About 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 promote the objectives of the Medicaid and Children’s Health Insurance Program (CHIP) programs. The purpose of these demonstrations, which give states additional flexibility to design and improve their programs, is to demonstrate and evaluate policy approaches such as:
- Expanding eligibility to individuals who are not otherwise Medicaid or CHIP eligible;
- Providing services not typically covered by Medicaid; or
- Using innovative service delivery systems that improve care, increase efficiency, and reduce costs.
There are general criteria CMS uses to determine whether Medicaid/CHIP program objectives are met. These criteria include whether the demonstration will:
- increase and strengthen overall coverage of low-income individuals in the state;
- increase access to, stabilize, and strengthen providers and provider networks available to serve Medicaid and low-income populations in the state;
- improve health outcomes for Medicaid and other low-income populations in the state; or
- increase the efficiency and quality of care for Medicaid and other low-income populations through initiatives to transform service delivery networks.
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.
On May 12, 2016, CMS announced a new policy for rebasing budget neutrality in longstanding section 1115 demonstrations that will require the demonstration's budget ceiling to be rebased using recent cost data and growth trends at every demonstration extension and will also limit carry-forward of accumulated savings from one demonstration approval period to the next. For an overview of the revised section 1115 budget neutrality policy, please review the All State Presentation rolled-out to states.
Generally, section 1115 demonstrations are approved for an initial five-year period and can be extended for an additional three years. States commonly request and receive additional 3-year extension approvals. Certain demonstrations that have had at least one full extension cycle without substantial program changes will be eligible for CMS’ “fast track” review process for demonstration extensions. For more information on the fast track federal review process for section 1115 Medicaid and CHIP demonstration extensions, visit the How States Apply page.