Medicaid Section 1115 Waivers:

Flexible Approach to Approving Demonstrations Could Increase Federal Costs

HEHS-96-44: Published: Nov 8, 1995. Publicly Released: Dec 8, 1995.

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Pursuant to a congressional request, GAO examined the financing arrangements for four approved section 1115 Medicaid demonstration waivers.

GAO found that: (1) the approved spending limits for demonstration waivers in Oregon, Hawaii, and Florida are not budget neutral and could increase federal Medicaid expenditures; (2) Tennessee's 1115 waiver agreement should cost less than the continuation of its prewaiver program and result in savings; (3) although additional federal funding is relatively lower than demonstration spending under federal expenditure caps, federal Medicaid expenditures could increase rapidly if similar flexibility in reviewing state 1115 financing strategies is allowed; (4) five waivers have been approved since late 1994, and the backlog of pending waivers includes three states with large Medicaid programs; (5) additional federal funding is available to protect against the uncertainties states face in implementing demonstrations; and (6) it remains unclear whether the states implementing demonstrations will exceed their 1115 waiver funding caps.

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