Article
What changed
In a July 7 informational bulletin, CMS rescinded its 2015 guidance that let states seek a faster federal review when extending certain section 1115 demonstrations. The application templates that went with it are gone as well. States should keep filing renewals, but CMS will review them under the standard section 1115 rules.
The agency tied the move to the 2025 reconciliation law. Section 71118 of that law adds a new budget neutrality test: starting Jan. 1, 2027, HHS may not approve a new waiver, renewal or amendment unless the CMS chief actuary certifies that it is not expected to raise federal spending. CMS said the fast-track process would make it hard to review renewals against that standard. It also noted that its Office of the Actuary does not play this role today, which suggests the process is still being built.
CMS gave states early notice of its budget neutrality plans in a June 11 letter to state Medicaid directors and said more guidance is coming. The bulletin lists no effective date of its own.
Why hospitals have a stake
Section 1115 waivers do more than test new ideas. In many states they carry uncompensated care pools, financing for safety-net hospitals, behavioral health coverage and community programs that hospitals run or rely on. When a waiver expires during a slow review, states often operate on short-term extensions, and hospital funding that flows through the waiver can stall or shrink.
The new certification also changes the math. A stricter actuarial test could make it harder to renew provisions that add federal spending, even ones that have run for years. Waivers up for renewal in 2027 and beyond face the most uncertainty, and states that wait may find themselves working against the new standard.
What leaders should do now
- Map your exposure. List every payment, pool or program that flows through a section 1115 waiver in your state, along with the waiver’s expiration date.
- Ask your state about timing. Find out whether officials plan to file renewals early, and whether they expect to rely on temporary extensions.
- Bring data to the table. States will need evidence that waiver programs control costs. Hospital outcome and utilization data can help make that case.
- Stress-test the budget. Model a gap or reduction in waiver-funded payments for fiscal 2027 and 2028.
Archive entry for Jul 12, 2026, added Nov. 11, 2026.