The Rockefeller Institute of Government is closely monitoring legislative and administrative actions at the federal level that could have implications for New York State’s healthcare system. Our previous analyses have, among other things, more extensively outlined changes and summarized potential impacts related to regulatory changes and the One Big Beautiful Bill Act’s (OBBBA’s) impact on healthcare in New York.

This blog focuses on additional recent actions the federal government has taken that specifically impact New York State’s 1115 Medicaid waiver and suggests where there are opportunities to align New York’s waiver renewal with the federal government’s policy goals.

Background

On July 17, 2025, the Centers for Medicare and Medicaid Services (CMS) issued updated guidance related to Medicaid enrollment and spending (CMS Reinforces Medicaid and Child Health Plus Integrity). This new guidance was provided by CMS through two letters, both of which have implications for New York’s 1115 Waiver. Additionally, on September 2, 2025, CMS announced new policy and operational changes in connection with an extension of the Achieving Healthcare Efficiency through Accountable Design (AHEAD) model, which is a component of New York’s current waiver.

Recent legislation under the OBBBA and other actions had already necessitated changes related to New York’s waiver, but recent guidance has resulted in three newly impacted areas (new items in bold):

• Restrictions on future workforce funding
• Elimination of continuous coverage requirements
  • Children (6 years)
  • Adults (expansion population biannual requirement)
• New requirements for the AHEAD model
• The elimination of future designated state health programs
• Restrictions on the future use of certain social determinants of health programs
• Limits on the focus on diversity, equity and inclusion
• Stricter budget neutrality calculations
• Requirements for community engagement/ work requirements
• Requirements for premiums and cost sharing for certain services
• Reduced retroactive eligibility
• Implementation changes for duplicate enrollment screenings
• Revised definitions of qualified immigrants
• Restrictions on Directed Payment Templates

This blog focuses on the three newly impacted areas—eligibility, enrollment, and coverage changes, healthcare workforce funding changes and the AHEAD model, which are summarized below:

Absent any waivers, Medicaid eligibility must be determined annually (every 12 months). Beneficiaries are required to notify the State if there is a change in circumstance and the agency must redetermine eligibility if it becomes aware of a change in status. Employment changes that result the provision of comprehensive health insurance coverage or modify financial eligibility for the program are examples of a change in circumstance that would necessitate a redetermination of coverage. However, an 1115 waiver, such as New York’s, can authorize a period of continuous coverage, regardless of a change in circumstance. Meaning that eligibility for Medicaid is guaranteed irrespective of whether the financial or other criterion continue to be met. A RAND study of New York’s continuous coverage requirement suggests that continuous coverage increases the enrollment period by over 8 percent. Accordingly, proponents of continuous coverage favor its use to avoid coverage gaps and/or disruptions in care that can occur, as in the example above, in the process of changing jobs.

CMS no longer intends to approve 1115 waivers with most continuous coverage provisions. New York is one of fewer than 10 states that provides continuous coverage for adults and children.

The July 17 update from CMS included enrollment integrity guidance to States. In the guidance, CMS stated that it is aimed at:

making clear it does not anticipate approving new or extending existing section 1115 demonstration authorities that have allowed some individuals to remain enrolled in Medicaid or Children’s Health Insurance Program (CHIP) for extended periods of time. Currently, children can remain continuously enrolled in Medicaid or CHIP for up to six years, even if a change in their circumstances would have otherwise made them ineligible at some point.

As of January 2024, all states are required to provide continuous coverage to children up to age 19 in Medicaid and Child Health Plus for a period of one year. This means that eligibility for children up to age 19 is renewed on an annual basis, rather than any other shorter duration, which was previously an option available to states. The one-year requirement was authorized in the 2023 Consolidated Appropriations Act and was later estimated to increase coverage for impacted states by the Assistant Secretary for Planning and Evaluation’s Office of Health Policy.

New York was previously not affected by the 2024 change, as it was already the standard for the state to have 12 months of continuous coverage annually for children up to 19 in Medicaid and Child Health Plus. In November 2024, in fact, New York was one of five states approved by the Biden administration for a six-year continuous coverage expansion.¹

Per the July 17 letter from CMS, continuation of the six-year continuous coverage option for children will not, however, be renewable following the expiration of New York’s current 1115 waiver on March 31, 2027. However, the consolidated appropriations language authorized in January 2024 will allow one year of continuous coverage for children to be permitted in the upcoming waiver renewal, which—as noted above—was the standard in New York prior to the November 2024 waiver authorization.

The administrative change to continuous coverage for children is in addition to eligibility changes included in the OBBBA, which we previously detailed, that would eliminate 12-month continuous coverage for certain childless adults, which is also authorized through New York State’s current 1115 waiver.

In addition to the eligibility changes announced, CMS also issued spending focus guidance indicating in its press release that it:

does not anticipate approving new or extending existing Medicaid-funded workforce initiatives—programs that use Medicaid dollars to fund certain job training or employment-related activities—which to date have involved more than $1 billion in federal commitments across California, Massachusetts, New York, North Carolina, and Vermont. CMS will allow currently approved initiatives to run out their course but does not anticipate extending them or approving new waivers.

New York’s Health Equity Reform (NYHER) 1115 waiver included $646 million in workforce initiatives intended to “address significant health care workforce shortages in safety net settings through innovative career pathways training programs for front-line health and social care professionals that will increase access to culturally appropriate services.”² Both 1199 SEIU and Iroquois Health Care Association, for example, are recipients of the funding, and are heavily focused on workforce training and recruitment, including for long-term care providers. The funding is also intended to be used for loan repayment programs for certain providers “who commit to working in community-based practices in underserved areas, including dentists, psychiatrists, and clinical nurse specialists.”³ In the context of healthcare delivery re-design, given the level of funding shifts and reductions expected, worker training and re-training can aid in transforming the State’s healthcare delivery system.

As detailed in recent Rockefeller Institute of Government writings⁴, the $646 million is funded by the federal government without a new state expenditure as part of the budget-neutrality test⁵ in which the federal government recognizes prior state expenditures, such as the healthcare worker bonus program. The transaction is what is known as a designated state health program (DSHP), which under the new administration, CMS has stated it will not renew beyond the currently approved terms.⁶,⁷

The recent change in focus away from federally funded workforce initiatives is in addition to this change limiting the use of DSHPs to generate federal funding under future waivers.

Effective January 2026, all states participating in the AHEAD program, including New York, will be required to implement changes that advance the CMS Innovation Center’s strategic pillars as follows:

Strategic Pillar #1 | Choice and Competition

States will be required to implement at least two policies, one from each category.

Choice

1. Implement Medicaid site neutrality.
2. Improve access to new and/or additional models of care delivery via telehealth.
3. Advance prescription drug price transparency.
4. Free up provider movement by banning non-compete clauses.

Promoting Competition

1. Change scope of practice restrictions (including for both physician assistants and nurse practitioners).
2. Remove certificate of need requirements for all non-hospital settings.
3. Expand access to care by revising network adequacy provisions in compliance with federal requirements.
4. Expand contracting flexibilities by repealing any-willing-provider laws.

Of the new requirements, the Hochul administration has previously stated its position on only one: scope of practice. New York has previously proposed changes to scope of practice requirements in recent executive budgets, but such expansions have been adopted in limited circumstances.

Newton’s Third Law of Motion—for every action there is an equal and opposite reaction—is applicable in healthcare finance and policymaking. Advancing any of the new requirements will, generally speaking, evoke opposition from affected constituencies, making the adoption of any two new requirements complex (without even considering all the other changes required by recent legislation and guidance) and therefore impossible to predict in a vacuum.

Strategic Pillar #2 | Prevention

States will be required to submit a Population Health Accountability Plan (PHAP) focusing on preventative care, including chronic disease prevention. The PHAP will replace previously required Health Equity Plans. According to CMS, “Each participating state will select a set of quality and population health measures from a menu of options provided by CMS. States will set specific targets for each selected measure, subject to CMS approval, that they will be accountable for meeting under the AHEAD Model.

CMS will also use quality measures and other data across the model to monitor impact and protect against any unintended consequences in the care delivered to beneficiaries or any negative changes in healthcare access or costs.”⁸

Other AHEAD Changes

According to CMS’s frequently asked questions on the changes, in addition to the above, participating states will need to implement new transparency requirements and incorporate additional risk-related measures. States will no-longer be able to set Medicare fee-for service rates through the AHEAD model. The potential for this change had earlier been highlighted at the 2025 United Hospital Fund’s Annual Medicaid conference as CMS had been raising flags in Maryland regarding the state’s authority to set Medicare rates.⁹

Also, as part of the announcement, a geographic based AHEAD model (Geo-AHEAD) will begin in 2028, with two four-year contract periods, and the overall AHEAD program extending through December 31, 2025. As New York is currently implementing the AHEAD model in five downstate counties (Bronx, Brooklyn, Queens, Staten Island and Westchester), further CMS guidance will be needed to determine whether NY will transition to the Geo-AHEAD model in 2028, absent statewide application.

The AHEAD model cannot be operated in combination with the Making Care Primary (MCP) model, which is operating in certain upstate regions in New York. However, CMS announced on March 12, 2025 that this program and others operated in New York, such as the Primary Care First model, will end effective December 31, 2025, so the two programs will not overlap. This is also true for the Transforming Maternal Health (TMaH) model, but New York is not participating in that model. Additional programs like the Cell and Gene Therapy (CGT) Access, Innovation in Behavioral Health (IBH) and the Primary Care First (PCF) can operate concurrently.

Next Steps

Given recent legislation and guidance, it is likely that New York will need to significantly revise the concept of its next waiver within a framework that CMS will approve. The waiver that was approved in 2024 was based on an August 2021 concept paper. Negotiations took nearly three years with CMS to solidify the final version of the waiver with the approval announced in January 2024. A new waiver design will be a significant administrative undertaking, and the number of policy changes required do not provide a large margin of error or timeline for multiple iterations, as was the case with the 2024 waiver.

While benefit and coverage expansions seem unlikely, a new waiver that brings in federal dollars may not be off the table. Among the objectives CMS Administrator Dr. Mehmet Oz detailed for CMS, patient-centric healthcare is an umbrella under which several more tactical approaches could potentially be funded. These include, but are not limited to:

• Healthcare restructuring, transformation, and integration
• Global payment models
• Electronic record sharing and digital services and platforms
• Population health and quality improvement

New York is already doing these initiatives and can seek federal support to expand upon and enhance the reach of these programs.

For example, a central component of Governor Hochul’s healthcare agenda has been to promote the sustainability of struggling hospitals through partnerships with stronger, high-quality affiliates through the Safety-Net Transformation Program (SNTP). This program, along with the newly created Rural Health Care Transformation Program, authorized in the OBBBA, could potentially be leveraged with new federal dollars in the State’s next 11115 waiver to redirect some of the lost federal dollars to New York.

As previously detailed, New York’s hospitals are smaller and more independent than hospital systems nationally. New York already supports more than 75 hospitals experiencing financial distress.¹⁰ A Medicaid waiver focused on transforming New York’s healthcare delivery system through incentivizing strategic partnerships and provider integration across the continuum while at the same time improving outcomes and quality could be a theme that is mutually agreeable for both CMS and New York policymakers.

While the required changes to the AHEAD model and to DSHP as a funding mechanism are significant, the federal government hasn’t precluded AHEAD’s continued use by the state to help finance safety net hospitals. And, while meeting the requirements may be challenging, it’s an important potential component of the state’s future waiver renewal. In addition to health care transformation and distressed hospital funding, the Hochul administration has supported efforts related to information technology, cybersecurity, and telehealth transformation, with $650 million in State only- funding.¹¹ Given that the State’s Request for Applications for this funding was only released in January and awards take several months to be announced, at least a portion of the state share of spending against this resource will most certainly align with the timeline for a new waiver.

Population health management and quality improvement are embedded in the three mechanisms described above, but beyond that New York has more quality improvement programs and strategies that may align with the new administration’s policies and priorities. There are two areas for improvement that may be of particular interest:

• An estimated 1.8 million adult New Yorkers (11.3%) have diagnosed diabetes.¹²
• Diabetes is more prevalent among adults enrolled in Medicaid (13.6%) compared to those with private insurance (6.6%).¹³
• Adults with an annual household income of less than $25,000 are most likely to be diagnosed with diabetes (17.3%).¹⁴
• Adults with obesity are more likely to have diabetes (18.8%) compared to adults with overweight (11.4%) or those with neither overweight nor obesity (5.4%).¹⁵
• The prevalence of diabetes among adults living with disability (20.6%) is two and a half times more than those living without disability (8.0%).¹⁶

• In 2012-2014, 66% of prenatal related deaths in NYS involved a cesarean section, which increases the likelihood of complications like any other surgery.¹⁹
• Recent research into the variable quality of hospital obstetric care has shown that the hospital location of deliveries has an impact on maternal outcomes and racial disparities.²⁰
• A 2016 study found that black mothers are more likely to deliver at higher risk-standardized severe maternal morbidity hospitals than are white mothers, contributing to black-white disparities.²¹ The study estimated that if black mothers delivered in the same hospitals as white women, there could be a possible reduction of severe maternal morbidity rates by 47.7% for black women.
• According to reviews of 2018 deaths, substance use disorder caused more than one in four statewide pregnancy‑associated deaths. Of these, 13% occurred during pregnancy, 18% occurred within 42 days of the end of pregnancy, and 69% occurred between 43 days and one year after the end of the pregnancy.²²

In these two areas, few would argue there isn’t room for improvement nationally and in New York. Improvement could not only have a positive impact on the health of New Yorkers, but also be part of the overall restructuring in response to technological changes, medical advancements and other factors changing the way healthcare is delivered and financed. Achieving gains on measurable quality improvement goals could generate federal funding through a new federal funding arrangement in New York’s next waiver.

Additionally, New York may seek funding from the federal government to better leverage administrative data to “empower patients to improve their outcomes and their healthcare experience.” The federal government may be willing to fund initiatives using administrative data that 1) advance population health quality goals (as described above), 2) design and test innovative models of care delivery (such as the AHEAD model or other models that improve outcomes and efficiency); and/or 3) improve the availability of information about accessing health care in New York through the communication of current data against key healthcare performance metrics.

As detailed in recent Rockefeller Institute work, recent federal healthcare policy changes will result in federal funding reductions, coverage loss, and reduced flexibility, particularly in a state like New York. This is principally true in the case of New York’s existing 1115 waiver. With the waiver’s expiration in 2027, New York will need to decide how to comply with legislatively mandated requirements and administrative guidance. This paper highlights a few opportunities for New York decision-makers to consider in negotiating the state’s next 1115 waiver to maximize the potential availability of federal funding to New York in support of its residents and the $300 billion healthcare economy.

The Rockefeller Institute of Government will continue to monitor key developments impacting healthcare for New Yorkers.

For more information about the programs described in this blogpost, see: “How Healthcare Changes in Washington Could Affect New York.”

ABOUT THE AUTHOR

Jillian Kirby Bronner is a special advisor to the New York State Budget Director and a guest author at the Rockefeller Institute of Government.

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[1] Five states include: New York, Colorado, Hawaii, Minnesota, and Pennsylvania. Oregon had a previously approved waiver.

[2] Press Release: Governor Hochul Announces Groundbreaking Medicaid 1115 Waiver Amendment to Enhance New York State’s Health Care System, January 2024.

[3] Ibid.

[4] Kirby Bronner: “How Healthcare Changes in Washington Could Affect New York.”

[5]The OBBBA includes language requiring 1115 waivers to be budget neutral, and would require HHS to develop methodologies for applying savings generated to be applied to future extensions, effective immediately. The OBBBA now requires that an actuary verify the budget neutrality test. By putting these requirements in statute, Congress has removed regulatory flexibility previously exercised by the Biden administration to grant states maximum flexibility in achieving the budget neutrality test. While the NYHER waiver was subject to budget neutrality, the budget neutrality test was met by CMS treating certain health related social needs expenditures as “hypothetical” rather than applying CMS’s 2018 more stringent budget neutrality policies, which have been essentially codified by the OBBA. Therefore, future budget neutrality tests may be more restrictive going forward.

[6] In April 2025, the US Centers for Medicare & Medicaid Services notified states that it did not intend to approve new or extend existing requests for federal matching funds for state expenditures on designated state health programs (DSHP) and designated state investment programs (DSIP). The letter informed states would need to shoulder more of any future funding for these specific programs. The NYHER waiver included $4.3 billion in allowable designated state health programs (DSHP) expenditures with a total cap of $3.9 billion.

[7] A major component of DSHP funding is used to support the Advancing All-Payer Equity Approaches and Development (AHEAD) model, which the New York State Department of Health indicates will provide $2.2 billion in federal funding to “stabilize and transform targeted financially distressed voluntary hospitals.” See also: 1115 Medicaid Redesign Team Waiver Webinar: New York Health Equity Reform (NYHER)

The 1115 waiver also included $646 million in DSHP funded workforce support to be distributed by 1199 SEIU Training and Employment Funds, Iroquois Healthcare Association, and the Finger Lakes Performing Provider System. In August 2024, Governor Hochul awarded three workforce investment organizations $646 million over three years to establish programs that train workers to become mental health, healthcare, and social care workers.

[8] Centers for Medicaid and Medicare Services AHEAD model frequently asked questions.

[9] See also: https://marylandmatters.org/2025/05/08/bumps-ahead-trump-administration-evaluating-marylands-authority-to-set-medicare-rates/

[10] New York State Fiscal Year 2026 executive budget documents stated that: “75 of 261, or 29 percent, of New York’s hospitals are financially distressed.

[11] See the January 2024 Request for Applications here.

[12] New York State Behavioral Risk Factor Surveillance System Brief: Number 2024-23

[13] Ibid.

[14] Ibid.

[15] Ibid.

[16] Ibid.

[17] New York State Expert Panel on Postpartum Care: Report—January 2021

[18] 2024 New York State Department of Health Maternal Mortality Press Release

[19] New York State Taskforce on Maternal Mortality and Disparate Racial Outcomes. March 2019

[20] Ibid.

[21] Howell, et al: Site of delivery contribution to black-white severe maternal morbidity disparity, 2016.

[22] Issue Brief from the New York State Maternal Mortality Review Board: Spotlight on Perinatal Substance Use Disorder, November 2023