MCD 301- Lesson 2: What are waiver programs?

You must first complete MCD 301- Lesson 1: What is Medicaid managed care? before viewing this Lesson

Lesson Goal


For you to understand each type of Medicaid waiver program and how states have used them.

Lesson Summary


Waivers are an important tool for states to customize their Medicaid programs by allowing states to deviate from the normal Medicaid requirements. Waivers allow states to offer targeted services to specific populations, expand eligibility and experiment with innovative program changes. Recent trends in waivers selected by states (and approved by CMS) suggest that the 1115 waivers provide states with the most options for current policy changes they prefer.

The Big Topics in This Lesson


1- Types of Waiver Programs

The information under this topic covers the basics of Medicaid waivers, including different types like section 1915 and 1115 waivers.

2- The Waiver Application Process

The information under this topic explains how states apply for a waiver and how waivers compare to State Plan Amendments.

3- Trends in States’ Use of Waiver Programs

The information under this topic looks at recent trends in the types of program changes states have made using waivers.

Lesson Video


Lesson Q & A


Click on each question to learn more

Q1: What is a Medicaid waiver?


Waivers are special agreements between a state and CMS that allow the state more flexibility compared to standard Medicaid program requirements. Waivers can allow states to provide subset of benefits to targeted populations (without having to provide those benefits to all members). Waivers can also facilitate Medicaid managed care in a state, or allow for services normally delivered in a facility to be delivered in the home or community. There are many different program changes made possible with a waiver. [1] Waivers allow a state to offer different services to different populations than are allowed in the State Medicaid Plan (an agreement between the state and CMS that defines the benefits and eligibility rules for a state program).

Waivers typically have to be cost neutral (meaning they can not cost more than doing them in the traditional Medicaid program) and are usually approved for 5 years at a time.


There are several types of waivers, including managed care waivers, home and community based services (HCBS) waivers and demonstration waivers. Each are discussed in this lesson.

Q2: Why is it called a waiver?


Waiver programs literally allow a Medicaid patient to “waive” the services they may be entitled to under Medicaid to receive alternative services in the waiver program.  Waiver services are often referred to as “not part of the entitlement.” For example, John Doe may be entitled to nursing home care by meeting Medicaid eligibility criteria, but may choose to forego nursing home care in exchange for less intense care in his home (paid for by Medicaid).  Waiver programs allow states to provide a smaller subset of services to these members, and thereby serve more people overall. States also have to get CMS to “waive” other requirements and approve the waiver programs for funding.

Because they are not part of the more richly funded Medicaid entitlement, and because demand for community-based services is high, there are often waiting lists for waivers.  These waiting lists can be very controversial, and have created an entirely new area for advocacy groups.


Q3: What are the section 1915 waivers?


The 1915 a and b waivers are usually referred to as the Managed Care waivers. 1915 a waivers allow a state to contract with managed care companies to provide services for members. 1915 b waivers allow a state to require members to enroll in a managed care organization to receive their Medicaid services. These waivers are not time limited.


The 1915 c waivers are also called the Home and Community Based Services (or HCBS waivers). These waivers allow states to avoid institutional care by provider services in the home or community, as well as allow more direct patient choice of providers.  States have to apply for the waivers, and they are typically approved for 5 years at a time. The types of services in these waiver programs include things like home health (where a care provider comes to someone’s home to provide basic healthcare) and day supports / adult day care (generally a group setting where developmentally disabled patients can participate in therapy sessions or learn new skills).  Since the beginning of these waivers, states have shifted huge portions of their mental health and nursing home expenses into community settings. As of the time of this writing, there were more than 300 approved 1915 c waivers in operation, serving more than 1M Medicaid members. States can also combine 1915 b (managed care) and 1915 c (home and community based services) waivers to provide HCBS through a managed care organization. One example is Michigan that operates a program combining these two types of waivers.

Q4: How does a state apply for a waiver?


There are different application processes for each waiver type. 1915 waivers have a standard application form, but 1115 waivers do not. Due to the open-ended nature of 1115 waivers, there can be a lot of back and forth between CMS and the state on the design of the waiver. This can lead to considerable delays in the approval process compared to other waiver types.

The applications for 1915 waivers requires states to show that the 1915(b) waiver will be cost neutral. There are defined calculations required to prove the cost neutrality.  There is a 90 day review clock for 1915 b waivers (similar to the review process for state plan amendments).

Q5: How is a waiver different from a State Plan Amendment?


While both methods are used to change Medicaid program rules in a state, there are some important differences in the process used. A state plan amendment usually does not require the same amount of public comment process as a waiver. State plan amendments do not have the same fiscal requirements as waivers such as budget neutrality and cost effectiveness calculations. Waivers also come with additional reporting requirements to CMS, and have limited timeframes of approval before they have to reviewed for renewal approval (state plan amendments do not).

Q6: What is the waiver public comment period?


The CMS waiver review process includes review of the opinion of other stakeholders that may be impacted by the Medicaid program change made by the waiver. For 1115 waivers, CMS requires at least 30 days of public comment on all draft waivers. For 1915 b and c waivers, CMS encourages use of a public comment period to capture additional feedback.

Q7: What have been the most common types of waivers in recent years?


While there was a trend in the 1990s for home and community based services and managed care waivers (the section 1915 waivers), most of the waivers submitted by states in recent years are section 1115 waivers. These waivers are often submitted for programs for long term services and supports (LTSS) and eligibility expansion. There have also been several waivers approved for Medicaid “transformation,” such as the Delivery System Reform Incentive Payment (DSRIP) waivers designed to change how provider are paid (moving towards a value-based system).

Q8: What types of waiver features has CMS been receptive to in recent years?


The Obama CMS administration was highly favorable for any waivers designed to increase Medicaid enrollment (especially in light of the states who chose not to accept the “normal” ACA expansion option). CMS has also favored waiver applications that seek to integrate physical and behavioral health services.

Q9: What types of waiver features has CMS rejected in recent years?


The Obama CMS administration has typically rejected more conservative program features such as job requirements, copays, premiums and HSAs. One notable example was the Indiana Medicaid expansion waiver approved by CMS.

Medicaid Dictionary

 New Terms from this lesson:

Waiver Agreements between states and CMS to change their Medicaid program.

HCBS Home and Community Based Services

LTSS Long Term Services and Supports

DSRIP Delivery System Reform Incentive Payment. Waivers designed to direct provider payment toward a value-based system.

HSA Health Savings Account

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