The Centers for Medicare & Medicaid Services (CMS) has placed new limits on how states can use Section 1115 waivers, which was previously one of the most flexible tools in the Medicaid program. In a July 17 letter to state officials, the Agency announced it will no longer approve or extend waivers that fund Medicaid workforce initiatives or expand continuous eligibility beyond what is allowed under federal law. 

Section 1115 waivers have long served as a testing ground for state innovation, allowing programs to pilot new models for coverage, payment and delivery. In recent years, several states used these waivers to address health care workforce shortages by covering loan repayment programs, training incentives or pipeline development for clinicians in underserved areas. Other states used them to extend continuous eligibility to reduce administrative errors in coverage. CMS’ latest announcement signals a shift away from these approaches. 

Existing waivers with workforce-related components will be allowed to continue through their current approval periods, but no renewals or new approvals are expected in this category. Demonstrations related to substance use disorder (SUD) treatment, reentry for justice-involved populations, and other delivery-system reforms remain active and continue to receive federal approval. 

Across the AHPA footprint (which spans 16 states and the District of Columbia), no state currently has a workforce-related Section 1115 waiver that would be directly impacted by the change. States such as California, Oregon, Washington, Texas and Missouri continue to operate 1115 demonstrations focused primarily on behavioral health integration, SUD services and care transitions. North Carolina’s 1115 waiver, which includes limited workforce elements, remains in effect through 2029 but may not be extended once it expires. Florida’s pending 1115 workforce request, called “Florida Health Care Workforce Sustainability,” is currently listed as “Pending” on Medicaid.gov and may be affected by CMS’ shift away from workforce-related approvals. 

In April 2025, the Agency announced it would discontinue the use of Designated State Health Programs (DSHP) and Designated State Investment Programs (DSIP) under the Section 1115 authority, limiting states’ ability to rely on creative financing models. Together, these steps suggest CMS is giving states less flexibility to use Medicaid funds for new or experimental initiatives.  

At this point, CMS has not released additional guidance suggesting a change in direction. The Agency’s communications continue to emphasize coverage fundamentals and fiscal discipline while signaling that for now, state innovation under Section 1115 will be steered back toward core Medicaid functions rather than broad system reforms. AHPA’s Policy Team will continue to track this issue and keep you up to date on any changes.