Section 1115 Waiver Authority

Section 1115 of the Social Security Act provides the Secretary of Health and Human Services (HHS) with broad authority to conduct research and demonstration projects under several programs authorized by the Social Security Act including Medicaid and SCHIP. Section 1115 also authorizes the Secretary to waive certain statutory requirements for conducting these projects without congressional approval. In recent years, there has been increased interest among states and the federal government in the Section 1115 waiver authority as a means to restructure coverage, control costs, and increase state flexibility. Under current law, states may obtain waivers that allow them to provide services to individuals not traditionally eligible for Medicaid (or SCHIP), cover non-Medicaid (or SCHIP) services, limit benefit packages for certain groups, among other purposes. Unlike regular Medicaid, CMS waiver guidance specifies that waiver costs are budget neutral to the federal government over the life of the waiver program. Program Types

As of July 1 2008, there were 94 operational Medicaid and SCHIP Section 1115 waivers in 43 states and the District of Columbia. In FY2006 (the most recent data available), Section 1115 waiver federal expenditures (for Medicaid and SCHIP) totaled approximately $42.4 billion. Section 1115 waiver programs represented approximately 24% of all federal Medicaid spending in the 50 states and the District of Columbia for FY2006 (19% for SCHIP), and provided coverage to approximately 11.5 million enrollees. Of the 11.5 million total Medicaid and SCHIP waiver enrollees, 2.5 million were only eligible for a targeted benefit package such as family planning benefits. Many of the comprehensive waivers operate under combined title XIX and title XXI authority and are financed with federal Medicaid and SCHIP matching funds. FY2006 state-reported enrollment estimates for these waivers totaled approximately 8.1 million, at a federal cost of approximately $38.4 billion. As of FY2008, there were 20 such operational programs in 15 states and the District of Columbia.
Section 1115 of the Social Security Act provides the Secretary of Health and Human Services (HHS) with broad authority to waive certain statutory requirements for states to conduct research and demonstration projects that further the goals of Titles XIX (Medicaid) and/or XXI (the State Children's Health Insurance Program; SCHIP). States use the Section 1115 waiver authority to cover non-Medicaid and SCHIP services, limit benefit packages, cap program enrollment, among other purposes.
As of July 1 2008, there were 94 operational Medicaid and SCHIP Section 1115 waiver programs in 43 states and the District of Columbia. In FY2006 (the most recent data available), Section 1115 waiver federal expenditures (for Medicaid and SCHIP) totaled approximately $42.4 billion. Section 1115 waiver programs represented approximately 24% of all federal Medicaid spending in the 50 states and the District of Columbia for FY2006 (19% for SCHIP), and provided coverage to approximately 11.5 million enrollees—2.5 million of whom were eligible only for a targeted benefit package such as family planning or pharmacy benefits. FY2006 waiver expenditure and enrollment estimates from the Centers for Medicare and Medicaid Services (CMS) based on state-reported data, and are subject to change. Between FY2001 (the earliest year for which CRS has access to Section 1115 expenditure estimates) and FY2005, federal Medicaid waiver expenditures as a percentage of total Medicaid spending were steady at approximately12-14%. In FY2006, there was a substantial increase in federal waiver spending as a percentage of total Medicaid spending (i.e., almost 60% increase over the FY2005 totals). While there are several plausible explanations for this increase (e.g., ramp up of new and renegotiated waivers, prior period adjustments, etc.) because waiver financing arrangements are negotiated over a 5-year budget window it is hard to determine if the jump in federal expenditures represents a step increase in overall federal waiver spending, or a one-time increase that will be mitigated over the budget authority window. Analysis of future waiver expenditure trends will help to clarify this question. Estimates do not include state experience under the 5 month temporary Katrina waivers (described below).This report provides background information on the waiver authority, and will be updated when new data are available.