The Kaiser Family Foundation has Long Term Care and Dual Eligibles: Overview and Managed Care Opportunities released a brief explaining Section 1115 Medicaid demonstration waivers, outlining how they are approved and financed, how states have used them, and how health reform affects them.  KFF notes that the waivers have traditionally authorized the testing of novel coverage methods not normally allowed under Medicaid.  The authors note that some states are now using the waivers to begin expanding health coverage under Medicaid in preparation for full implementation of health reform.  In addition, the brief notes that some states use the waivers as a means to reduce costs and address budgetary shortfall.

From the report:

Section 1115 of the Social Security Act gives the Secretary of Health and Human Services authority to waive provisions of major health and welfare programs authorized under the Act, including certain Medicaid requirements, and to allow a state to use federal Medicaid funds in ways that are not otherwise allowed under federal rules. The authority is provided at the Secretary’s discretion for demonstration projects that the Secretary determines promote Medicaid program objectives.

Full report: Five Key Questions And Answers About Section 1115 Medicaid Waivers (PDF | 865.26 KB)

Kaiser Family Foundation.  (2011).  Five key questions and answers about section 1115 Medicaid waivers.