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CMS Outlines Section 1115 Budget Neutrality Methodology Changes

The Centers for Medicare & Medicaid Services (CMS) has made public a set of slides describing a methodology adjustment for calculating budget neutrality in Section 1115 waivers.

Section 1115 demonstrations allow states to advance the goals of the Medicaid program in innovative ways. The slides — available on CMS’ website — outline dramatic restrictions to CMS’ budget neutrality policy for 1115 waivers.

Longstanding CMS policy requires that Section 1115 waivers are budget neutral for federal spending. CMS on the May 2016 call initially announced several changes to the way budget neutrality is calculated, including:

  • limits in savings rollover;
  • a phase-down of newly accrued savings;
  • changes to “without waiver” baselines; and
  • limits on growth of upper payment limit diversion.

The slides provide a background on budget neutrality in Section 1115 waivers, as well as details and examples of the changes in methodology.

Contact Director of Policy Erin O’Malley at or 202.585.0127 with questions.


About the Author

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

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