Question

Research budget neutrality.

Explain what this concept is and why it is important when adjustments are made to Federal guidelines and rate calculations. Post your references using APA format.

Answer 1

"Budget neutral" refers to an approach to fiscal policy in which a program or project has no impact on the budget. The term is usually used in formulating government programs and involves incorporating a method of funding other than borrowing.

The goal of budget neutrality is to avoid creating a spending deficit or adding to an existing deficit.

Budget Neutral Strategies

According to the International Institute for Sustainable Development, the fiscal policy associated with legislative initiatives can be based on spending, generating revenue or budget neutrality.

There are several ways to achieve budget neutral funding. One strategy is to cover a program's costs by increasing revenues, usually via additional taxes.

Alternatively, you can offset the costs by cutting spending in another budget area. A third alternative is to design a program to be self-funding. For example, an anti-pollution program could impose a fee on businesses for the use of toxic materials.

When a business doesn't use these materials, or recycles them, it receives compensation paid for out of the fees collected. There is thus no impact on the government’s budget.

Budget Neutrality Form

Section 1115 Medicaid Demonstrations should be budget neutral. This means the Demonstration cannot cost the federal government more than what would have otherwise been spent absent the Demonstration. In this section, the state must provide its explanation of how the Demonstration program will achieve budget neutrality and the data to support its rationale.
New Demonstration Request: The following form provides guidance on some of the most commonly used data elements for demonstrating budget neutrality. CMS is available to provide technical assistance to individual states to identify any other elements needed to demonstrate budget neutrality for their specific request. Use the accompanying Excel Workbook to submit supporting data, following the instructions below. All expenditure totals in the Excel Workbook  are total computable expenditures (both federal and state shares combined), unless indicated otherwise.