Earlier this year I put together an AHCCCS 101 series explaining how Arizona’s Medicaid program works, who makes the decisions and what all those waivers and contractors mean.
Here’s a real-life example of the foundation of Arizona’s Medicaid system – our “1115 Waiver”.
Any state Medicaid program that uses a demonstration waiver (most do) has to turn in their approach to how they’ll implement Medicaid in their state every 5 years and get CMS’ approval.
Anytime they want to substantially deviate from their plan that CMS had already approved they have to turn that in for approval too.
Last week AHCCCS released its draft application to renew Arizona’s Section 1115 Medicaid Demonstration Waiver from October 1, 2027, through September 30, 2032.
Arizona’s Section 1115 Waiver Renewal Request (2027-2032)
A Quick Refresher
As we covered in AHCCCS 101 Part 1, Arizona was the last state to join Medicaid. AHCCCS didn’t begin until 1982… 17 years after Congress created Medicaid. By the time AZ joined Medicaid the other 49 states had been participating for well over a decade.
When AZ finally got around to implementing AHCCCS the legislature built it around a managed care model. Instead of paying most doctors and hospitals directly for each service, AHCCCS contracts with health plans and pays them a set amount per member per month to arrange and pay for care.
Because the federal government pays a large share of Medicaid costs, Arizona needs federal approval to depart from the normal rules.
In our AHCCCS 101 Part 2 we covered how a Section 1115 waiver is basically a permission slip from the CMS to evaluate new approaches that otherwise wouldn’t be allowed.
What Does Arizona’s Waiver Do?
Arizona has operated under an 1115 waiver since AHCCCS began.
The waiver supports the statewide managed-care structure for most members along with programs including:
- Home and community-based services through the Arizona Long Term Care System (ALTCS);
- Expanded KidsCare eligibility;
- The Housing and Health Opportunities program, or H2O;
- Certain dental services through IHS and Tribal facilities; and
- Medicaid services for eligible people preparing to leave prison or jail.
What’s New?
Most of the application asks CMS to continue authorities Arizona already has. But AHCCCS is requesting a few changes in their 5 year renewal.
One proposal would expand reimbursement for certain Traditional Health Care Practices through Urban Indian Organizations.
Another would allow more time for certain Extraordinary Care Reviews involving kids getting home and community-based services.
A third would create an Enhanced Residential Treatment Demonstration for adults with a serious mental illness, expanding access to intensive behavioral-health treatment in residential settings. That’s an important one!
Arizona needs better options for people with serious mental illness to get more intensive treatment in residential housing settings… especially residential settings like Secure Residential Behavioral Health Facilities with strong clinical standards, clear discharge planning and safeguards against simply moving people into another institutional setting. That’s part of what the enhanced treatment model is trying to do.
Who Decides?
AHCCCS develops the application, but CMS (Oz & Kennedy) have the final say.
After the state public-comment process, AHCCCS will revise their proposal and send it to CMS. CMS can approve it, reject parts of it or require changes.
AHCCCS then has to turn those federal permissions into actual policies, contracts and services.
That connects back to AHCCCS 101 Part 3. Federal permission is only the first step. AHCCCS still needs good contracts, measurable expectations, reliable oversight and consequences when health plans or providers do not perform in order for the system to work well.
And, as presented in AHCCCS 101 Part 4, the real test is whether any of this makes it easier for members to get care.
Your Chance to Weigh In
AHCCCS is accepting comments through September 6, 2026, and will hold a virtual public forum on Friday, August 7, from 1 to 4 p.m.
Arizona’s Section 1115 Waiver Renewal Request (2027-2032)
Written comments can be sent to waiverpublicinput@azahcccs.gov
Comments don’t need to sound like they came from a lawyer or Medicaid consultant. In fact, it’s better if they don’t all sound like that. Members, families, providers and advocates can simply explain what’s working, what isn’t and what would improve access to care.
For readers who missed the earlier series: