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CMS Issues Guidance on 1115 Waiver Budget Neutrality

In an Aug. 22 letter to State Medicaid Directors, the Centers for Medicare & Medicaid Services (CMS) detailed, for the first time, how it will calculate budget neutrality for Section 1115 waivers.

To receive Department of Health and Human Services (HHS) approval, Section 1115 waivers must be budget neutral for the federal government, meaning the demonstration will not cost the federal government more than the state’s Medicaid program would cost without the waiver.

The letter marks the first time CMS has clearly described its budget neutrality calculation and represents the agency’s attempts to further streamline the waiver process and control costs.

CMS also introduced a new standardized budget neutrality reporting tool for states that consolidates financial data into a unified report to reduce redundancy and make reviews more efficient.

Contact Senior Director of Policy Erin O’Malley at eomalley@essentialhospitals.org or 202.585.0127 with questions.

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About the Author

Rachel Schwartz is a policy associate at America's Essential Hospitals.