Section 1115 Demonstrations

Section 1115 of the Social Security Act gives the Secretary of Health and Human Services authority to approve experimental, pilot, or demonstration projects that are found by the Secretary to be likely to assist in promoting the objectives of the Medicaid program. The purpose of these demonstrations, which give states additional flexibility to design and improve their programs, is to demonstrate and evaluate state-specific policy approaches to better serving Medicaid populations.

CMS performs a case-by-case review of each proposal to determine whether its stated objectives are aligned with those of Medicaid. CMS also considers whether proposed waiver and/or expenditures authorities are appropriate and consistent with federal policies, including the degree to which they supplant state-only costs for existing programs or services and can and should be supported through other federal and non-federal funding sources.

On April 10, 2025, CMS released a letter explaining that CMS does not anticipate approving new state proposals of section 1115 demonstration expenditure authority for federal designated state health program (DSHP) or designated state investment program (DSIP) funding or renewing existing section 1115 demonstration expenditure authority for federal DSHP or DSIP funding, including when current DSHP or DSIP authority concludes before the expiration date of the demonstration.

On July 17, 2025, CMS released a letter explaining that CMS does not anticipate approving new state proposals or extending existing section 1115 demonstration expenditure authority for expanded continuous eligibility for certain populations beyond what is allowable under current Medicaid or CHIP statute.

Also on July 17, 2025, CMS released a letter explaining that CMS does not anticipate approving new state proposals or extending existing section 1115 demonstration expenditure authority for workforce initiatives and will continue to monitor results of currently approved initiatives to assess the impact.

Demonstrations must also be "budget neutral" to the Federal government, which means that, during the course of the project, Federal Medicaid expenditures will not be more than Federal spending without the demonstration. Section 71118 of the Working Families Tax Cut (WFTC) legislation adds budget neutrality as a new statutory requirement in subsection (g) of section 1115 of the Act and introduces the role of the CMS Chief Actuary to certify demonstration, amendment, and renewal approvals made on or after January 1, 2027. For additional guidance on budget neutrality, reference the State Medicaid Director Letter released on June 11, 2026.