Section 1115 of the Social Security Act empowers the Secretary of Health and Human Services to approve experimental, pilot, or demonstration projects that are likely to further the objectives of the Medicaid program. These initiatives, known as demonstration programs, provide states with increased flexibility to innovate and enhance their healthcare programs, aiming to test and evaluate state-specific strategies for better serving Medicaid populations, especially in the context of the Affordable Care Act’s (ACA) goals for expanded coverage and improved healthcare delivery.
How States Innovate with Medicaid Demonstrations
Each proposal for a demonstration program undergoes a thorough case-by-case review by the Centers for Medicare & Medicaid Services (CMS). CMS assesses whether the stated goals of the project align with the broader objectives of Medicaid and the spirit of affordable care initiatives. This review includes evaluating if the requested waivers and expenditure authorities are suitable and consistent with federal guidelines. A key consideration is to ensure federal funds are used to supplement, not replace, existing state-funded programs, and to explore if other federal or non-federal funding sources are more appropriate.
Budget Neutrality for Demonstration Projects
A fundamental requirement for all Section 1115 demonstration programs is budget neutrality. This principle ensures that federal Medicaid expenditures during the project’s duration do not exceed what federal spending would have been without the demonstration. In essence, these Affordable Care Act Demonstration Programs must not increase federal costs. For detailed guidance on budget neutrality, refer to the 2024 Budget Neutrality SMDL and the 2024 Budget Neutrality Approach Slide Deck. These resources provide essential information for states designing and implementing these programs under the Affordable Care Act framework.
Project Lifespan and Extension Opportunities
Typically, section 1115 demonstrations, designed to advance affordable care act objectives within Medicaid, receive initial approval for a five-year period. Depending on the populations served and program scope, these demonstrations can be extended for up to an additional three to five years. States frequently seek and are granted subsequent 5-year extension approvals, allowing for sustained innovation. Furthermore, demonstrations that have completed at least one full extension cycle without significant program modifications may qualify for CMS’ “fast track” review process for extensions. For detailed information regarding the expedited federal review process for section 1115 Medicaid and CHIP demonstration extensions, please visit the How States Apply page. This streamlined process helps ensure continued progress in affordable care and program improvement.
