Why It Matters
Washington state and dozens of other states rely on Section 1115 Medicaid demonstration waivers to fund expanded health programs for vulnerable populations. New federal oversight requirements announced by the Trump administration could limit how states design and finance those programs going forward, adding scrutiny at a time when Washington already faces its third consecutive budget deficit.
What Happened
The Centers for Medicare and Medicaid Services notified state Medicaid directors in letters that the administration is imposing stricter financial oversight on Section 1115 demonstration waivers, the mechanism states use to pilot innovative coverage expansions or benefits not otherwise permitted under standard Medicaid rules.
Waivers have historically allowed flexibility in financing structures and allowed states to extend coverage to specific populations — including soon-to-be-released incarcerated individuals and tribal communities. Under the new framework, states must now provide more extensive spending analyses, documentation, and monitoring as part of waiver applications.
The centerpiece of the change takes effect January 1: the CMS chief actuary must formally certify that any approved waiver will not result in more federal Medicaid spending than what would have occurred without the program. Budget neutrality was already a standing requirement for waivers, but the approval authority had previously rested at the discretion of the Health and Human Services secretary rather than being tied to a formal actuarial certification process.
By the Numbers
- January 1 — effective date for the new actuarial certification requirement on waiver approvals
- $900 billion — in Medicaid cuts enacted through the One Big Beautiful Bill Act, signed into law last summer
- 4 states — received approval in 2024 for waivers covering traditional healing practices at tribal health facilities and urban Indian organizations
- Several states — had used demonstration waivers to pre-enroll individuals approaching release from incarceration into Medicaid coverage
Zoom Out
The tightened waiver rules are part of a broader restructuring of Medicaid at the federal level. The Trump administration has already said it will no longer approve new Section 1115 waivers that include workforce initiative components, and it has rolled back aspects of the Biden administration’s expanded waiver framework that allowed states to address housing and other health-related social needs through Medicaid funding.
The changes arrive alongside the most significant Medicaid spending reduction in the program’s history. The One Big Beautiful Bill Act, enacted last summer, cut more than $900 billion from Medicaid over the coming decade — a figure that advocacy groups and several state budget offices have flagged as a major fiscal pressure point.
For tribal communities in particular, the new scrutiny could complicate the future of coverage models approved as recently as 2024. Four states gained federal approval that year to use Medicaid funds for traditional healing practices delivered through tribal health facilities and urban Indian organizations — programs whose long-term status under a tighter actuarial standard is now uncertain.
What’s Next
States with pending or upcoming waiver applications will be required to meet the new documentation and monitoring standards as CMS begins enforcing the actuarial certification process starting January 1. States that currently operate waivers under Biden-era frameworks addressing social determinants of health may face additional compliance questions as the administration continues its review of those agreements.
Washington, which has used demonstration waivers to extend coverage in several program areas, will need to weigh its options within the new federal parameters. Given the state’s ongoing budget pressures, the added administrative burden and tighter federal cost standards could narrow the range of programs the state can pursue through the waiver process.
Congressional Republicans and the administration have framed the Medicaid changes broadly as steps toward fiscal accountability and program integrity. State officials and health care groups are expected to continue pressing CMS for clarity on how existing waiver commitments will be treated under the new certification rules.