Section 1115 Waivers and Budget Neutrality: Using Medicaid Funds

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Section 1115 of the Social Security Act permits the Secretary of the Department of Health and Human Services (DHHS) to waive certain portions of the federal Medicaid Act for a five year demonstration project, if the demonstration is budget neutral to the federal government. Once the budget neutrality test is met, the Secretary, through the Health Care Financing Administration (HCFA), can grant a state’s request to alter Medicaid eligibility standards, benefit rules, payment provisions, and other rules.