The Trump administration, working with governors and state legislatures, could make dramatic state by state changes to Medicaid and the ACA marketplaces using two types of state innovation waivers. Section 1332 of the ACA, which went into effect on Jan. 1, 2017, lets states waive several key provisions of the ACA, including the individual mandate, the employer mandate, the premium tax credit, cost-sharing subsidies, and essential health benefits for ACA marketplace plans. In short, Section 1332 (ACA) waivers let states operate their health care systems as if major parts of the ACA do not exist. Additionally, Section 1115 (Medicaid) waivers give states the opportunity to waive federal Medicaid law. The changes made possible by Section 1115 waivers aren’t as dramatic as those contained in the AHCA—for example, states can’t use these waivers to fully restructure Medicaid under block grants or per capita caps, nor can the federal government use them to take away federal reimbursements for Medicaid expansion—but they are still significant.

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