1115 Waiver Watch: A Look at Budget Neutrality Policy Changes Authors: Amaya Diana and Elizabeth Hinton Published: Nov 5, 2026

https://www.kff.org/medicaid/1115-waiver-watch-a-look-at-budget-neutrality-policy-changes/ Section 1115 Medicaid demonstration waivers offer states an avenue to test new approaches in Medicaid that differ from what is required by federal statute, if [in the Health and Human Services (HHS) Secretary’s view] the approach is likely to “promote the objectives of the Medicaid program.” Nearly all states have at least one active Section 1115 waiver and some states have multiple 1115 waivers. Under long-standing policy and practice, Section 1115 demonstration waivers were required to be “budget neutral” to the federal government over the course of the waiver, meaning federal costs under the waiver could not exceed what they would have been for the state without the waiver. Using 1115 waivers has allowed states to generate “savings” that can be reinvested (under the waiver) to support new initiatives (e.g. coverage expansions, new benefits etc.).