The Medicaid Waiver Playbook: How to Navigate and Influence the System
The Hidden Engine of State Policy
Advocates often spend their time fighting over line items in the annual state budget. But in Medicaid—which often accounts for roughly one-fifth to one-third of total state spending—the real architectural decisions aren’t made in the budget at all.
They are made through waivers.
While the Medicaid state plan establishes the foundation of each state’s program, waivers are what allow states to go beyond that foundation. They are where flexibility enters the system, and where some of the most consequential policy decisions are made.
Specifically, Section 1115 Research and Demonstration Waivers and Section 1915(c) Home and Community-Based Services (HCBS) waivers are seemingly among the most powerful tools that states can use to shape their Medicaid programs. With federal approval, these mechanisms allow states to modify how Medicaid operates—defining who is covered, what services are available, and how care is delivered.
In practice, this means that while legislatures debate how much to spend, waivers often determine what much of that spending actually does.
Why This Matters
If you are advocating for changes in your state’s behavioral health system, housing support system, or any other system redesign, the change itself will often be implemented through a waiver or a change to an existing one.
In many cases, states use legislation to support the development of a Medicaid waiver, not to create the waiver itself. Instead, bills may direct the state to pursue a specific waiver, authorize funding, and establish parameters for what the waiver should achieve, consistent with federal requirements. However, depending on the state and stakeholders, waivers can sometimes be pursued through existing executive or agency authority without new legislation.
Just as importantly, this reframes where power actually sits. The most significant decisions about access to care are often made through administrative processes that receive far less public attention than legislative debates.
The Three Types of Waivers You Must Know
Not all waivers are created equal. To be effective, you need to identify which vehicle matches your policy goal.
Section 1115 Waivers: System Transformation
These are among the most flexible—and powerful—waivers available to states.
They are used to:
redesign delivery systems
expand or modify eligibility
test new service models
address behavioral health gaps
pilot initiatives related to social determinants of health (SDOH)
In practice, Section 1115 waivers are also a primary pathway states use to work around structural federal limitations. States can apply for either an SUD-specific waiver, SMI specific, or both.
One key example these waivers may address is the IMD Exclusion Rule, which generally prohibits federal Medicaid reimbursement for individuals ages 21–64 receiving care in an Institution for Mental Diseases (IMD)—defined as a psychiatric hospital or residential treatment facility with more than 16 beds.
The IMD exclusion has long been criticized by advocates and policymakers as discriminatory in effect, as it limits access to Medicaid-covered treatment based on the type of facility and, in practice, the nature of the illness being treated—particularly for individuals with serious mental illness and substance use disorders.
Through 1115 waivers, states can seek federal approval to test approaches that allow for targeted reimbursement in these settings, often as part of broader behavioral health system reforms.
Section 1915(b) Waivers: Managed Care Authority
These waivers allow states to structure how Medicaid services are delivered through managed care arrangements.
They are commonly used to:
require enrollment in managed care
limit provider networks
define how beneficiaries access and navigate services within managed care systems
Unlike other waiver types, 1915(b) waivers are primarily focused on how care is organized and delivered, rather than expanding eligibility or adding new services.
Why This Matters for Advocates
1915(b) waivers shape how people may experience Medicaid on the ground.
They determine:
Which providers individuals can see
How easy or difficult it is to access care
How services are coordinated across systems
For advocates, this means that access to care is not only about what is covered, but how that care is structured. Engaging in decisions around managed care design, network adequacy, and access requirements can have a direct impact on whether services are truly reachable for those who may need them.
Not all states rely heavily on 1915(b) waivers. For example, North Dakota primarily operates through fee-for-service Medicaid and other authorities, meaning managed care plays a more limited role compared to many other states.
Section 1915(c) Waivers: Home and Community-Based Services (HCBS)
These waivers are the backbone of long-term care systems.
They allow states to:
provide services in home and community settings instead of institutions
target specific populations (e.g., individuals with disabilities, medically fragile children)
design specialized service packages
To qualify, individuals must meet an institutional level of care, meaning they would otherwise require services in a setting such as a nursing facility or intermediate care facility.
Critically, unlike the Medicaid state plan, these waivers allow states to cap enrollment.
This creates a fundamental shift:
While the state plan operates as an entitlement, 1915(c) waivers function as controlled-access programs—determining not only what services exist, but how many people can receive them.
In practice, this often results in waiting lists, meaning eligible individuals may not receive services immediately despite meeting the criteria.
Additionally, these waivers must meet federal cost neutrality requirements, meaning the cost of providing services in the community cannot exceed the cost of institutional care.
For advocates, this means that expanding services is not only about defining what should be covered, but also addressing capacity, funding, and waiting lists that determine whether individuals can actually receive care.
* While not a waiver, it is also important to note the Section 1915(i) state plan option, which allows states to provide home and community-based services without requiring an institutional level of care. Unlike 1915(c) waivers, these services must be offered as an entitlement and cannot be capped—highlighting a key trade-off between access and cost control.
While 1915(i) services must be provided as an entitlement for those who qualify, states retain control over eligibility criteria and target populations. This means access can still vary significantly; for example, a state may offer 1915(i) services for individuals with developmental disabilities, but not for those with serious mental illness.
Note on Scope
This resource reflects a policy and advocacy-focused perspective on Medicaid waivers. Given the complexity of these programs, additional technical, legal, and administrative considerations may not be fully captured here. This content is intended as a starting point for understanding, not a substitute for legal or regulatory guidance.
