The Government Accountability Office (GAO) found that the U.S. Department of Health and Human Services (HHS) did not ensure budget neutrality when approving Arkansas’ Medicaid expansion waiver. HHS approved a section 1115 Medicaid demonstration waiver that allowed Arkansas to expand coverage for newly eligible individuals through the health insurance marketplaces (exchanges). GAO found that HHS approved a spending limit for the demonstration based on unsupported state assumptions and projections. As a result, GAO concluded the spending limit of $4 billion was about $778 million more than what it should have been. Moreover, GAO noted that HHS also gave Arkansas and 11 other states the flexibility to adjust spending limits if actual demonstration costs proved to be higher than expected. According to GAO, this increases the risk that the programs will not be budget-neutral. GAO did not make any recommendations in this report but has previously recommended that the budget neutrality process for Medicaid demonstration waivers be improved.
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