Since then, 10 additional waivers have been approved. The 1115 waiver is health care reform in Tennessee. Objectives, Scope, and Methodology

We reviewed the financing arrangements for approved 1115 Medicaid demonstration waivers in several states, with a focus on (1) the relationship between the waiver and other state health reform initiatives, (2) the planned sources of funding available to finance expanded coverage, (3) the potential net impact of these waivers on federal Medicaid expenditures, and (4) the actual waiver expenditures of states with the most implementation experience. Three of Four Demonstration Waivers Are Potentially Not Budget Neutral

Contrary to the administration’s assertion that approved Medicaid 1115 waivers are budget neutral, net federal spending in the four states we examined could potentially exceed projected without-waiver program costs over the 5-year duration of the demonstrations. The net additional federal funding available in these four states is small in relation to allowable demonstration spending. However, overall federal Medicaid expenditures could grow significantly if the administration shows a similar flexibility in reviewing the large backlog of pending waivers. Oregon was able to meet greater than expected demand without exceeding its waiver agreement expenditure cap. We continue to believe that the administration’s waiver funding caps for these states may result in increased federal spending.
Why GAO Did This Study

Pursuant to a congressional request, GAO examined the financing arrangements for four approved section 1115 Medicaid demonstration waivers.

What GAO Found

GAO found that: (1) the approved spending limits for demonstration waivers in Oregon, Hawaii, and Florida are not budget neutral and could increase federal Medicaid expenditures; (2) Tennessee's 1115 waiver agreement should cost less than the continuation of its prewaiver program and result in savings; (3) although additional federal funding is relatively lower than demonstration spending under federal expenditure caps, federal Medicaid expenditures could increase rapidly if similar flexibility in reviewing state 1115 financing strategies is allowed; (4) five waivers have been approved since late 1994, and the backlog of pending waivers includes three states with large Medicaid programs; (5) additional federal funding is available to protect against the uncertainties states face in implementing demonstrations; and (6) it remains unclear whether the states implementing demonstrations will exceed their 1115 waiver funding caps.