CMS’ Approval of Section 1115 Demonstrations for Justice-Involved Individuals

CMS’ Approval of Section 1115 Demonstrations for Justice-Involved Individuals

Since Medicaid’s inception, the program has not covered services for anyone who is an “inmate of a public institution,” as federal law excludes federal payment for such services. This means that  incarcerated individuals have no access to Medicaid-funded services and resources, and may face delays getting access upon release. Disabled and Black, Native American, and Hispanic individuals are vastly overrepresented in prisons and jails. Therefore, ensuring that people who are in carceral settings are enrolled in Medicaid and connected with services upon release is key to reducing health disparities and advancing health equity.

On January 26, 2023, CMS approved a first-of-its-kind section 1115 “reentry demonstration” in California, through which the Centers for Medicare & Medicaid Services (CMS) created a temporary, limited carve-out to the “inmate exclusion.” This approval marks a major change in Medicaid’s role in funding services in carceral settings. The demonstration permits California to collect federal Medicaid matching funds for a targeted set of “reentry services” to youth and adults in state prisons, jails, and youth correctional facilities for up to 90 days prior to release.

Fifteen states have 1115 “reentry demonstration” waivers pending, and we are likely to see more states applying in the near future. CMS’ detailed approval letter provides a roadmap for how CMS will address pending future requests for 1115 reentry demonstrations.

To ensure that federal funds are used appropriately by the states, CMS included numerous guardrails in California’s approval. For example, CMS limited the state’s ability to use the reentry demonstration to shift costs related to incarceration to the federal government. If California receives increased federal funding for services that were “the responsibility of and were previously provided or paid by the” state or locality, it must reinvest those new dollars in certain initiatives aimed at supporting reentry, smoothing transitions to the community, diverting individuals from jails and prisons, or improving the health of the justice-involved population. Such guardrails diminish the risk that Medicaid funding could be used to expand carceral settings, which are notoriously ill-suited settings for addressing serious physical and mental health needs.

To learn more about California’s reentry demonstration waiver, CMS’ guardrails, and future implications of CMS’ approval, please read our issue brief titled CMS Establishes Guardrails for Section 1115 Demonstrations for Justice-Involved Individuals in California Waiver .



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