Medicaid Waiver Programs: 1115, 1915(b), and 1915(c)

Medicaid waiver programs allow states to depart from standard federal Medicaid rules under specific statutory authorities, enabling experimentation, managed care mandates, and home- and community-based service delivery that would otherwise be impermissible under Title XIX of the Social Security Act. Three authorities — §1115, §1915(b), and §1915(c) — form the structural backbone of state Medicaid flexibility and collectively govern how tens of millions of low-income and disabled Americans access long-term services, managed care, and demonstration programs. This page explains how each waiver type is defined, how approval mechanics differ, what tradeoffs states face in choosing among them, and where common misunderstandings arise.

• Definition and scope
• Core mechanics or structure
• Causal relationships or drivers
• Classification boundaries
• Tradeoffs and tensions
• Common misconceptions
• Checklist or steps (non-advisory)
• Reference table or matrix

Definition and scope

Federal Medicaid law under Title XIX of the Social Security Act establishes baseline requirements for covered populations, services, and provider payment that apply uniformly to all states. Waiver authority carves out structured exceptions to those requirements, subject to federal review and approval by the Centers for Medicare & Medicaid Services (CMS).

Section 1115 Demonstration Waivers are authorized under §1115 of the Social Security Act and permit states to test Medicaid policy changes that would not otherwise comply with federal statute. The Secretary of Health and Human Services may waive almost any Medicaid requirement if the project "is likely to assist in promoting the objectives" of Title XIX. Because the scope is exceptionally broad, 1115 demonstrations have been used to expand eligibility beyond standard thresholds, test work requirements, restructure benefits, and pilot new delivery system reforms.

Section 1915(b) Managed Care Waivers authorize states to require Medicaid beneficiaries to enroll in managed care organizations (MCOs) or to restrict the pool of providers from which enrollees may receive services. States use 1915(b) authority primarily to impose mandatory managed care enrollment statewide or in specific geographic areas.

Section 1915(c) Home and Community-Based Services (HCBS) Waivers allow states to provide long-term services and supports in home and community settings to populations who would otherwise require institutional care — nursing facilities, intermediate care facilities for individuals with intellectual disabilities (ICF/IID), or hospitals. The Social Security Act §1915(c) authorizes these waivers explicitly to support alternatives to institutionalization.

The Medicaid and CHIP Payment and Access Commission (MACPAC) provides ongoing analysis of waiver program scope, costs, and population impacts to Congress.

Core mechanics or structure

1115 Demonstrations

States submit a demonstration proposal to CMS describing the policy change, the affected population, and a financing plan demonstrating budget neutrality over the waiver period. Budget neutrality is the pivotal requirement: the federal cost of the demonstration must not exceed what federal expenditures would have been absent the waiver, calculated over the full demonstration term (typically 5 years, renewable). CMS negotiates a "without-waiver" cost baseline against which actual expenditures are compared. States may request waiver of standard Medicaid provisions under §1902 and claim expenditure authority under §1903.

1915(b) Managed Care Waivers

A 1915(b) waiver is approved in a 2-year cycle (renewable for additional 2-year periods). States must demonstrate that beneficiaries retain access to services comparable in amount, duration, and scope to what they would receive under standard Medicaid. Four distinct types of 1915(b) authority exist:

• 1915(b)(1): Limits freedom of choice to enroll with a particular MCO or provider.
• 1915(b)(2): Designates a central broker to assign beneficiaries to managed care plans.
• 1915(b)(3): Restricts savings generated by managed care to provide additional services.
• 1915(b)(4): Limits providers to those who meet cost-effectiveness and quality criteria.

1915(c) HCBS Waivers

States submit an application to CMS using a standardized format specifying the target population (e.g., aged, physically disabled, intellectually disabled, or individuals with traumatic brain injury), the geographic area served, the services to be offered, and underpinning cost-neutrality documentation. CMS approval requires that the per-capita cost of serving the waiver population in the community not exceed the per-capita cost of serving them in an institution. Enrollment is capped — states specify an enrollment limit in the approved waiver — which creates waiting lists that, as of 2023, exceeded 700,000 individuals nationally (Kaiser Family Foundation).

States may operate multiple concurrent 1915(c) waivers targeting distinct populations. Renewal occurs on a 3-year cycle.

Causal relationships or drivers

Several structural forces explain why states pursue waiver authority and why the three waiver types differ in usage:

Fiscal pressure drives managed care adoption. States seeking to introduce cost predictability shift risk to MCOs through capitated payment arrangements. The 1915(b) waiver is the primary vehicle because it authorizes mandatory enrollment — beneficiaries cannot opt out — which states require to achieve the actuarial risk pools that make capitation viable.

Olmstead compliance motivates 1915(c) expansion. The U.S. Supreme Court's 1999 decision in Olmstead v. L.C. (527 U.S. 581) established that unjustified institutionalization of individuals with disabilities constitutes discrimination under Title II of the Americans with Disabilities Act. States responded by expanding 1915(c) HCBS waivers as a mechanism for transitioning residents out of institutions, directly linking Olmstead compliance plans to waiver enrollment growth.

Federal matching rates create enrollment incentives and constraints. Standard Medicaid FMAP (Federal Medical Assistance Percentage) ranges from 50% to 83% depending on state per-capita income (42 CFR § 433.10). Under 1915(c), states claim FMAP on waiver expenditures — but only up to the institutional cost ceiling. Enrollment caps thus function as a fiscal control mechanism, not merely an administrative convenience.

Demonstration waivers respond to political priorities. CMS approval posture for 1115 demonstrations shifts with federal administration. Expansions of eligibility, substance use disorder carve-ins, and delivery system reform pilots have all been pursued under 1115 authority, reflecting its role as the primary vehicle for contested or novel Medicaid policy.

Classification boundaries

Understanding where the three waivers overlap and diverge is essential for accurate program categorization.

Population targeting: 1915(c) waivers are explicitly population-specific and require that enrollees need an institutional level of care. 1915(b) waivers apply to all Medicaid beneficiaries within a defined geographic area and are not limited to disability or long-term care populations. 1115 demonstrations may define their own target populations, potentially including individuals who would not qualify under standard Medicaid eligibility rules.

Freedom of choice: 1915(b) directly waives the §1902(a)(23) free-choice-of-provider requirement. 1115 waivers may do the same by waiving §1902 provisions. 1915(c) waivers do not waive free choice of provider; beneficiaries enrolled in an HCBS waiver retain provider selection rights.

Renewability and term length: 1115 demonstrations run for 5-year terms; 1915(b) for 2-year terms; 1915(c) for 3-year terms.

Stacking: States may and do combine 1915(b) and 1915(c) waivers for the same population — a practice known as a "combination" or "b/c" waiver — allowing managed care enrollment requirements and HCBS service authorization to operate simultaneously. 1115 waivers generally cannot be "stacked" with other waiver types for the same population, as they supersede existing authorities for their scope.

Budget neutrality: 1115 and 1915(c) both require cost-neutrality demonstrations, though methodologies differ. 1915(b) does not require a formal budget neutrality demonstration; savings from managed care are presumed to flow from competitive contracting.

For additional context on how Medicaid program dimensions interact, see Key Dimensions and Scopes of Medicaid.

Tradeoffs and tensions

Waiting lists versus enrollment caps. The cost-neutrality requirement in 1915(c) structurally limits enrollment. States that cannot demonstrate per-capita community costs below institutional costs must either reduce services, reduce per-person expenditures, or restrict enrollment. This creates documented waiting lists — an inherent tension between fiscal compliance and Olmstead obligations.

Budget neutrality methodology disputes. In 1115 demonstrations, the "without-waiver" baseline is a negotiated counterfactual. States and CMS regularly dispute the appropriateness of trend rates, population projections, and cost assumptions embedded in these baselines. A favorable baseline can allow a state to claim federal matching funds for coverage expansions that would not have occurred without the demonstration, while an unfavorable baseline may constrain state flexibility.

Managed care accountability gaps. 1915(b) waivers shift service authorization responsibility from the state to MCOs. Federal Medicaid managed care regulations at 42 CFR Part 438 impose network adequacy, grievance, and appeal requirements — but enforcement capacity varies by state. The delegation of coverage decisions to private plans creates oversight challenges that do not exist in fee-for-service Medicaid.

Demonstration scope creep. Because 1115 authority is broad, administrations have used it for policy changes that critics argue lie outside the "objectives of Title XIX." Work requirements, Medicaid lock-out periods, and premiums on low-income populations have all been proposed or implemented under 1115, generating litigation over whether such conditions promote or undermine the program's objectives.

Service definition rigidity in 1915(c). Once a 1915(c) waiver is approved, the approved service package is locked until the next renewal or an approved amendment. Adding a new service category mid-cycle requires a formal amendment process with CMS review, limiting states' ability to respond dynamically to beneficiary needs.

Common misconceptions

Misconception: Waiver approval is automatic once an application is submitted.
CMS review of 1115 demonstrations can take months to years. The agency may require multiple rounds of revision, impose special terms and conditions, or deny the demonstration. 1915(b) and 1915(c) applications also undergo substantive CMS review; approval is not guaranteed.

Misconception: 1915(c) waivers cover all home care services.
A 1915(c) waiver covers only the specific services enumerated in the approved waiver application for the specific enrolled population. Services not listed in the approved waiver are not covered under that authority, even if they are otherwise Medicaid-coverable state plan services.

Misconception: Enrollment in a 1915(c) waiver disenrolls the beneficiary from standard Medicaid.
Individuals enrolled in a 1915(c) waiver remain Medicaid beneficiaries and retain access to all standard state plan services. The waiver adds HCBS services; it does not replace the base benefit package.

Misconception: Budget neutrality means cost savings.
Budget neutrality in 1115 demonstrations means the federal government spends no more than it would have without the waiver — not that the state or federal government saves money. Demonstrations can cost more than standard Medicaid in absolute terms if the baseline is set high enough.

Misconception: 1915(b) waivers require managed care for all Medicaid beneficiaries.
A 1915(b) waiver can be geographically limited (e.g., covering only specific counties or regions) and can be population-specific. States may exempt certain groups — such as individuals dually eligible for Medicare and Medicaid, or Native Americans — from mandatory managed care enrollment requirements.

Checklist or steps (non-advisory)

Elements present in a complete 1915(c) HCBS waiver application

The following components are required under CMS's HCBS waiver application framework (CMS HCBS Waiver Application, Version 3.6):

• [ ] Target population defined with level-of-care criteria specified
• [ ] Geographic area (statewide or specific counties) identified
• [ ] Enrollment cap established with documentation of capacity limit rationale
• [ ] Each waiver service described with provider qualifications, limits, and delivery method
• [ ] Institutional cost neutrality calculation completed, using CMS-approved methodology
• [ ] Participant safeguards section completed (critical incident reporting, backup plans, emergency protocols)
• [ ] Quality Improvement Strategy (QIS) documented with performance measures and remediation processes
• [ ] Participant rights and freedom of choice protections described
• [ ] Rate-setting methodology for each waiver service documented
• [ ] Transition plan included if the waiver replaces or modifies an existing approved waiver

Reference table or matrix

Waiver type comparison: §1115, §1915(b), and §1915(c)

For a broader overview of Medicaid program structure, the Medicaid Authority home provides an orientation to program scope and federal-state administration. Additional program-specific questions are addressed in the Medicaid Frequently Asked Questions resource.