April 10, 2025
See below. It just arrived from CMS.
I could be wrong but I think CMS has decided it will no longer approve federal match agreements for states seeking a new 1115 Waiver, or for states applying to extend an 1115 Waiver, and this includes federal match for DSRIP funding. If I am correct in this early analysis, this could have implications for any plan to try and extend New York’s current 1115 Waiver that is currently on a tight timeline with which to achieve promised outcomes.
I have pasted brief information regarding the Programs discussed in the CMS Press Release (directly below)
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Designated State Health Programs (DSHP): Health programs funded entirely by the state that provide safety-net health care services for low-income or uninsured individuals. Under an 1115 demonstration, spending on these programs can sometimes be used to draw down a federal funding match without affecting the operations of the program itself. Federal matching of DSHP expenditures will make up a portion of the resources supporting Washington State’s Medicaid Transformation project initiatives. Delivery System Reform Incentive Program/Payment/Pool (DSRIP): This term refers to the type of funds available under Initiative 1 of the demonstration. DSRIP funds are unique to 1115 Medicaid demonstrations in that they are meant to incentivize providers to achieve specific milestones and outcomes related to improving care for Medicaid enrollees. DSRIP funds are not grants, providers must demonstrate specific milestones have been met before receipt CMS Refocuses on its Core Mission and Preserving the State-Federal Medicaid Partnership The Centers for Medicare & Medicaid Services (CMS) is taking action to preserve the core mission of the Medicaid program by putting an end to spending that duplicates resources available through other federal and state programs or isn’t directly tied to healthcare services. Mounting expenditures, such as covering housekeeping for individuals who are not eligible for Medicaid or high-speed internet for rural healthcare providers, distracts from the core mission of Medicaid, and in some instances, serves as an overly-creative financing mechanism to skirt state budget responsibilities. CMS sent a letter to states today notifying them that it does not intend to approve new or extend existing requests for federal matching funds for state expenditures on these two types of programs — designated state health programs (DSHP) and designated state investment programs (DSIP). DSHPs and DSIPs are state-funded health programs that, without “creative interpretations” of section 1115 demonstration authority, would not have qualified for federal Medicaid funding. Federal DSHP funding has historically raised oversight concerns from Congressional oversight committees and the Government Accountability Office (GAO) about whether DSHPs were linked to eligible populations and aligned with the federal-state financial partnership established under the Medicaid statute. In 2017, CMS took action to phase-out these expenditures, noting “demonstrations have not made a compelling case that federal DSHP funding is necessary to support the continuation of important programs previously operated by the state, and federal DSHP funding is inconsistent with the overall federal-state financial relationship under the Medicaid statute.” DSHPs and DSIPs have grown from approximately $886 million in 2019 to nearly $2.7 billion in eligible expenditures in 2025, representing increasing costs to the federal government without a sustainable state contribution. DSHPs and DSIPs are essentially a tap on the federal Treasury for programs that states have determined are priorities outside of the federal commitment to the Medicaid program. These programs do not tie directly to services provided to Medicaid beneficiaries. A few examples include:
As CMS continues to focus on the statutory objectives of the Medicaid program and improving health outcomes for the most vulnerable, the agency is refocusing its resources on Medicaid programmatic goals. To ensure this vital safety net continues to be available in the future, CMS is taking this action to safeguard the financial health of the Medicaid program. While CMS will continue to work with states on innovative state section 1115 demonstrations, those demonstrations should be focused on improving health outcomes of the most vulnerable dependent on Medicaid. |