Shifting Federal Policy Impacts State Behavioral Health Workforce Initiatives
Recent federal policy shifts are impacting state efforts to address critical behavioral health workforce shortages through Medicaid‘s Section 1115 demonstration waivers. While several states recently gained approval for considerable funding – totaling at least $2.7 billion across four states - to bolster their behavioral health workforces, the centers for Medicare & Medicaid Services (CMS) has signaled a change in direction, indicating it will not approve new workforce initiatives and will allow currently approved waivers to expire without extension.
A recent report highlighted by stakeholders identifies the behavioral workforce crisis as the primary obstacle to expanding behavioral health services within states. Approved waivers are subject to ongoing reporting, monitoring, and evaluation, which will ultimately provide data on the effectiveness of these workforce programs.
These initiatives are embedded within broader 1115 waivers, which are required to be budget neutral – meaning federal costs cannot exceed what they would have been without the waiver, and any savings must be reinvested into the approved programs. CMS also allowed some states to utilize “freed up” state funds, accessed through Designated State Health Programs (DSHP), to finance the state share of these workforce initiatives. Vermont’s waiver includes workforce programs within a larger “Investments Framework,” making specific funding amounts for workforce initiatives tough to isolate.
However, a recent letter from CMS indicates a reversal of this approach.the agency stated it will not approve further 1115 workforce initiatives, allowing existing waivers to conclude their terms. most waivers are slated to expire in 2027, with California and North Carolina’s extending to 2029.this policy change also impacts pending requests, such as Florida’s May 2025 proposal for federal matching funds to support training and loan repayment programs for healthcare professionals serving Medicaid recipients in underserved areas. CMS now prioritizes initiatives demonstrating “clear health benefits, cost savings, and strong accountability for federal spending.”
This shift represents the latest action by the current administration to roll back policies enacted during the previous administration. Previously, CMS also announced it would not extend existing or approve new continuous eligibility waivers for Medicaid enrollees, and has signaled a broader intention to limit waiver financing tools and adaptability, including those related to social determinants of health. Historically, 1115 waiver priorities have fluctuated with changes in presidential administrations, and the current administration has yet to articulate its specific priorities for 1115 waiver policy.
