Budget Neutrality for Section 1115(a) Medicaid Demonstration Projects SMDL (SMD 24-003)
This letter describes the Centers for Medicare & Medicaid Services’ (CMS) current approach to
determining budget neutrality for Medicaid demonstration projects authorized under section
1115(a) of the Social Security Act (“the Act”) and is intended to give states and interested parties
information on how CMS calculates and applies budget neutrality in demonstration approvals.
Until September 2022, CMS and states generally applied an approach to calculating budget
neutrality described in the 2018 State Medicaid Director Letter (SMDL) available at link
https://www.medicaid.gov/federal-policy-guidance/downloads/smd18009.pdf. S
Issued by: Centers for Medicare & Medicaid Services (CMS)
Issue Date: August 22, 2024
DISCLAIMER: The contents of this database lack the force and effect of law, except as authorized by law (including Medicare Advantage Rate Announcements and Advance Notices) or as specifically incorporated into a contract. The Department may not cite, use, or rely on any guidance that is not posted on the guidance repository, except to establish historical facts.