On June 11, CMS Administrator Dr. Oz issued a letter to all state Medicaid Directors that outlines significant changes to 1115 waivers – a key way states have been gaining flexibility to address non-medical factors that impact health, such as food, transportation, and housing.
What's changing?
The June guidance aligns with an H.R. 1 requirement: beginning January 1, 2027, specific to budget neutrality, CMS will not approve, renew or amend 1115 demonstrations without independent certification from CMS's chief actuary that confirms the demonstration will not increase federal spending to state Medicaid programs.
Key changes include:
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Under the new guidance, states will have to submit actuarial, economic, statistical or another form of rigorous analysis to show projected financial impacts of individual demonstration activities.
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Demonstrations that would increase federal Medicaid expenditures will not move forward.
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States must monitor programs based on CMS parameters (still to be defined) and will face corrective actions if expenditures do not closely align with projections.
What's next?
CMS expects to provide additional details, guidance, and technical assistance to states before January 1, 2027.
What's Next on Work Reporting Requirements?
CMS's June 1, 2026, interim final rule on Medicaid work requirements sets up a more prescriptive and administratively complex framework for eligibility and compliance.
Significant Changes in Medical Frailty
The rule narrows the definition of "medical frailty," requiring that conditions demonstrably limit an individual's ability to meet work requirements, reducing state flexibility and limiting automatic exemptions. As a result, fewer individuals may qualify for exemptions—particularly those with mental health or substance use conditions—and providers may face increased administrative burden to document functional limitations and support eligibility determinations.
Tracking State Changes?
Two new tools can help you do so:
Escalating Actions on Waste, Fraud, and Abuse
A new report from the Paragon Health Institute, a conservative think tank led by a former Trump adviser, argues that improper enrollments are widespread in the ACA marketplaces, estimating that more than 6 million (about 27%) of 2026 sign-ups may not meet eligibility criteria. The report attributes these issues in part to incentives tied to zero-premium plans and weaker verification systems, particularly in states using the federal exchange platform.
Why it matters
While "improper enrollments" do not necessarily indicate intentional fraud, the findings are being used to bolster calls for stronger oversight and tighter eligibility verification.
What You Can Do Now
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Use our Here We Stand resources — Schedule a one-on-one consultation to put the new Here We Stand resources into action: please contact Kylie Bowlds to set up a time.
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Take Action and send messages to your lawmakers urging them not to make further harmful cuts to Medicaid funding, using our quick, easy advocacy tool.
A tool you can use:
A new program integrity resource from our partners at the Modern Medicaid Alliance offers an infographic highlighting Medicaid's multi-layered approach to program integrity.
