabled Medicaid adults — had enrolled fewer than 5,000 people in its first year due to administrative complexity, far below projections. The Trump administration also received applications from additional states seeking work requirement waivers; approvals are expected for states with Republican governors.
- Innovative waiver uses under Trump: Beyond work requirements, § 1115 has been used to approve "closed formulary" approaches limiting Medicaid drug coverage, time-limited enrollment for new adults (requiring periodic re-enrollment), and premium requirements for certain populations. These approaches test the boundaries of the OBBBA's statutory "further the purposes of Medicaid" requirement. The Trump CMS has interpreted this standard permissively, approving waivers that the Biden CMS would have rejected as coverage-reducing.
- Coverage locks for procedural disenrollment: One of the most significant § 1115 issues in 2024-2025 is "coverage lock" waivers — where states seek permission to bar re-enrollment for individuals who are disenrolled for procedural reasons (failure to return paperwork, missed calls) for a period of 3-6 months. The Biden CMS rejected these waivers as coverage-reducing; the Trump CMS is reviewing them. The practical effect: people who lose Medicaid due to paperwork errors or administrative mistakes would be locked out of coverage for months, even if they were continuously eligible.
- § 1115 and OBBBB interaction: The OBBBA reconciliation package includes proposed statutory changes to Medicaid that would make federal work requirements and cost-sharing a matter of statute rather than waiver — removing the need for § 1115 approval for these provisions. This would bypass the waiver approval process (and associated administrative and judicial scrutiny) and make work requirements and premiums mandatory features of the program for non-disabled adults in all states. States would have limited flexibility to opt out if federal law requires these provisions.