The Centers for Medicare & Medicaid Services (CMS) announced Thursday that it would no longer approve funding for some services previously covered by state section 1115 demonstrations, including some in-home non-medical services.

In a letter addressed to state Medicaid directors, CMS stated that the organization “did not anticipate” approving new federal funding for designated state health programs (DSHP) and designated state investment programs (DSIP) under section 1115 demonstration authority.

Among the examples of expenditures that would not be approved moving forward, CMS cited $241 million for a program in New York dedicated to non-medical in-home services, including housekeeping.

“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,” a CMS statement read.

Other examples of services that CMS will no longer fund include a diversity in medicine initiative and grants to a labor union designed to reduce insurance costs for certain childcare providers.

People who receive services through section 1115 waivers overlap with the population of people receiving home- and community-based services, industry experts previously told Home Health Care News. 

Services provided under section 1115 waivers can improve access to care for the most vulnerable populations, Kristen Palumbo, chief operating officer and chief compliance officer of Innovive Health, told Home Health Care News.

“1115 waivers have been a critical policy tool for states to design Medicaid programs that address the real-world needs of complex patient populations,” Palumbo said. “These waivers allow for innovative approaches that reduce barriers to access and improve outcomes. Scaling back this flexibility would not only limit states’ ability to respond to local needs, but also risk destabilizing care for those who rely on it most.”

Medford, Massachusetts-based Innovive provides home-based skilled nursing services to complex behavioral health patients.

Costs relating to DSHPs and DSIPs, two types of state-funded health programs, have increased from approximately $886 million in 2019 to nearly $2.7 billion in 2025, according to CMS. The programs were once funded entirely without Medicaid dollars, the department said, and are not a “prudent financial investment.”

“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,” CMS’s statement read. “These programs do not tie directly to services provided to Medicaid beneficiaries.”

CMS will continue to work with states on section 1115 waivers, according to the statement, but the programs must be “focused on improving health outcomes of the most vulnerable dependent on Medicaid.”

“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,” CMS’s statement read. 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.”

The department will contact states with existing DSHPs and DSIPs and emphasize that it will not extend DSHPs and DSIPs past the currently approved demonstration periods.

Potential cuts to Medicaid have been a cause for concern for home-based care providers whose patients rely on the insurance program. Providers and advocacy groups have spoken out, saying reductions would worsen already low margins and potentially limit access to care.