CMS Revises Budget Neutrality Expectations For Medicaid 1115 Demonstrations To Focus On Prospective Spending

The Centers for Medicare & Medicaid Services (CMS) plans to change how it defines budget neutrality for Medicaid Section 1115 waiver demonstrations. Going forward, rather than reviewing budget neutrality retrospectively against a "without waiver" scenario, CMS will emphasize prospective certification based on more rigorous actuarial analysis and activity-level financial modeling to ensure waiver services are not expected to cost the federal government more than the state's Medicaid program without the demonstration. The new budget neutrality analysis will also include administrative costs.

This change was a provision of the One Big Beautiful Bill Act, House Resolution 1 of 2025 . . .