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services. There are two broad types of these “waivers” which refer to different sections of theSocial Security Act. Section 1115 waivers are called “research and demonstration waivers” andusually involve comprehensive reform projects, while Section 1915 waivers are called “programwaivers” and involve waiving specific requirements to allow more innovative programs such asmanaged care and community-based care. Section 1115 waivers apply to both Medicaid andSCHIP, and one type of 1115 waiver is the Health Insurance Flexibility and Accountability(HIFA) initiative implemented by the Bush Administration in 2001. Section 1915 waivers applyto Medicaid only and include 1915(b) waivers (freedom of choice) and 1915(c) waivers (homeand community-based services).Section 1931 is another section of the Social Security Act that allows changes in a state’sMedicaid program, but it does not require a waiver application to filed; it can be implementedthrough amending a state’s Medicaid State Plan. This initiative gives states more flexibility tocover low-income people in families with dependent children by increasing income and assetsdisregards and limits.Texas has the highest rate of uninsured people in the nation, at about 26 percent. Texasimplemented Medicaid in 1967, and the federal government paid 62.67 percent of Medicaidexpenses in Texas in federal fiscal year (FFY) 2004. Combined federal and state spending forMedicaid in Texas was $15.5 billion in state FY 2004, not including DSH payments, which addanother $1.5 billion. SCHIP began in May 2000 in Texas, and the federal share for SCHIP was72.15 percent in Texas for FFY 2004. Texas spent almost $330 million on SCHIP in FY 2004,including both federal and state funds. Changes in Medicaid and SCHIP in Texas include majorcuts in 2003 to save money and the possible restoration of some of the cut benefits in 2005.Texas currently has five 1915(b) and seven 1915(c) waivers, and no approved 1115 waiver. An1115 HIFA waiver was submitted in December 2004 for a SCHIP premium assistance program,and there are other 1115 waivers under consideration in the state. Other options for Texas toconsider for expanding Medicaid and SCHIP to cover more low-income people, which for themost part do not require a waiver, include implementing Section 1931, eliminating assets testsand disregards for SCHIP, and implementing the Ticket to Work program. Promisingalternatives to consider include a HIFA waiver using a hypothetical 1931 expansion as the basisfor cost savings, offering prenatal care under SCHIP (including to undocumented women), abroader women’s health waiver, and public-private models for small businesses.Medicaid BackgroundMedicaid is a federal-state matching program established by Congress under Title XIX of theSocial Security Act of 1965 and administered by the Centers for Medicare and MedicaidServices (CMS) within the U.S. Department of Health and Human Services. It was created topay the medical bills of low-income people and increase access to health care. It is anentitlement program, meaning all people who meet the eligibility requirements are entitled toservices. Every state (plus Washington, D.C., and five U.S. territories) has a Medicaid program,but since implementation is left to each state, there are variations in the eligibility, benefits,reimbursements, and other details of the program among states.Title XIX of the Social Security Act establishes some basic principles for the Medicaid program.States must follow these four principles as well as all laws related to mandated eligibility andbenefits unless the Centers for Medicare and Medicaid Services approves a state’s waiverrequesting an exemption from certain requirements of the program. 1) Statewideness: Medicaidservices must be offered on a statewide basis and not in certain locations only. 2)Comparability: the same level of services must be available to all Medicaid beneficiaries (withB-2