Federal Budget Reconciliation Law and Other Recent Medicaid Rule-Making Implementation Timeline

• States use state directed payments (SDPs) to require Medicaid managed care organizations (MCOs) to increase provider rates (in general or for specific provider types) or to carry out other objectives to improve care quality for Medicaid beneficiaries. Prior to H.R. 1, SDPs could be set up to direct MCOs to pay providers at rates comparable to those paid by commercial insurance companies (“average commercial rate”). H.R. 1 sets a limitation on all new SDPs to the Medicare rate: 100% of Medicare rate (for states that have expanded Medicaid) and 110% of Medicare rate (for non-expansion states).
• Starting with the rating period on or after January 1, 2028, H.R. 1 imposes reductions to existing SDPs (those that received “grandfathering status” under the law), reducing the SDP rate down 10 percentage points per year until they reach 100% Medicare rate (expansion states) or 110% Medicare rate (non-expansion states).

(See section above on State Directed Payment limitations.)

• Background 1915(c) waivers: Within broad federal guidelines, states can develop HCBS waivers to meet the needs of people who prefer to get long-term care services and supports in their home or community, rather than in an institutional setting. States are required to cover nursing facility care under Medicaid, but nearly all HCBS care is optional. Currently, HCBS 1915(c) waivers limit services to people who require an institutional level of care.
• H.R. 1 creates a new type of 1915(c) waiver that does not require determination that an individual needs institutional level of care.
  • Under the law, these new waivers must be standalone (separate from any other waiver approved under section 1915(c));
  • States are required to establish needs-based criteria, subject to approval by the U.S. Department of Health and Human Services (HHS) Secretary, that determine eligibility for services under the waiver;
  • States must demonstrate to HHS that the waiver as designed will not increase the amount of time people who need HCBS will have to wait for those services.
• This new waiver opportunity still functions as a traditional 1915(c) waiver, which allows for enrollment caps. In addition, states applying for a waiver must attest that average per capita costs will be less than average per capita Medicaid costs for individuals receiving institutional care (meaning, the waiver must result in cost savings).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• The law gives states an important opportunity to obtain waivers that expand HCBS to more Medicaid enrollees, including for those enrollees who do not need an institutional level of care but still need services in their homes and communities to support their care.
• The Congressional Budget Office estimates this provision will lead to an increase in federal spending by $6.6 billion over 10 years (2025 to 2034). This means an increase in Medicaid dollars that support HCBS.

Potential State Policy Considerations

HCBS waiting lists are notoriously long and such waivers may increase access without addressing supply-side constraints and workforce capacity. Aspects of the Medicaid Access Rule aim to address some of these problems, but for waivers to be successful and result in expected cost savings, states may need to address access issues.

• Advocates can contribute to waiver development by participating in any public forums and providing feedback during open comment periods. Efforts here will require advocates to unpackage the many different types of information being collected by the Centers for Medicare & Medicaid Services (CMS) and states under the Medicaid Access Rule (for example, critical incident reports, reassessments of functional need, results from the HCBS Quality Measure Set, HCBS waiver waiting lists) to understand gaps in HCBS care and devise appropriate solutions.
• Advocates may also want to engage with their states on solutions outside of the waiver option that bring better access to HCBS (for example, increasing payment rates through state directed payments [SDPs] or other value-based payment models).

States use state directed payments (SDPs) to require Medicaid managed care organizations (MCOs) to increase provider rates (in general or for specific provider types) or to carry out other objectives to improve care quality for Medicaid beneficiaries. The Managed Care Final Rule requires that providers that receive payments through SDPs attest that they do not participate in any hold harmless agreements as defined in 42 C.F.R. § 433.68(f)(3) (meaning they do not provide payment to the state through taxes with the expectation that they will receive increased payment or other incentives in return).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• This rule change comes in response to rapid growth in the use of SDPs. Along with the State Directed Payment Evaluation Plan & Reports and State Directed Payments Documentation this provision serves as one more way for the Centers for Medicare & Medicaid Services (CMS) and other entities to ensure that SDPs made to providers are lawful.
• H.R. 1 § 71116 puts limitations on SDPs so that they may not rise above the Medicare rate (with certain exceptions), but this provision of the law should not impact the requirements set forth under this rule change: Even if SDPs are limited to the Medicare rate, providers that receive SDPs will still be subject to attesting to their compliance with the hold harmless provision.

Potential State Policy Considerations

On SDP preprints submitted to CMS, states must indicate the source of in-state funding for SDPs. Providers will not run afoul of this rule change if their state uses general state revenue or sources other than provider taxes for the state’s portion of the SDP. States may need to restructure SDPs as a result. However, in a moment of budget shortfalls, it may be difficult to shore up state general revenue for provider payments through SDPs. On the other hand, ensuring that provider taxes in existence fund other worthy aspects of the Medicaid program, this may free up general revenue to cover the state portion of SDP costs. Even where provider taxes continue to fund SDPs, this rule change does not prevent that financing structure from continuing, so long as providers can attest to their status in meeting the hold harmless provisions of the law.

• Advocates may have a role in educating providers so they understand this rule change and what attestation to the hold harmless provision means (especially where SDPs go to smaller safety-net providers that may not have resources to follow changes in federal laws). Advocates can also monitor how this rule change impacts provider participation in Medicaid.
• Advocates may also need to engage with state decision-makers to ensure that states do not, as a result of this rule change, pull back on SDPs that are important for enhancing access to care for MCO plan members.

• The Managed Care Final Rule requires states to use independent secret shoppers to validate provider networks, surveying four critical elements for the following provider types: primary care, OB/GYN, outpatient mental health and substance use disorder, and a fourth state-chosen provider type. The survey must also include managed care plan compliance with appointment wait time standards.
• The rule requires states to arrange for an independent entity to conduct the survey, and states must post results on their websites in addition to reporting to the Centers for Medicare & Medicaid Services (CMS).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Secret shopper surveys are an important oversight tool that can be leveraged to highlight problems faced by consumers enrolled in managed care plans. For example, provider network directories are historically inaccurate in many states (recently, Maryland performed a secret shopper survey and could only verify insurance coverage for 46% of the listed providers) and where providers accept Medicaid patients, long appointment wait times can make care inaccessible to enrollees. Secret shopper surveys can help illuminate these issues and document where states or MCOs can make changes to improve access to care.
• While many states already conduct secret shopper surveys, this is the first federal requirement for states to put these programs in place.

Potential State Policy Considerations

While the Managed Care Rule aims to improve provider directories (with new regulations that require MCOs to post provider directories on their websites) and set new wait time standards (routine visits within 10 to 15 business days of date of request), secret shopper surveys are a needed oversight mechanism to ensure these improvements make their way to consumers. As current cuts to Medicaid funding threaten access to care, secret shopper surveys will be more important than ever to document consumer experience.

• Secret shopper surveys must be accompanied by carefully thought-out plans for enforcement if surveys reveal inadequate access to provider networks or routine care appointments. Advocates should monitor the outcomes of surveys and hold states accountable to remedying identified problems (including by submitting a remedy plan to CMS where applicable). Advocates can also collect consumer stories concerning these issues to add personal accounts of how wait times and ghost provider networks impact patient care and health.
• Advocates may want to push states to collect additional information through the secret shopper survey. For example, assessing additional specialty provider types or gathering information on other important accessibility factors (physical accessibility, language access and discrimination and disparities based on various demographic characteristics).
• Advocates may consider conducting their own surveys to document additional elements important to patient care. Advocates with limited resources can focus their surveys on certain provider types (for example, reproductive health) or certain regions (for example, rural areas that may be hit hard by the loss of Medicaid funding caused by H.R. 1).

• State Medicaid agencies are required to submit a corrective action plan to the Centers for Medicare & Medicaid Services (CMS) when they identify access to care deficiencies in fee-for-service Medicaid. However, until this rule change, there was no similar enforcement action in place for addressing access to care deficiencies in managed care.
• The Managed Care Final Rule establishes that whenever a state identifies an area where managed care organizations (MCOs) fail to meet access to care standards, the state will submit a remedy plan to CMS. Access to care standards include the Provider Directory and Network Adequacy standards established by the rule. The state must develop a remedy plan that addresses any areas of non-compliance and details specific steps, timelines and responsible parties to address the problem within 12 months. In addition, states must submit quarterly progress reports to CMS.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• States often have limited capacity for MCO oversight. This rule change forces states to invest greater energy into oversight, focusing attention on aspects of Medicaid managed care related to network adequacy and consumer access to providers. While there are many additional aspects of managed care worth addressing and remedying, remedy plans under this rule — if implemented well — should result in improved access to care for enrollees.

Potential State Policy Considerations

Various elements of the Managed Care Rule — including secret shopper surveys, external quality reviews (EQRs) and enrollee experience surveys — offer data to states to understand deficiencies in managed care. However, there are no standards under the rule that tell states when uncovered issues rise to the level of needing a remedy plan.

• Where states are not taking action to pursue a remedy plan, advocates may need to mount pressure. Advocates can identify areas of MCO noncompliance via state reports and the results of their own secret shopper surveys or other research and use these data to support remedy plan submission. Advocates can also elevate patient stories that show deficiencies in access to care and hold listening sessions with providers to better understand barriers to participation in Medicaid and potential solutions.
• Where provider networks or wait time standards are deficient, possible corrective action approaches include increasing provider payment rates, improving claims processing or expanding telehealth options. In states without an adequate number of providers enrolled in Medicaid to meet network adequacy standards, advocates can work with their state Medicaid office to improve incentives for providers. This may include increasing rates, providing more administrative support or reducing administrative burden through streamlining applications, documentation and prior authorizations. State engagement with the Medicaid Advisory Committee (MAC) and Beneficiary Advisory Council (BAC) is important to garner feedback on corrective action approaches; where possible, advocates can offer guidance to states on best approaches for a given identified problem.
• When remedy plans are in place, advocates can hold Medicaid agencies and MCOs accountable to the steps, timelines and responsible parties outlined in the plan. While CMS will receive quarterly progress reports, advocates may be in the best position to document true progress by engaging with consumers and/or providers to understand whether changes made are making an impact on access to care.
• While a corrective action plan is a form of sanction for a MCO, monetary sanctions may be appropriate when documented deficiencies are especially egregious; advocates may be instrumental in pushing states to pursue additional sanctions and to report any sanctions publicly.

• Requires states to use and report on the HCBS Quality Measure Set (previously a voluntary option for states) and sets a formal process for measurement development including input from a variety of stakeholders. States must comply with the HCBS Quality Measure Set reporting requirements by July 9, 2028. States will be required to report every other year on all mandatory measures and are required to establish reporting targets.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Such reporting provides an important opportunity for states, researchers and advocacy organizations to better understand the quality of HCBS provided through managed care, to document shortcomings and to strategize ways to improve the provision of these services so that they are most effective for the populations that need these services to support their care.

Potential State Policy Considerations

States will need to update MCO contracts to reflect the HCBS Quality Measure Sets to ensure that MCOs begin reporting no later than the rating period following July 9, 2028. States will need to decide what, if any, additional documentation Medicaid MCOs must provide to ensure accurate measure set calculations. Additionally, states will need to ensure interoperability of data systems between MCOs and state Medicaid agencies so that quality measure information can seamlessly transfer for utilization.

• CBS are considered an “optional” Medicaid benefit. As states look to address fiscal shortfalls in the wake of Medicaid cuts brought by H.R. 1, they may be looking to decrease benefits provided to Medicaid beneficiaries. Information from the HCBS Quality Measure Set may serve a critical role in defending the need for state Medicaid programs to continue to offer HCBS, as such information may help document what types of services are provided and their value to Medicaid beneficiaries (both in general and among beneficiaries who receive Medicaid through managed care).
• The rule requires the U.S. Department of Health and Human Services (HHS) Secretary to update the HCBS Quality Measure Set through a public process. Advocates should monitor the Federal Registrar for the opportunity to comment and use this as an opportunity to identify measures that should be included or removed. In addition, as the rule allows the Secretary to stratify and phase in various quality measures, advocates may want to offer comment on which measures should be stratified and how to structure phase-in periods. Advocates can leverage local, state and national coalitions to ensure their priorities are known through the public comment process.
• Advocates can work to ensure HCBS quality metrics are publicly posted with other mandated quality measures, including the quality rating system and enrollee experience surveys, and that state Medicaid agencies adhere to their chosen reporting targets and quality improvement strategies. Advocates may need to monitor reporting to ensure MCOs properly report on all quality measures.
• Advocates can examine quality reporting data to understand how HCBS are delivered within managed care, where there may be need for improvement and what strategies may support better provision of HCBS (for example, improved provider payment or incentives to enhance HCBS provider networks). These data may also support advocates in explaining the value of HCBS to their state to ensure that these important services are not eliminated or scaled back.

• Already in existence, the Medicaid managed care quality rating system (QRS) is intended to hold states and managed care organizations (MCOs) accountable for offering quality care to Medicaid enrollees. The rule change more formally requires states to adopt the Centers for Medicare & Medicaid Services (CMS) QRS framework, and states must report quality ratings to CMS for each mandatory quality measure at the plan level for each MCO.
• In a second phase of this provision, states will have to display information on a website that is interactive and helps consumers use quality information to evaluate and compare MCO plans (website required no earlier than December 31, 2030). In the meantime, states are permitted, but not required, to publicly post the data on a website. If states chose to post the information, it must be in accordance with CFR 42 § 438.520.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• The rule offers a set of mandatory criteria for measures to be included in the QRS developed by CMS, including that the measures must be meaningful and useful to beneficiaries to help them distinguish among MCO plans and must assess health plan performance in at least one of the following areas: customer experience, access to services, health outcomes, quality of care, health plan administration and health equity.
• Once this information becomes publicly available, this will go a long way toward giving consumers the tools they need to make educated choices about their health care.

Potential State Policy Considerations

Initially, states are not mandated to publicly display quality ratings, but states may want to include this information as they build out other aspects of the improved website content required under the law.

• Advocates can encourage states to create a public facing website displaying QRS data in combination with other mandated publicly available data for easier plan comparison. Advocates can use all available data to ensure that MCOs are providing high quality care to enrollees.
• At least every other year, CMS will engage in a public process to modify the mandatory quality measures collected by the QRS. Advocates should look for opportunities to weigh in on this process and bring to light patient care needs that could be better assessed through quality measures.

• Effective October 1, 2028, H.R. 1 adds mandatory deductions, cost sharing or similar requirements for certain Medicaid expansion enrollees (with incomes over 100% of the federal poverty line). Prior regulation permitted states to impose cost sharing, but as of October 1, 2028, it will be required.
• Cost sharing must be “greater than $0,” but cannot exceed $35, for any particular health care item or service rendered. The law sets a total aggregate limit on cost sharing of 5% of family income (as applied on a quarterly or monthly basis).
• There is no specific penalty for failure to pay cost sharing, but the provision allows (but does not require) Medicaid-participating providers to refuse care to enrollees who do not pay the required cost-sharing amount at the time of service. Additionally, providers are permitted to reduce or waive the cost-sharing requirements on a case-by-case basis.
• The law prohibits cost sharing for any services provided at a federally qualified health center (FQHC), behavioral health clinic or rural health clinic. Some services, including primary care, mental health, pregnancy-related services and others are exempt.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Even relatively small levels of cost sharing in the range of $1 to $5 can create barriers to care, including delayed or reduced use of care, worse health outcomes and increased financial burdens. Because 5% family income limit on cost sharing applies on a monthly or quarterly basis, this could overburden individuals who are employed seasonally, or whose incomes vary in different months or quarters during the year.
• The Congressional Budget Office anticipates that asking Medicaid enrollees to shoulder more of the burden of the cost of care will make it more difficult for people to obtain services, resulting in savings to the federal government of $7.4 billion over 10 years (2025 to 2034). These savings would come as a direct result of reduced care to people who are enrolled in the Medicaid expansion but who are unable to seek the care they need.

Potential State Policy Considerations

States must require cost sharing for certain services, however they have significant latitude in how this is implemented and can choose to reduce harm while remaining in compliance with federal law.

• Advocates can encourage states to opt for the lowest cost-sharing requirements possible. Even just $0.10 satisfies the legislative requirement. Advocates can encourage states to ensure no patient is denied care because of inability to pay cost sharing and should encourage providers to reduce or waive cost sharing as generously as possible. MCO contracts may also be able to dictate scenarios where cost sharing is waived, and advocates can work with their state to ensure they explore any avenues within managed care to reduce cost-sharing burdens.
• Advocates can track the harms of cost-sharing requirements on access and document stories and patient harm to report to local media, the legislature, and in Medicaid Advisory Committees (MACs).

• By January 1, 2027, states are required to put in place a community engagement program (also known as work reporting requirements) for people enrolled in the Affordable Care Act (ACA) Medicaid expansion. H.R. 1 allows states to apply for a delayed start to their program if they can demonstrate a “good faith” effort to comply with the new requirements. However, the “good faith” exemption is only available for a two-year period and all states must have a community engagement program in place by December 31, 2028.

(See H.R. 1 § 71119)

• Requires state Medicaid programs to put a process in place, by January 1, 2027, to regularly obtain address information for individuals enrolled in Medicaid/CHIP (from specific data sources that include returned mail, the USPS National Change-of-Address Database, managed care plans and other sources identified by states and approved by the Secretary of the U.S. Department of Health and Human Services [HHS]). By October 1, 2029, HHS will establish a database to collect information from state Medicaid programs to ensure that beneficiaries are not enrolled in multiple states.
• Requires MCOs to share address information for their Medicaid plan enrollees with the state.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• It is already against federal law for individuals to be enrolled in Medicaid in more than one state concurrently and most states already proactively conduct data matches to determine address changes. Still, the Congressional Budget Office (CBO) estimates that greater efforts to reduce duplicate enrollment would produce savings to the federal government of $17.4 billion over 10 years (2025 to 2034).
• Note: While there is implementation funding for Centers for Medicare & Medicaid Services (CMS) to implement new data systems, the law does not provide implementation funding to states.

Potential State Policy Considerations

One of the lessons learned from the recent Medicaid unwinding is that a lack of updated address information hampers states’ ability to contact enrollees. As Medicaid enrollees move more frequently than the general population, an estimated 20 to 30 percent of mail is returned to state agencies undelivered, causing delays and risking inappropriate coverage losses. The new requirement for MCOs to share address information with the state, while intended to reduce duplicate enrollees, has the potential to help solve the persistent problem of poor mailing addresses overall. This is an important factor in mitigating inappropriate coverage loss, especially as Medicaid agencies will now be responsible for determining Medicaid eligibility more frequently (see § 71107) and, by 2030, will face financial implications for any billing errors due to incorrect eligibility (§ 71106).

• CMS has issued specific guidance allowing states to permit MCOs to update enrollee contact information and facilitate continued enrollment. As MCOs may be uniquely positioned to support maintenance of up-to-date contact information, advocates should make sure states take this one step further. Rather than just require MCOs to share address information, states should require plans to regularly obtain and update enrollee address information and to use a range of modalities (e.g., phone, text) to conduct outreach to enrollees to ensure contact information is up-to-date. States can also set clear policies for how MCOs should respond to returned mail.

• H.R. 1 requires states to redetermine Medicaid eligibility every six months (rather than once a year) for individuals enrolled in the Affordable Care Act (ACA) Medicaid expansion. Includes an exemption for people who receive Supplemental Security Income (SSI) benefits.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Requiring more frequent or more onerous Medicaid eligibility checks will force individuals off Medicaid coverage for failure to comply with burdensome paperwork requirements. The Congressional Budget Office estimates that in 2027 (the year this provision becomes effective), these new eligibility redeterminations will cause 700,000 people to become uninsured, resulting in considerable savings to the federal government due to people falling off coverage: $62.5 billion over 10 years (2025 to 2034).
• To meet more frequent redetermination requirements (and to implement the community engagement requirements for the Medicaid expansion population), states may need to build or procure new IT systems, overhaul operational and compliance procedures, and invest in public educational campaigns. Guidance from the Centers for Medicare & Medicaid Services (CMS) guidance (released by December 31, 2025) will spell out some of these requirements but will likely give flexibility to states to design their systems.
• MCOs are a key stakeholder here, as they may be tasked with assisting in enrollment. In addition, where more frequent eligibility checks cause reduced enrollment, MCOs will not only have fewer plan enrollees, but more frequent eligibility checks may have a negative impact on risk pools: People more likely to jump through eligibility hoops to remain on Medicaid may be those most in need of expensive health care services (e.g., people with chronic diseases). In addition, disruptions in care caused by disenrollments can lead to higher costs for patients down the road when they reenroll.

Potential State Policy Considerations

By December 31, 2025, CMS will release guidance to states to implement this change. Presumably, guidance from CMS on implementing the new community engagement provisions of the law (see H.R. 1 § 71119) will also intersect here, as both provisions of H.R. 1 impact eligibility and enrollment for the Medicaid expansion population (H.R. 1 instructs that interim final rules from CMS related to community engagement must be published by June 1, 2026).

• Advocates should remain engaged as states adopt CMS’ guidance. Where states have flexibility to define terms or design aspects of enrollment systems, advocates can participate in public forums to hold states accountable to meeting CMS’ minimum requirements and exceeding these requirements where possible to minimize coverage loss.
• Advocates can also look for where CMS guidance implicates (or could implicate) the managed care system in their state, as MCOs are a key stakeholder that can and should assist with redeterminations. Advocates can highlight for state policymakers where state MCO contracting or other oversight mechanisms are needed to ensure MCOs implement new enrollment systems to minimize coverage loss.

States have just gone through the unwinding, with many lessons learned about enrollment and impact on churn, procedural disenrollments, member acuity, etc. Medicaid enrollment continues to decline post-unwinding with many people falling through the cracks due to procedural issues. MCOs have every incentive to reverse this trend to retain members and balance risk pools. States should have every incentive to prevent more residents from becoming uninsured (which adds to states costs to prop up hospitals and other safety-net providers who see uninsured patients).

• Advocates can remind states of important lessons learned from the unwinding and help states determine where they need to improve enrollment processes and where they may want to take up aspects of Medicaid Eligibility and Enrollment (E&E) Rule (despite H.R. 1’s moratorium under § 71102) that will assist with the task of more frequent reenrollments for the Medicaid expansion population.
• Advocates can push for changes in state policy to better enable MCOs to assist with enrollment for Medicaid expansion enrollees. For example, states can allow plans to submit applications and track eligibility determinations on behalf of the individual. States can also update enrollment transaction fields to include the disenrollment reason (e.g., procedural denial, ineligible due to income change, etc.) and provide plans with monthly termination files, allowing plans to conduct outreach to individuals terminated for procedural reasons.
• Advocates can encourage states to use the MCO contracting process to advance enrollment. For example, requirements for MCOs to: identify and reach out to enrollees who are at high risk for not renewing coverage in a timely manner; assist members at renewal periods; use additional modalities (e.g., phone, text) to conduct outreach and encourage individuals to complete/return renewal forms; launch patient education initiatives; reach out to individuals terminated for procedural reasons; partner with community organizations to reach vulnerable populations; and assist with ACA Marketplace transitions, where applicable.

By 2030, H.R. 1 § 71106 restricts the total amount of erroneous state Medicaid payments the U.S. Department of Health and Human Services (HHS) Secretary may waive using its “good faith” waiver authority and expands the definition of erroneous payments to include instances when payments were made for an ineligible individual’s health care due to “insufficient information [being] available to confirm eligibility.” This means that states can no longer count on the current 3% “allowable” error rate and will have to be much more diligent about determining eligibility or else face financial implications. This creates tension between the goal of ensuring that Medicaid-eligible populations are covered versus the need for total accuracy in eligibility determinations.

• Advocates should remain engaged as states put eligibility systems in place to ensure that states strike the right balance and do not err on the side of denials for fear of financial consequences. Advocates can collect stories from eligible individuals denied enrollment or conduct secret shopper surveys to ensure enrollment systems are not erroneously denying coverage.

Retroactive coverage offers a critical safeguard for new Medicaid enrollees, as it allows them to receive reimbursement for past medical expenses incurred up to three months prior to their official Medicaid application date. Retroactive Medicaid is meant to provide a safety net for financially needy persons who have an unexpected illness or injury (for example, when someone needs nursing home care) or who have a change in life event that makes them eligible for Medicaid (such as pregnancy or childbirth). As the Medicaid application process can be complicated and lengthy, it may be difficult for someone experiencing major health care needs to apply efficiently before medical bills pile up. Retroactive coverage allows people time to apply for Medicaid without stressing over how bills are going to be paid and, because it reduces uncompensated care costs for providers, it helps ensure Medicaid-eligible populations will not be turned away from the care they need.

• H.R. 1 restricts retroactive coverage for all Medicaid enrollees, but makes a distinction for people who access Medicaid under the Affordable Care Act (ACA) Medicaid expansion:
  • Medicaid expansion enrollees: Retroactive coverage is limited to one month prior to month of application.
  • Other Medicaid enrollees: Retroactive coverage is limited to two months prior to month of application.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• This change is particularly harmful for people experiencing pregnancy or childbirth or sudden declines in health. For example, delays in submitting an application following the birth of a child or medically difficult miscarriage could result in no coverage for families for the care provided and, subsequently, large hospital bills and medical debt.
• The provision further penalizes people who access Medicaid through the ACA expansion, many of whom may have serious medical needs and no other pathway to obtaining Medicaid than through the expansion.
• The Congressional Budget Office (CBO) estimates this provision will save the federal government $4.2 billion over 10 years (2025 to 2034) — in other words, this provision means Medicaid-eligible populations will be on the hook for $4.2 billion in medical costs not covered by Medicaid. Furthermore, CBO estimates that by 2028, this provision will cause 100,000 people to become uninsured.

Potential State Policy Considerations

In states and eligibility groups where Medicaid benefits are provided by MCOs, retroactive coverage is generally handled outside the managed care system, with the state paying any retroactive claims on a fee-for-service basis. The managed care plan is not financially or administratively responsible for the member until their official enrollment date begins. However, managed care plans can still assist beneficiaries and providers by helping coordinate care and directing them to the proper channels for processing retroactive claims.

• As maximizing retroactive coverage opportunities is important for new enrollees now more than ever, states can ensure the managed care plans in their state educate new beneficiaries on the process for billing retroactive claims. Advocates can urge states to set this expectation in contract terms or by using other oversight mechanisms.

• H.R. 1 requires community engagement (also called work reporting requirement) activities as a condition of eligibility for the Medicaid expansion population (aged 19 to 64). Community engagement may consist of 80 hours of work, community service, participation in a work program or enrollment in an educational program at least part time (or a combination of these). H.R. 1 outlines several categories of individuals who must be exempted and allows states to define additional exemptions for people experiencing temporary hardships.
• Enrollees have to prove they meet the requirements at each redetermination. Under H.R. 1 § 71107, redetermination for people enrolled in the Medicaid expansion must be at least every six months, but this provision gives states the option to require community engagement verification more frequently.
• Noncompliance results in disenrollment and termination. People in this population who fail to meet Medicaid community engagement activities will also be blocked from getting premium tax credits on the Affordable Care Act (ACA) Marketplace.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Termination and disenrollment of Medicaid expansion-eligible enrollees and subsidized marketplace enrollees will result in millions losing their health insurance. The Congressional Budget Office (CBO) estimates that in 2027 (the first year work reporting requirements are in effect), 2.2 million individuals will lose Medicaid coverage and become uninsured. By 2033, CBO estimates this provision will cause 5.3 million people to become uninsured. Given these coverage losses, CBO estimates the federal government will expend $325.6 billion fewer Medicaid dollars over 10 years (2025 to 2034); this means $325.6 billion less health care services covered for low-income Americans.
• Research suggests that work requirements could have particular adverse effects on certain Medicaid populations, such as women, people with HIV, and adults with disabilities including those age 50 to 64.

Potential State Policy Considerations

Work requirements can disrupt MCO risk pool stability and care coordination because of administrative burdens and disruptive, less predictable enrollment cycles. As MCOs have a vested interest in both making sure their current beneficiaries remain enrolled and bringing new covered lives into their plans, there may be a conflict of interest if MCOs themselves verify eligibility. H.R. 1 prohibits MCOs from being the entity that determines beneficiary compliance (under the law, a contractor can determine beneficiary compliance but only if they have NO direct or indirect financial relationship with a MCO or other similar entity responsible for providing or arranging care for applicable individuals). Still, MCOs ought to be able to assist with redeterminations and drive down inappropriate disenrollments in the same manner as they often do today, including assisting with paperwork and education/communications/outreach. In addition, as states have just gone through the Medicaid unwinding, there are many lessons learned about enrollment and impact on churn, procedural disenrollments, member acuity, etc. that states and MCOs alike can bring into new enrollment/IT systems being built to facilitate the community engagement requirement.

• Advocates can remind states of important lessons learned from the unwinding and help states determine where they need to improve enrollment processes even in the face of new eligibility requirements. Advocates can push for changes in state policy to better enable MCOs to assist with enrollment. For example, states can allow managed care plans to submit applications and track eligibility determinations on behalf of the individual (including by using pre-populated forms). States can also update enrollment transaction fields to include the disenrollment reason (e.g., procedural denial, ineligible due to income change, etc.) and provide plans with monthly termination files, allowing plans to conduct outreach to individuals terminated for procedural reasons. States can also provide plans with data on who the state is not able to verify through the ex parte process so the MCO can assist with paperwork.
• States can set requirements for MCOs to identify and reach out to enrollees who may be eligible for various exceptions/exclusions to ensure they obtain and submit necessary documentation (including the MCO itself providing that documentation, where applicable).
• MCOs may be an important source of information for beneficiaries to understand the new community engagement requirement and its many exceptions/exclusions. States can set expectations (in contract language or other oversight mechanisms) for MCOs to launch ongoing education initiatives related to this requirement (including by using multiple modalities for reaching beneficiaries — mail, email, text, etc.). Advocates should also encourage states to require MCOs to partner with community organizations to reach vulnerable populations.
• MCOs are uniquely positioned to help states maintain up-to-date contact information (see H.R. 1 § 71103) to ensure beneficiaries do not suffer inappropriate coverage loss due to address changes. Advocates should urge states to require plans to regularly obtain and update enrollee address information and to use a range of modalities (e.g., phone, text) to ensure contact information is up-to-date. States can also set clear policies for how MCOs should respond to returned mail.

H.R. 1 sets the expectation that states will use ex parte data to verify work, community engagement or qualification for one of the many categories of exceptions and exclusions. However, tracking this information may be difficult through ex parte methods and, depending on how the Centers for Medicare & Medicaid Services (CMS) regulates these issues, there may be a lot left up to state discretion for how they will define key terms (for example, “medically frail”) or set parameters for verifying information and compliance. MCOs may be key partners in helping states verify information (e.g., encounter data, claims data, pharmacy data).

•  Advocates should engage with states (through the Medicaid Advisory Committee [MAC]/Beneficiary Advisory Council [BAC] or other channels) to help states create a system that is the least onerous on applicants, especially where ex parte mechanisms fall short (for example, by allowing individuals to submit self-attestation forms or simple provider attestation forms). Advocates can play a role in advising where MCOs in the state can provide information suitable for ex parte verifications and where MCO data may be lacking (for example, lags in claims/payment data that make it difficult to use for demonstrating compliance in a timely manner). In addition, advocates should encourage states to set clear expectations of MCOs to verify certain types of data, including how many times the plan should attempt a data match before the state will ask the enrollee for paperwork.
• Advocates can encourage states to put in place a secret shopper survey to ensure their systems are able to effectively identify compliance through ex parte methods and effectively acquire additional data (from individuals or MCOs) where ex parte data sources fall short.
• Where new enrollment/IT systems being set up for this purpose bring efficiencies or lower paperwork burdens, advocates can push states to extend these efficiencies to enrollment for other Medicaid programs.

One of the ways that Medicaid expansion enrollees can meet the community engagement requirement is by participating in a “work program,” defined as several types of programs, including the general category of “a program of employment and training operated or supervised by a State or political subdivision of a State that meets standards approved by the Governor of the State.” Some Medicaid managed care plans already operate voluntary work support programs to link their members to employment and may have good practices in place to identify members who could benefit from job support services. Depending on how CMS regulates this provision, work programs run by MCOs may qualify if sufficiently supervised by the state.

• Advocates should help states evaluate current MCO work support programs to identify their impact, elements of success and areas where these types of programs need improvement. Advocates should encourage states to require MCOs to invest in successful models or otherwise partner with community organizations who operate these programs. However, it is important for MCO work programs to remain voluntary, with no impact on the plan’s obligation to provide benefits or help enrollees with submitting paperwork to show their exemptions/exceptions under the law.

• Managed care organizations (MCOs) (and other payers) often require patients to obtain approval of certain health care services or medications before the care is provided — an insurance practice commonly referred to as “prior authorization.” Federal regulations allow MCOs to use prior authorization as a strategy to contain costs. However, these practices can cause delays in care and confusion among beneficiaries.
• To help facilitate better communication and transparency between payers, providers and patients, the Interoperability and Prior Authorization Final Rule equires MCOs (and other payers) to make prior authorization information available through different application programming interfaces (APIs) to allow providers, payers and consumers to know what medical items and services require prior authorization, what documentation is required for the plan to make a prior authorization decision and the current status of a prior authorization decision.
• The Patient Access API allows patients to access their own information through a health app of their choice. This API was already put in place in 2021, but through this rule change, The Centers for Medicare & Medicaid Services (CMS) is expanding the API to include prior authorization data. After its implementation by Jan. 1, 2027, patients will have access to their prior authorization status, including information on whether the prior authorization is pending, approved, or denied. If approved, the patient will know the length of the approval and any restrictions. If denied, the patient will be able to access a reason for the denial.
• Payers, including MCOs, must provide access to information about prior authorization within one business day of a status change (approval, denial, etc.).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Giving consumers increased access to information on prior authorization decisions can improve patients’ engagement with their providers as well as their understanding of their health insurance and medical treatments. In addition, if the interface includes information about past prior authorization decisions, this is useful for patients who may need to obtain prior authorization again for the same service when switching health plans.
• The Patient Access API is especially important in the context of Medicaid and MCOs: A 2023 U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) report found that Medicaid MCOs had an overall prior authorization denial rate (12.5%) that was more than double the Medicare Advantage rate (5.7%). A recent KFF poll found that 53% of adult Medicaid beneficiaries had to seek prior authorization before getting a treatment or services in the past year and 79% of Medicaid enrollees found the delays and denials caused by the prior authorization process to be a “major problem.” MCO-enrolled children also have challenges: A 2024 report from the U.S. Government Accountability Office (GAO) found wide variation in MCO prior authorization practices related to Early and Periodic Screening, Diagnostic and Treatment (EPSDT) benefits.

Potential State Policy Considerations

Consumers have been slow in utilizing the existing Patient Access API functionalities, and researchers note numerous barriers to patient adoption and use (for example, limited access to technology or low digital literacy).

• MCO enrollees may require additional education and resources to take advantage of the Patient Access API and to understand that this interface may contain useful prior authorization information. Advocates can provide resources to consumers to explain the functionalities of the Patient Access API, its utility for helping MCO enrollees navigate the prior authorization process, and ways to opt out of data exchange (and how this impacts patient care). Consumers may also need support in understanding options after a denial (appeals and fair hearings with state officials).

Better information flow to patients through the API is an important first step. But additional oversight tools are needed. In a time of reduced Medicaid funding as a result of H.R. 1’s policies, MCO plans may be more interested in assessing prior authorization practices as a means of containing costs. Despite some MCOs having prior authorization denial rates higher than 25%, state Medicaid agencies do not routinely review the appropriateness of MCO denials of prior authorization requests. Most State Medicaid agencies report that they do not have a mechanism for patients and providers to submit a prior authorization denial to an external medical reviewer independent of the MCO. The absence of robust oversight of MCO decisions on prior authorization requests presents a limitation that can allow inappropriate denials to go undetected in Medicaid managed care.

• Advocates can work with state policymakers to identify MCOs that may be issuing inappropriate prior authorization denials. According to GAO, states may need to employ a number of oversight strategies, including collecting data on MCO prior authorization decisions; regularly reviewing a sample of MCO prior authorization denials to determine their appropriateness; implementing automatic external medical reviews of upheld MCO prior authorization denials; and defining repercussions for MCOs that may be issuing inappropriate prior authorization denials.
• While the Patient Access API will provide consumers with information about prior authorization decisions, the information contained in the interface will only be as good as the data put in. States should also monitor whether plans are using accurate reason and denial codes so patients have the best available information for how to proceed with their care (or with an appeal).
• Advocates can document and track the prior authorization experience among MCO members and elevate these stories to policymakers and the media.
• States can also set requirements (in MCO contracts or state laws/regulation) for a set of services where it is not appropriate to have prior authorization, or for the prior authorization turnaround to be much quicker (for example, EPSDT services). Advocates can help state policymakers determine where prior authorization may not be appropriate and help states design a pilot program to experiment with how to adjust prior authorization policies to improve service delivery.

• To help facilitate better communication and transparency between payers, providers and patients, the Interoperability and Prior Authorization Final Rule requires managed care organizations (MCOs) (and other payers) to make prior authorization information available through different application programming interfaces (APIs) to allow providers, payers and consumers to know what medical items and services require prior authorization, what documentation is required for the plan to make a prior authorization decision and the current status of a prior authorization decision.
• The Provider Access API allows providers to share patient data with in-network providers with whom the patient has a treatment relationship. The API must be in place by January 1, 2027, and must make available individual claims and encounter data (excluding provider remittances and enrollee cost-sharing information), data classes, United States Core Data for Interoperability (USCDI) data elements and specified prior authorization information, including recent prior authorization history.
• Payers are required to develop an attribution process to associate patients with their providers to ensure that data exchanged in the API are only given to providers that have a treatment relationship with the patient. Patients who do not want their information accessed in this way can opt out.
• Payers must provide educational resources to patients written in plain language describing the Provider Access API and instructions for opting out of (or back into) the data exchange.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Once implemented, this rule change means providers across a patient’s care team can retrieve information on clinical care and medical services that require prior authorization. Access to patients’ clinical information (e.g. medical diagnoses, prescriptions, previous medical procedures) and prior authorization information could be useful to reduce duplicate care and prior authorization requests, making the prior authorization process more efficient and potentially reducing delays that might affect patients’ health.

Potential State Policy Considerations

Approximately 20% of Medicaid enrollees have limited English proficiency, so careful attention to education materials coming from payers and providers is important. In addition, since multiple mechanisms exist apart from the new APIs for disseminating patient clinical information (such as through a health information exchange), it may be confusing for some consumers that opting out of the Provider Access API may not prevent their information from being shared through other electronic means.

• Advocates can review educational resources offered by providers to ensure information is in plain language and in a language accessible to the patient.
• Advocates can provide resources to consumers to explain the functionalities of the Provider Access API, its utility for helping MCO enrollees navigate the prior authorization process and ways for opting out of data exchange (and understanding how this impacts patient care). Consumers may also need support in understanding options after a denial (e.g., appeals and fair hearings with state officials).

Health care providers face significant challenges getting paid due to the increasing burden of prior authorization requests, which often lead to claim denials, delayed payments, and increased administrative costs. Providers may spend excessive staff time on manual, outdated prior authorization processes, diverting resources from patient care. Moreover, even after approval, prior authorization is not a guarantee of payment, as insurers can issue retrospective denials. These issues result in lost revenue that threatens financial stability for practices and hospitals. While the Provider Access API (and Prior Authorization API) is an important step to improving information exchange to reduce administrative hurdles, providers may need support beyond this rule change. Reducing prior authorization burdens on providers is more important than ever in light of H.R. 1. Because the new law greatly threatens Medicaid reimbursement, providers need to be assured they will get paid for the work they do.

• Advocates can work with state policymakers to identify MCOs that may be issuing inappropriate prior authorization denials. According to the Government Accountability Office (GAO), states may need to employ a number of oversight strategies, including collecting data on MCO prior authorization decisions; regularly reviewing a sample of MCO prior authorization denials to determine their appropriateness; implementing automatic external medical reviews of upheld MCO prior authorization denials; and defining repercussions for MCOs that may be issuing inappropriate prior authorization denials.
• Advocates can document and track the prior authorization experience among MCO members and elevate these stories to policymakers and the media.
• States can also set requirements (in MCO contracts or state laws/regulations) for a set of services where it is not appropriate to have prior authorization, or for the prior authorization turnaround to be much quicker (for example, Early and Periodic Screening, Diagnostic and Treatment [EPSDT] services). Advocates can work with provider organizations in their state to compose a list of where prior authorizations are not appropriate. Advocates can help states design a pilot program to experiment with how to adjust prior authorization policies to improve service delivery.

• To help facilitate better communication and transparency between payers, providers and patients, the Interoperability and Prior Authorization Final Rule requires managed care organizations (MCOs) (and other payers) to make prior authorization information available through different application programming interfaces (APIs) to allow providers, payers and consumers to know what medical items and services require prior authorization, what documentation is required for the plan to make a prior authorization decision and the current status of a prior authorization decision.
• Starting January 1, 2027, payers (including MCOs) must implement and maintain a Payer-to-Payer API that allows the exchange of information from one payer to another payer, including adjudicated claims, patient encounter data and certain information regarding prior authorizations within a five-year time frame.
• This is an opt-in data sharing policy. Within one week after the start of coverage, new payers must reach out to patients to make them aware of the API and identify previous and concurrent payers to gather their information and initiate the exchange of information. Previous payers will have to provide requested data within one day of receiving the request. Patient data must then be incorporated into the new payer’s patient record.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Transferring clinical information from one payer to the next can improve coordination of care for patients when they switch health plans and help ensure patients have access to their medical record over time. Documentation of past treatment may help with prior authorization requests by documenting medical necessity or meeting step therapy requirements.
• One potential value of this API is to allow a patient’s new health plan to access information about a prior authorization approval from the patient’s previous health insurer. This might eliminate the time a patient and their doctor must spend to obtain a new prior authorization for the same treatment when a patient must change their health insurance.

Potential State Policy Considerations

For the Payer-to-Payer API, a patient’s information will not be shared between payers unless a patient opts in with both their previous and new insurers, allowing for data to be exchanged. Given the opt-in requirement, lack of awareness of this API could limit its use and consumer education is needed. Approximately 20% of Medicaid enrollees have limited English proficiency, so careful attention to education materials coming from payers is important.

• Advocates can review educational resources offered by payers to ensure information is in plain language and a language accessible to the patient. Advocates can urge their states to set standards of patient education within MCO plan contract materials.
• Advocates can provide resources to consumers to explain the reasons for data exchange between payers and the importance of opting into data exchange through the API (including its utility for supporting prior authorizations). Advocates can also help consumers understand that prior authorization policies are different for different managed care plans. A prior authorization denial from one MCO does not mean that care will be denied by their new MCO when they switch plans. Consumers may also need support in understanding options after a denial (e.g., appeals and fair hearings with state officials).

• Starting January 1, 2027, impacted payers will be required to build and maintain a Prior Authorization application programming interface (API) that automates three parts of the prior authorization process: (1) Identifying whether an item or service requires prior authorization; (2) understanding payer-specific documentation requirements; and (3) exchanging prior authorization requests and responses.
• Through the Prior Authorization API, health care providers can ask the payer if an item or service the patient needs requires prior authorization. If prior authorization is required, the API will send the health care provider payer-specific documentation requirements so that health care staff can understand what needs to be submitted for a prior authorization request.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Streamlining prior authorization requests is important as health care providers face significant challenges getting paid due to the increasing burden of prior authorization requests, which often lead to claim denials, delayed payments, and increased administrative costs. The American Medical Association estimatesthat health care practices spend, on average, 13 hours per week on prior authorization paperwork which diverts staff time from patient care. Moreover, even after approval, prior authorization is not a guarantee of payment, as insurers can issue retrospective denials. These issues result in lost revenue, which threatens financial stability. The Prior Authorization API is an important step to reducing this paperwork burden and supporting patient care.

Potential State Policy Considerations

While the Prior Authorization API (and Provider Access API) is an important step to improving information exchange to reduce administrative hurdles, providers may need support beyond this rule change. Reducing prior authorization burdens on providers is more important than ever in light of H.R. 1. Because the new law greatly threatens reimbursement for Medicaid providers, providers need to (1) keep administrative costs low; and (2) be assured they will get paid for the work they do.

• Advocates can work with state policymakers to identify MCOs that may be issuing inappropriate prior authorization denials or have burdensome prior authorization procedures. According to the  Government Accountability Office (GAO), states may need to employ a number of oversight strategies, including collecting data on MCO prior authorization decisions; regularly reviewing a sample of MCO prior authorization denials to determine their appropriateness; implementing automatic external medical reviews of upheld MCO prior authorization denials; and defining repercussions for MCOs that may be issuing inappropriate prior authorization denials.
• Advocates can document and track the prior authorization experience among MCO members and elevate these stories to policymakers and the media. Advocates can also document the experience of health care providers in using the Prior Authorization API.
• States can also set requirements (in MCO contracts or state laws/regulation) for a set of services where it is not appropriate to have prior authorization, or for the prior authorization turnaround to be much quicker (for example, EPSDT services). Advocates can work with provider organizations in their state to comprise a list of where prior authorizations are not appropriate. Advocates can help states design a pilot program to experiment with how to adjust prior authorization policies to improve service delivery.

• Starting January 1, 2027, all new or renewed Medicaid demonstration or pilot projects will be subject to a statutory requirement of budget neutrality, codifying what has historically been an administrative practice since the 1970s.
• Adds additional requirements to restrict how expenditures and state savings are captured and used. Directs the U.S. Department of Health and Human Services (HHS) Secretary to specify the methodology used when savings are achieved under a demonstration project, giving the secretary authority to determine how states can use Section 1115 Demonstration Waiver savings with respect to subsequent demonstration waiver renewals. Defines an appropriate base comparison for budget neutrality certification as the previous fiscal year’s expenditures.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Under current law, states may use demonstration savings to fund services not traditionally covered by Medicaid, such as uncompensated care pools, Delivery System Reform Incentive Payment (DSRIP) programs, or social determinant of health initiatives. By requiring Centers for Medicare & Medicaid Services (CMS) certification and allowing the HHS Secretary to direct how savings are applied, HR.1 could limit state flexibility in using demonstration savings for these types of programs, hampering state innovation and non-traditional supports that address health disparities.
• The Congressional Budget Office (CBO) estimates that codifying budget neutrality will reduce federal Medicaid spending by $3.2 billion over 2025 to 2034. These savings may result from changes to how states are permitted to reinvest any demonstration-related savings, creating less opportunity for states to expand beyond traditional Medicaid services.

Potential State Policy Considerations

Many states have historically used Section 1115 Demonstration Waivers to expand coverage or test innovations, including initiatives to address health-related social needs (HRSN), supports for reentry from incarceration, and workforce investments. However, the Trump Administration has identified Section 1115 waivers as a driver of Medicaid spending and has taken steps to narrow their scope (Section 1115 waivers comprise about a third of federal Medicaid spending). These actions include rescinding Biden-era guidance on reentry, announcing it will no longer approve or extend continuous eligibility or workforce initiatives. Going forward, states may need to reassess the financial assumptions that underpin current or planned waivers, especially those that rely heavily on waiver savings to fund uncompensated care pools or other reforms. This will likely result in reducing services offered through Section 1115 waivers.

• Advocates should closely monitor waiver activity and participate in both state and federal public notice-and-comment processes. In particular, CMS’s upcoming decisions on pending HRSN waiver requests will provide important signals about the Administration’s priorities in approving or extending state Medicaid waivers focused on these issues.
• In states with Medicaid managed care, innovations tested through Section 1115 Demonstration Waivers are often delivered in partnership with MCOs. Information about cost savings may be held by MCOs, along with information about the impact of demonstration programs on health, care quality or access to providers and services. As advocates review any proposed state waivers before they are submitted to CMS, they can review to ensure that states are properly accounting for the impacts of demonstration projects and appropriately including data from MCOs.
• Where states need to reassess waiver priorities in response to recent signals from CMS, advocates should make sure states engage their Medicaid Advisory Committees (MACs)/ Beneficiary Advisory Councils (BACs) and hold other public forums to solicit feedback from Medicaid beneficiaries and providers on what types of demonstration projects are needed to test and advance cost-efficient, high quality care. It may be that states can accomplish similar objectives outside the Section 1115 mechanism, for example through value-based payment arrangements through state directed payments.

• For rating periods that begin on or after July 9, 2027, states must submit an evaluation report for SDPs that amount to more than 1.5 percent of managed care program costs. (States use SDPs to require MCOs to increase provider rates or to carry out other objectives to improve care quality for Medicaid beneficiaries).
• States must publicly post evaluation reports.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• This rule change comes in response to rapid growth in the use of SDPs and offers a way for the Centers for Medicare & Medicaid Services (CMS) and other entities to better understand the provider payments that happen through managed care.
• In September 2025, CMS released a bulletin on SDP evaluation reports, stating its concern that “many states initially submit incomplete SDP evaluation plans or do not include SDP evaluation findings at the time of SDP preprint renewal submission which raises concerns for CMS that the total payment rate for the SDP may not be reasonable, appropriate and attainable.” Without submission of minimum SDP evaluation data, CMS may not consider an SDP preprint to be complete and may withhold approval. Although new SDP evaluation reports may increase administrative burden on states and Medicaid MCOs, the value of the SDPs themselves to care quality and access goals in the state should outweigh the costs.
• H.R. 1 § 71116 puts limitations on SDPs to prevent them from rising above the Medicare rate (with certain exceptions). While states may need to decrease existing SDPs as a result of H.R. 1, this shouldn’t impact the requirements set forth under this provision of the Managed Care Rule. Even if SDPs now offer a lower reimbursement rate, it is still helpful for CMS and others to understand where that money goes.

Potential State Policy Considerations

SDP evaluation reports offer a new oversight mechanism and an important way for advocates to better understand how SDP dollars are spent by MCOs.

• Advocates can use the required public reporting to hold states accountable and highlight whether SDPs are improving access to care, reducing disparities or merely serving as financing tools.
• Advocates can help states prioritize which SDPs to pursue and can demand clearer links to access and quality outcomes.

• Beginning with contracting periods on or after July 9, 2027, the Managed Care Final Rule requires states to conduct a Medicaid enrollee experience survey on an annual basis and use this survey information to improve performance in their managed care program. States are then required to report in their annual Managed Care Program Annual Program Report (MCPAR) managed care organization (MCO) performance information based on survey results. States can elect to use an external quality review organization (EQRO) to conduct these surveys.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Capturing the experience of Medicaid managed care plan enrollees is an important way to measure access to care and care quality, and an important oversight tool for states. Through these surveys, managed care enrollees should have the opportunity to inform their state Medicaid program of whether something that should happen under the MCO contract is actually happening (for example, timely access to providers in the network or care coordination for individuals dually enrolled in Medicare and Medicaid).
• With the information posted publicly, enrollees and advocates can more easily compare plan performance and make more informed decisions during plan selection.

Potential State Policy Considerations

The rule does not specify the survey instrument that must be used, but it does allow states to use an external quality review organization (EQRO) to conduct enrollee surveys. As the rule gives significant flexibility to states to design enrollee surveys, it is important for advocates to be at the table to ensure surveys adequately capture information that reflects important concerns for Medicaid enrollees.

• Advocates can look for opportunities to engage in the survey planning/design process in their state. Advocates should ensure their state engages Beneficiary Advisory Councils (BACs) in the planning process and that survey design appropriately captures responses from a broad range of Medicaid enrollees, including those language, literacy or technology barriers.
• States are designing their surveys in a moment where federal Medicaid eligibility requirements are shifting, including new community engagement requirements. Advocates have an important role in ensuring that survey instruments include questions that examine the enrollee experience with new requirements (for example, Are enrollees able to properly document community engagement or exceptions?).
• Advocates can monitor for survey and summary-results posting as this can be used as a powerful oversight tool of MCOs. Based on results, advocates can highlight enrollee priorities (such as provider access, care quality and equity), and push for improvement where systemic problems are identified.
• Advocates can help states consider whether to use EQROs or internal processes to administer surveys, balancing cost, capacity, quality and independence.

• Under current regulations, state Medicaid agencies must develop quantitative network adequacy standards for the following provider types: adult and pediatric primary care, OB/GYN, adult and pediatric mental health and substance use disorder, hospital, pharmacy and pediatric dental. However, there is wide variation among states in terms of what quantitative standards they use.
• The Managed Care Final Rule requires states to “establish and enforce” appointment wait time standards for specific services (for example, 10 business days from the date of request for routine mental health services, 15 business days for OB/GYN visits). Compliance with the rule means that managed care organizations (MCOs) must make “routine” appointments available for patients at least 90% of the time within the standard 10- to 15-day window. States may set a shorter window at their discretion.
• When developing network adequacy standards, states must consider multiple elements, including: Medicaid enrollment, providers that can communicate with enrollees with limited English proficiency, providers able to ensure physically access accommodations and available triage, telemedicine and e-visits.
• The state can permit exceptions to wait time standards, taking into consideration the number of providers in the MCO’s service area or payment rates offered by the managed care entity.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Historically, Medicaid enrollees have greater difficulty obtaining appointments with Medicaid providers in a timely manner than patients with private insurance. Network adequacy standards should help ensure that MCOs extend provider networks where possible to give Medicaid enrollees access to timely appointments that support their care needs.
• MCOs will need to strengthen provider recruitment, retention and data accuracy to meet state-defined quantitative benchmarks and appointment wait time standards. Increased federal and state oversight may require expanded monitoring and corrective action processes. MCOs may face greater scrutiny over directory accuracy and must ensure their networks meet both access and reporting requirements.

Potential State Policy Considerations

States are responsible for ensuring that adequate providers are enrolled in the Medicaid program to meet new wait time standards. This means that states may need to change incentives (inclusive of payment and administrative burden) to ensure that providers are willing to provide care to Medicaid enrollees. Adding to the challenge is that network adequacy standards are being implemented after changes brought by H.R. 1 § 71116 that reduce state directed payments (SDPs), a mechanism that has been used in many states to improve payment to providers that participate in MCO networks. Medicaid agencies and Medicaid MCOs may need to focus on other ways to increase incentives or reduce barriers to Medicaid participation where needed to ensure there are enough providers enrolled to meet network adequacy standards and patient care.

• In states without an adequate number of providers enrolled in Medicaid to meet network adequacy standards, advocates can work with their state Medicaid office to improve incentives for providers. This may include increasing rates, providing more administrative support or reducing administrative burden through streamlining applications, documentation and prior authorizations. Advocates can hold listening sessions with providers to better understand barriers to participation in Medicaid and potential solutions.
• Advocates can leverage the new Fee-for-Service (FFS) Rate Transparency Access Rule (§ 447.203(b)(1)-(4)) to ensure that managed care organizations are adequately reimbursing providers.
• States are not required to conduct secret shopper surveys under the Managed Care Rule until 2028. In the meantime, advocates can conduct their own secret shopper surveys of managed care plans to document network adequacy and provide feedback to their state. Advocates with limited resources can focus their surveys on certain provider types (for example, reproductive health) or certain regions (for example, rural areas that may be hit hard by the loss of Medicaid funding caused by H.R. 1).
• Advocates may have an important role to serve in their state to provide education to Medicaid enrollees about the standard wait times and what actions to take if standards are not met.

• The Medicaid statute already requires that home- and community-based services (HCBS) provided through a section 1915(c) waiver be provided pursuant to a written plan of care. The Medicaid Access Final Rule establishes a new approach to this plan of care, termed a “person-centered service plan.” Under the rule, effective for rating periods that start on or after July 9, 2027, the state must ensure that every individual’s person-centered service plan is reviewed and revised at least annually, when the individual’s circumstances change or upon request.
• States must ensure that at least 90% of applicable individuals receive a plan review each year.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Person-centered service plans help create a sustainable system where older adults and people with disabilities live their lives by making informed choices about their care, having full control and accessing a broad array of quality services. Reviewing and updating these plans frequently is important for ensuring that beneficiaries receive the most appropriate care for their needs in a setting that reflects their values, health and safety.

Potential State Policy Considerations

Where Medicaid beneficiaries receive HCBS through a Medicaid managed care plan, their MCO will be at the helm of effectuating that person-centered service plan.

• Advocates can ensure that state MCO contracts reflect this rule change and that MCOs have a requirement to incorporate changes to service plans for each individual.
• Advocates can make educational materials available to Medicaid beneficiaries on HCBS patient-centered service plan requirements, including information on how to log problems in the HCBS grievance system. Advocates can also collect patient stories about access to HCBS within managed care to help document how well plans are meeting person-centered service plan requirements. Information gathered may be shared with the HCBS Interested Parties Advisory Group to inform rate setting for these services.

• The Medicaid Access Final Rule requires states to operate a comprehensive incident management system for Home- and Community-Based Services (HCBS). The system must identify, report, investigate and track “critical incidents” using a new standardized federal definition.
• States must define critical incidents to include (at minimum): Verbal, physical, sexual, psychological or emotional abuse; neglect; exploitation including financial exploitation; misuse or unauthorized use of restrictive interventions or seclusion; medication error resulting in a telephone/consultation with a poison control center, emergency department (ED) visit, urgent care visit, hospitalization or death; and unexplained or unanticipated death, including, but not limited to, a death caused by abuse or neglect.
• States must ensure providers report incidents and use electronic systems to collect and analyze data (including claims and fraud data) on incidents occurring during delivery of services or as a result of failure to deliver services.
• The rule requires states to initiate investigations for at least 90% of reported critical incidents and report annually to the Centers for Medicare & Medicaid Services (CMS) on all incident investigations.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• The Office of the Inspector General (OIG) has found systemic issues with HCBS provided in states, including poor quality and poor state oversight. This new rule should help improve care for beneficiaries who need HCBS but ensuring that the state has a process in place to identify and investigate problems.

Potential State Policy Considerations

While this rule is an important step toward improving care for individuals who require HCBS, the rule only establishes a system to monitor these problems, not a system to make changes and improvements. In a time of significant Medicaid funding cuts to states as a result of H.R. 1, states may be looking to scale back benefits to reduce Medicaid costs; HCBS services are “optional” state benefits and could be on the chopping block. There is an important role for advocates to ensure that data from the HCBS incident system are not used as weapons to reduce HCBS or reduce access to underperforming HCBS providers, but rather as tools to highlight opportunities to improve care.

• Where possible, advocates may want to be at the table as states determine the definition of “critical incidents” and make decisions about how they will investigate incidents of poor quality care or abuse. The new Medicaid Advisory Committees (MACs)/ Beneficiary Advisory Councils (BACs) should collaborate on design of the incident management system, and advocates can ensure that beneficiaries who access HCBS have an appropriate opportunity to weigh in. The HCBS grievance system is a starting point for feedback into systemic problems and incidents of poor care that should be monitored and addressed by the incident management system.
• Under the rule, states have a responsibility to initiate investigations into 90% of incidents, but not a responsibility to resolve these incidents with corrective action. Likewise, providers have a responsibility to report incidents but not necessarily a responsibility to make changes to patient care delivery to reduce the likelihood of such incidents in the future. Certainly, depending on the incident at hand, there may be other federal or state laws/regulations that intervene and ensure corrective action. However, it may be incumbent upon advocates to monitor the outcomes of investigations, log incidents of poor provider care and hold their state accountable to making improvements. As MCOs are often responsible for paying HCBS providers and including them in networks, procurement contracts could outline metrics holding MCOs accountable to ensure HCBS quality.

• The Medicaid Access Final Rule requires states to use and report on the HCBS Quality Measure Set (previously a voluntary option for states) and requires the U.S. Department of Health and Human Services (HHS) Secretary to update the HCBS Quality Measure Set no later than December 31, 2026.
• States must comply with the HCBS Quality Measure Set reporting requirements by July 9, 2028. States must report every two years on all mandatory measures, set performance targets, and outline quality improvement strategies to achieve them.

(See section above on HCBS quality measure set and payment adequacy reporting)

• The Medicaid Access Final Rule requires state Medicaid agencies to create a consumer-friendly website to make information about the accessibility and quality of Home- and Community-Based Services (HCBS) publicly available. The website must include results from state reports on: incident management systems and critical incidents; reassessments for functional need; results from the HCBS Quality Measure Set; HCBS waiver waiting lists; access to key services (homemaker, home health aide, personal care and habilitation); adequacy of payment for these services; and percentages of providers qualifying for exemptions from payment adequacy standards. States must verify website accuracy and timeliness quarterly. These requirements apply to HCBS provided under sections 1915(c), (i), (j) and (k).
• In addition, the Centers for Medicare & Medicaid Services (CMS) must post state-reported results on its own website, ensuring transparency even if states fail to publish their data.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• The rule establishes a number of monitoring and data reporting systems aimed at better understanding the provision of HCBS within state Medicaid programs, payment for these services and ways the system can improve care for individuals who require care in home and community settings. Having one website that pulls all this information together will be an important tool for beneficiaries to understand their care options and make informed decisions.

Potential State Policy Considerations

As this website is intended to be for consumers of HCBS care, Medicaid beneficiaries who access these services need to be informed of the website’s existence and how to use the information within to inform their health care decision-making, including how this information may inform their choice in provider or MCO plan.

• Advocates can provide education about the importance of reviewing the website content and where to find key information (such as information about HCBS waitlists or critical incidents investigated against HCBS providers).
• Depending on what the information looks like on the eventual website, advocates may need to distill data to be relevant to consumers (for example, What do results from the HCBS Quality Measure Set tell us? How does information about adequacy of payment rates inform care decision-making?).
• Advocates can evaluate the accessibility of information, ensuring the information is provided in way that offers clear, consumer-friendly information that meets federal/state requirements and Medicaid beneficiary needs (for example, Do website materials include the use of clear language, icons, captioned videos, large print, American Sign Language and suitable color contrast?).

Researchers and advocates can use data pulled together on the state website to help them evaluate where their state is offering high quality HCBS and where systemic problems may exist that impede care in home and community settings. Data from the HCBS website may also be important for helping advocates document the value of HCBS; this information may be critical to defend against state Medicaid programs scaling back HCBS services in response to Medicaid budget shortfalls occurring post-H.R. 1.

• H.R. 1 sets a freeze on current provider taxes (as of date of enactment) and requires future reductions on certain provider taxes in states that have expanded Medicaid under the Affordable Care Act (ACA) Medicaid expansion. For fiscal years (FYs) 2026 and 2027, all states can keep their current provider tax rates in place (assuming the tax amount is within the current “safe harbor” threshold of 6% or less of net patient revenue), but starting in FY 2028 (October 1, 2027), the provider tax threshold will be reduced over time down to 3.5% (by FY2032) in states that have expanded Medicaid under the ACA Medicaid expansion. This provision applies to all tax types except nursing home and institutional intermediate care facilities.

(See section above on Provider Tax limitations.)

• The American Rescue Plan Act (ARPA) offered a 5% FMAP increase for eight quarters to any state newly adopting Affordable Care Act (ACA) Medicaid expansion — a “bonus” to encourage states to adopt expansion. H.R. 1 sunsets that FMAP increase on January 1, 2026.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• States can still expand Medicaid, but to receive the enhanced ARPA match, expansion needs to be in place by January 1, 2026.
• The Congressional Budget Office (CBO) estimates this provision will result in savings to the federal government of $13.6 billion over 10 years (2025 to 2034), due to the expectation that fewer states will expand Medicaid. As a result, CBO estimates 100,000 people will become uninsured by 2026.
• Many states use managed care to serve Medicaid expansion populations, with the majority of expansion states enrolling most of their newly eligible adults in managed care plans.

Potential State Policy Considerations

The business case for states to expand Medicaid remains compelling even after the ARPA enhanced federal funding sunsets. While the temporary funding incentives created an added economic benefit for states, the core economic arguments — including offset budget savings, increased state revenue and broader economic growth — persist.

• While it is likely not viable for states to expand Medicaid before the APRA incentive sunsets, advocates in non-expansion states should continue to make the business case for Medicaid expansion, including reduced state and local government spending on uncompensated care for the uninsured; reduced spending on the “traditional” Medicaid population; lower costs for state-funded mental health, substance use and corrections programs; increased health care-related jobs and economic activity; and improved support for rural health providers.

H.R. 1’s Medicaid funding cuts and increased barriers to enrollment are expected to lead to more uninsured people and could harm health care providers and facilities that rely on Medicaid reimbursement (particularly in rural and underserved areas). Despite H.R. 1’s deliberate attempt to dissuade states from expanding, state policymakers may actually have renewed interest in exploring Medicaid expansion as a mechanism for reducing uninsured populations and bringing Medicaid funding to the state. From the perspective of managed care organizations, Medicaid expansion results in a surge of new Medicaid enrollees being served by managed care; as the managed care market risks losing covered lives due to H.R. 1’s provisions, MCOs may have new incentives for pushing for Medicaid expansion.

• While a number of H.R. 1’s provisions attempt to penalize expansion states, these penalties may not be a true deterrent for expansion. For example, if the state does not tax providers above 3.5% (see H.R. 1 § 71115) or does not have state directed payments in place above the Medicare rate (see H.R. 1 § 71116), then these provisions will not have an impact on the state if it elects to expand Medicaid. Advocates can serve an important role in helping state policymakers weigh the pros and cons of expansion in a post H.R. 1-era.

• MCOs (and other payers) often require patients to obtain approval of certain health care services or medications before the care is provided — an insurance practice commonly referred to as “prior authorization.” Federal regulations allow MCOs to use prior authorization as a strategy to contain costs. However, these practices can cause delays in care and confusion among beneficiaries.
• To help facilitate better communication and transparency between payers, providers and patients, the Prior Authorization Rule requires MCOs (and other payers) to make prior authorization information available through different application programming interfaces (APIs) to allow providers, payers, and consumers to know what medical items and services require prior authorization, what documentation is required for the plan to make a prior authorization decision, and the current status of a prior authorization decision. These interfaces must be in place by January 1, 2027.
• In advance of the API launch, the Prior Authorization Rule sets out new prior authorization standards for MCOs (and other payers) that need to be in place by January 1, 2026:
  • Reduction of prior authorization decision timeframes: Payers will be required to send standard prior authorization decisions within seven calendar days and expedited prior authorization decisions within 72 hours. The clock starts when the payer receives the request from the provider.
  • Providing a specific reason for denial: Payers must provide specific denial reasons from a standardized industry list when refusing an authorization (e.g., incomplete documentation, lack of medical necessity, incorrect billing codes, or the service not being a covered benefit).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Prior authorization requests are routinely denied with little to no explanation and delays in response times on prior authorization decisions can greatly impact patient care. Armed with better information about the reason for a denial, providers can take whatever necessary steps are needed for their patient — whether that is an appeal of the decision and/or a recommendation for an alternative treatment

Potential State Policy Considerations

While timely decisions and better information on the reason for denial are important, the final regulation does not address how prior authorizations decisions are made or set standards for when prior authorization is appropriate.

• Advocates can document and track the prior authorization experience among MCO members and providers who serve Medicaid patients and elevate these stories to policymakers and the media.
• Advocates can urge their states to conduct oversight over timeliness of decisions and appropriateness of denials. States can also set additional or more comprehensive requirements related to these issues (for example, to address retrospective denials or qualifications required for personnel reviewing requests).

• The Interoperability and Prior Authorization Final Rule aims to improve transparency and reduce burdens for patients and providers to seek prior authorization (a practice managed care organizations [MCOs] and other payers may engage in to require patients to obtain approval for certain health care services or medications before the care is provided). The rule requires MCOs (and other payers) to report information about prior authorization determinations on their public website on an annual basis, including the percent of prior authorization requests approved, denied and approved after appeal, as well as average time between submission and decision.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• In theory, consumers will be able to go to an MCO plan’s website to review prior authorization information and use this as a metric to compare various plans or to better understand how a plan’s prior authorization policies may impact patient access to services. Researchers and advocates will also have access to transparent prior authorization information which may help them review prior authorization policies among MCOs in their state (or across states).

Potential State Policy Considerations

Consumers will need education to understand that prior authorization data are available to them, and there is a clear role for researchers to compile that data across MCOs to help consumers navigate this information and help states understand where they may need to focus oversight efforts.

• Advocates can provide educational materials to consumers to let them know the importance of seeking information on prior authorization practices, where to find this information and how to use this information to compare various plan options. Advocates can compile and routinely update prior authorization information from across MCO plans to help consumers make comparisons.
• Advocates can mine public information to better understand prior authorization policies among MCOs in their state. With these data, advocates and researchers may be able to: review whether MCOs are following state laws or contracts in providing access to care; examine how prior authorization practices in their state stack up against practices in other states; and compile common themes among prior authorization practices that are leading to inappropriate denials or inadequate patient care (including prior authorization practices that create delays in medical record documentation that may be needed to demonstrate compliance with various exceptions/exclusions under the new community engagement requirements). With these data, advocates may help inform state policymakers on ways to have better oversight of MCOs on their prior authorization practices.

• H.R. 1 requires community engagement activities (also called work reporting requirements) as a condition of eligibility for the Medicaid expansion population (aged 19 to 64 years). Community engagement may consist of 80 hours of work, community service, participation in a work program or enrollment in an educational program at least part-time (or a combination of these). The law outlines several categories of individuals who must be exempted and allows states to define additional exemptions for people experiencing temporary hardships.
• Enrollees must prove they meet the requirements at each redetermination. Under H.R. 1 § 71107, redetermination for people enrolled in the Medicaid expansion must be at least every six months, but this provision gives states the option to require community engagement verification more frequently.
• Noncompliance results in disenrollment and termination. People in this population who fail to meet Medicaid community engagement activities will also be blocked from getting premium tax credits on the Affordable Care Act (ACA) marketplace.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Termination and disenrollment of Medicaid expansion-eligible enrollees and subsidized marketplace enrollees will result in millions losing their health insurance. The Congressional Budget Office (CBO) estimates that in 2027 (the first year the community engagement requirements will be in effect), 2.2 million individuals will lose Medicaid coverage and become uninsured. By 2033, CBO estimates 5.3 million people will become uninsured due to community engagement requirements. Given these coverage losses, CBO estimates the federal government will expend $325.6 billion fewer Medicaid dollars over 10 years (2025 to 2034); this means $325.6 billion less health care services covered for low-income Americans.
• To implement community engagement requirements (and to meet more frequent eligibility redetermination requirements under the law), states may need to build or procure new IT systems, overhaul operational and compliance procedures and invest in public education campaigns. Guidance from the Centers for Medicare & Medicaid Services (CMS) will spell out some of these requirements but will likely give flexibility to states to design their systems.

Potential State Policy Considerations

Presumably, guidance from CMS on implementing the new community engagement provisions of the law will also intersect with guidance the agency is releasing for changes to eligibility redeterminations (H.R. 1 § 71107), as both provisions of H.R. 1 impact eligibility and enrollment for the Medicaid expansion population (H.R. 1 instructs CMS to issue guidance for six-month eligibility redeterminations by December 31, 2025).

• Advocates should remain engaged as CMS releases implementing guidance on these provisions and be on the lookout for where guidance gives states flexibility or otherwise leaves key decisions up to state policymakers.
• Advocates can also look for where CMS guidance implicates (or could implicate) the managed care system in their state, as MCOs are a key stakeholder that can and should assist their members with meeting new community engagement requirements.
• Advocates can engage in public forums as states plan and design new enrollment systems in light of CMS guidance and should highlight for state policymakers where state MCO contracting or other oversight mechanisms are needed to ensure that MCOs participate in new enrollment systems in ways that minimize coverage loss.

The law requires states to conduct outreach to enrolled applicable individuals beginning between June and August of 2026 (between four and six months in advance of any individual having to comply, the timeline depending on whether the state requires individuals to demonstrate meeting the community engagement requirement for just one month prior to determination or up to three months prior). This is a very tight timeline for states to generate quality outreach materials and to deliver them to impacted individuals and communities. Given this timeline, guidance concerning outreach/education may come out sooner than other guidance.

• Should CMS release guidance on outreach/education surrounding community engagement, advocates will need to respond quickly to support their state in constructing a multifaceted outreach plan that involves a range of stakeholders — including Medicaid MCOs and community-based organizations — that can reach vulnerable populations and support their understanding of new eligibility requirements under the law.

• The Medicaid Access Final Rule rescinds the Access Monitoring Review Plan (AMRP); in its place, the rule sets a new regulatory framework aimed at improving rate transparency.
• States must publicly post Medicaid fee-for-service (FFS) payment rates no later than July 1, 2026. Rates must be posted on a website, must include separate rates by population (adult and child, as necessary) and must be easily understood such that providers know the payment amounts in advance of providing services. Payment rates must include payment amounts from the Medicaid agency and any coinsurance or deductibles.
• Some Medicaid FFS rates (primary care, OB/GYN, mental health and substance use disorder services) must be compared to Medicare rates for 2025.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• MCOs often pay providers based on FFS rates. With enhanced transparency and analysis, providers can ensure they are being adequately reimbursed for their services, which gives them more negotiating power managed care plans. This could lead to more providers entering into and remaining in the Medicaid program.

Potential State Policy Considerations

States must develop policies to ensure that all comparative data and rate disclosures are de-identified prior to posting.

• Advocates can monitor rates to ensure that providers are being reimbursed at or above 80% of Medicare rates for similar services. More competitive rates should attract more providers to enroll in Medicaid and relieve some of the provider shortage burden.
• MCO contracts with providers include a negotiated rate for Medicaid services rendered. These rates may not be reflective of what the state pays for services. Advocates can notify providers that state payment rates are posted, giving providers the information they may need to ensure they are being adequately reimbursed by MCOs in their state.

• The one-year ban on Medicaid payment to certain family planning/reproductive health clinics who provide abortion services sunsets on this date.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• When the ban expires, Medicaid can again reimburse clinics like Planned Parenthood for Medicaid-eligible services (for example, birth control, cancer screenings, sexually transmitted infection [STI] testing and other preventive care).

Potential State Policy Considerations

As managed care plans rely on family planning clinics to provide a wide range of reproductive and comprehensive health care to their members, MCO plans will again want to contract with Planned Parenthood clinics and other free-standing family planning providers impacted by the ban. However, clinic closures resulting from the ban will change the provider mix available in many communities, impacting MCO provider networks and patient access to reproductive health services going forward.

• States entering a competitive procurement process in 2026 should set standards for plans to improve their provider networks with respect to reproductive health. Advocates can push states to pursue higher reimbursement for reproductive health providers through state directed payments and value-based payment options that attract and reward strong reproductive health care networks. Advocates should engage with state leaders in designing any new payment options that impact reproductive health care.
• State MCO contracts do not always adequately clarify which services are eligible for freedom of choice protection. Advocates can urge states to have more detailed specifications in contracts to ensure that enrollees have access to a wide array of reproductive health services out-of-network (including postpartum services, STI treatment and testing and cancer screening).

• Under the Medicaid Access Final Rule, states must convene the first Home- and Community-Based Services (HCBS) Interested Parties Advisory Group meeting by July 9, 2026, and at least every two years thereafter.
• The group will consult on categories of current and proposed provider rates relevant to HCBS, including rates paid to direct care workers and home health aides, and rates paid for homemaker services and habilitation services. At minimum, the Interested Parties Advisory Group must include: direct care workers, beneficiaries, beneficiaries authorized representatives and other impacted and interested parties. The state Medicaid agency must publish the recommendations of the advisory group.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• This rule change allows more transparency into the rate setting process and gives relevant stakeholders a voice in proposed payment rates. While the state is not required to accept all advisory group recommendations, they are required to publish the recommendations, ensuring more oversight and transparency in the process.

Potential State Policy Considerations

The HCBS Interested Parties Advisory Group may serve a critical role in defending the need for state Medicaid programs to continue to offer HCBS, an optional Medicaid benefit that may be vulnerable given reduced funding to state Medicaid programs post-H.R. 1.

• Advocates should ensure that stakeholders are aware of this process and engaged. Advocates can monitor for information regarding advisory group member selection and assist with information dissemination to ensure that all interested parties are represented.
• Advocates can leverage published data to support fair payment rates and ensure Medicaid MCOs are fairly compensating providers, especially given the limitations of state directed payments (SDPs) (H.R. 1 § 71116). Higher payment rate recommendations coming from the advisory group can support state efforts to raise base fee-for-service (FFS) Medicaid rates and/or put SDPs in place to increase payments for HCBS through managed care.
• Advocates may also want to support this process with data on the overall importance of HCBS to Medicaid beneficiaries (for example, data on cost-savings to the state as a result of making HCBS more widely available).
• Adequate payment rates should help support providers in maintaining their participation in the Medicaid program. However, in managed care states, MCOs still need to network with these providers to ensure enrollees have access to an adequate network of providers to support their care needs. While MCOs are required to meet new network adequacy standards Managed Care Rule (§ 438.68(b)(1)), procurement contracts or managed care quality strategies may need to be updated to sufficiently include HCBS providers or quality metrics related to these services.

• Existing regulations include broad fair hearing rights across Medicaid, but they do not provide an avenue for individuals receiving HCBS to raise additional concerns that fall outside the fair hearing process (for example, failure of a provider to comply with HCBS setting requirements or failure of the state to adhere to person-centered service plan requirements). Under the Medicaid Access Final Rule, states must establish a grievance process specific to HCBS services by July 9, 2026.
• Grievances must be resolved quickly (no more than 90 calendar days from submission) and states must assist individuals in filing grievances (including help for individuals with disabilities).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• This regulation strengthens protections for Medicaid enrollees receiving HCBS services.

Potential State Policy Considerations

While this provision does not apply to managed care delivery systems, it could have implications for the provision of HCBS through managed care.

• Advocates can leverage the HCBS grievance system as a blueprint for Medicaid MCO contracts to ensure that Medicaid MCOs are beholden to similar standards of oversight and accountability as under Medicaid fee-for-service.
• Advocates should ensure that the Beneficiary Advisory Council (BAC) is engaged in the development of policies and procedures for the HCBS grievance process to ensure that it is inclusive and reasonable for all individuals.

HCBS are considered “optional” Medicaid benefits and could be cut given the financial impacts of H.R. 1 on state budgets. Grievance systems can be used as a lever to ensure that states continue to provide a high quality HCBS program.

• Advocates should ensure that even with reduced funding, states continue to provide HCBS. Information from the grievance system can be used to make a compelling case for why home- and community-based services are important and why states should continue offering them.

• Effective July 9, 2026, the Managed Care Final Rule requires states to post on their state Medicaid agency website enrollee experience surveys specific to each managed care organization (MCO) with a contract in the state. The website should allow for stakeholders to compare results among MCOs.
• Prior to this rule change, states were required to use any existing enrollee survey information (whether conducted by the state or the MCO) in improving managed care program performance, but states were not required to conduct any surveys or post any survey information. The rule also sets a requirement for states to conduct a Medicaid enrollee experience survey on an annual basis, but this requirement is not live until July 9, 2027.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Understanding the experience of Medicaid managed care plan enrollees is an important way to measure access to care and care quality, as well as an important oversight tool for states. With the information posted publicly, enrollees and advocates can more easily compare plan performance and make more informed decisions during plan selection.

Potential State Policy Considerations

By July 2027, states will be required to conduct an enrollee experience survey each year. Information from existing enrollee surveys can inform state survey design.

• Advocates can mine publicly available survey information to understand challenges enrollees may be facing in seeking quality care. For example, current surveys may illuminate persistent network adequacy issues which could inform targeted state efforts to improve access to care.
• Current survey data — including information absent from such survey data — may inform state survey design. As states may be starting the planning process for launching their Medicaid enrollee experience surveys in 2027, advocates can use existing survey information to inform survey design.

• The Managed Care Final Rule requires states to report data to enable the Centers for Medicare & Medicaid Services (CMS) to track how much money is flowing to which providers through the state directed payment (SDP) mechanism. States use SDPs to require managed care organizations (MCOs) to increase provider rates (in general or for specific provider types) or to carry out other objectives to improve care quality for Medicaid beneficiaries. The rule requires states to submit provider-specific data annually via the Transformed Medicaid Statistical Information System (T-MSIS).
• For contract periods that begin on or after July 9, 2027, states will be required to publicly post evaluations of SDPs that amount to more than 1.5 percent of managed care program costs.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• This rule change comes in response to rapid growth in the use of SDPs and offers a way for CMS and other entities to better understand the provider payments that happen through managed care.
• H.R. 1 § 71116 puts limitations on SDPs so that they may not rise above the Medicare rate (with certain exceptions). While states may need to decrease existing SDPs as a result of H.R. 1, this shouldn’t impact the requirements set forth under this regulation. Even if SDPs now offer a lower reimbursement rate, it is still helpful for CMS and others to understand where that money goes.

Potential State Policy Considerations

While these data will be useful to CMS, advocates, researchers and state lawmakers can mine these data as well to better understand Medicaid payments in their state.

• Tracking money flow to providers is an important oversight mechanism, and advocates can look to these public data as resources to help them unpackage what provider payment looks like in their state and where payments may need to be redistributed to better support patient access to care (particularly to rural health providers and other safety-net providers). There could also be value in comparing provider payment information to enrollee experience surveys.
• Advocates could leverage these data to support health care cost containment commissions or other efforts to evaluate costs within the Medicaid system.
• States are required to submit data via T-MSIS. To make this happen, states may need to improve interoperability between MCOs and T-MSIS to ensure that this information can be easily transmitted. As system updates can take months to years, states should begin reviewing their current systems and prioritize system upgrades based on an implementation timeline for multiple components of the rules discussed here.

• Under the Managed Care Final Rule, MCOs must submit an annual payment analysis to the state to compare payment rates provided by the plan against the published Medicare rate for those services. The payment analysis must focus on codes for primary care, OB/GYN, mental health and substance use disorder services and will be reported on an aggregate basis. This analysis excludes services for which the MCO is not the primary payer as well as services furnished by federally qualified health centers.
• The state is required to include each MCO payment analysis in an annual analysis submitted to Centers for Medicare & Medicaid Services (CMS), posting this information on their website within 30 days.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Public data on MCO provider payment offers a powerful oversight tool that can help Medicaid agencies ensure that MCOs are paying their providers their contracted rates. Medicaid agencies are often understaffed and may not have the bandwidth to monitor MCO payments to providers, so having MCOs submit these data is important. In addition, data on how Medicaid rates stack up to Medicare rates is valuable information that may support changes in payment or incentive structures.

Potential State Policy Considerations

States must update MCO contracts to include these reporting requirements and ensure adequate interoperability to receive reports. States can leverage these reports as an added tool of MCO oversight.

• Advocates should ensure that these rates are made public and that calculated rates are consistent with the rates MCOs proposed to pay providers.
• Advocates can monitor rates from both Medicaid managed care and fee-for-service to ensure provider rate parity. Advocates can also use data comparisons to Medicare rates to help bolster an argument to improve payment or incentives for certain providers or certain types of services.

• In addition to current regulations, states must update their Medicaid websites to include documentation of available services from each managed care organization (MCO), documentation of compliance with mental health and substance use parity, state standard for appointment wait times, state directed payment evaluation reports, the results of secret shopper surveys (when those are available, in 2028) and quality ratings (when those systems are live, no earlier than December 31, 2030).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

This significantly improves transparency for enrollees and the public and allows enrollees to make informed choices about their chosen plan.

Potential State Policy Considerations

As improvements to the Medicaid website are intended to help applicants and enrollees, individuals who would potentially benefit from this website content need to know that it’s there and how to use the information within to inform their health care decision-making. Website content may also be useful to advocates and researchers to evaluate MCO plan quality.

• In states where Medicaid enrollees have choice for their MCO provider, advocates can provide education about the importance of reviewing the website prior to choosing a MCO. Advocates can offer learning sessions to educate enrollees on the differences in managed care plans.
• With clear, accessible data to compare services of plans and costs, advocates can leverage this information to evaluate MCO plan quality. Ideally, this level of transparency should drive competition among plans and encourage plans to provide higher quality services for beneficiaries; advocates may need to evaluate this information and report out to their states to ensure state oversight.

• Restricts Medicaid/CHIP coverage to individuals who are: (1) residents of the 50 states, the District of Columbia or a U.S. territory; and (2) either:
  • (a) a citizen or national of the United States;
  • (b) an alien lawfully admitted for permanent residence (as defined by the Immigration and Nationality Act) but, excluding, among others, alien visitors, tourists, diplomats and students who enter the United States temporarily with no intention of abandoning their residence in a foreign country;
  • (c) an alien who has been granted the status of Cuban and Haitian entrant, as defined by the Refugee Education Assistance Act of 1980; or
  • (d) an individual who lawfully resides in the United States in accordance with a Compact of Free Association referred to in section 402(b)(2)(G) of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Currently, state Medicaid programs may not cover health care for “an alien who is not lawfully admitted for permanent residence or otherwise permanently residing in the United States” unless for an emergency medical condition. Current law also gives states the option to cover children and pregnant women who are lawfully residing in the United States.
• Leaving the above current laws in place, this new provision further restricts Medicaid coverage and could eliminate Medicaid/CHIP coverage for many types of legal immigrants: refugees, asylees, parolees, certain abused spouses and children; certain victims of trafficking.
• By making it harder for legal immigrants to gain/retain Medicaid coverage, Congressional Budget Office estimates this will result in savings to the federal government of $6.2 billion over 10 years (2025 to 2034) and will cause 100,000 people to become uninsured by 2026.

Potential State Policy Considerations

While MCOs do not determine Medicaid eligibility (it is the responsibility of the state Medicaid authority to assess applicant’s finances and other eligibility criteria), plans currently enroll many types of legal immigrants. MCOs should have the incentive to ensure all people who meet Medicaid requirements remain enrolled.

• As there has been much in the news about H.R. 1’s impact on immigrant populations and many changes to these requirements as Congress debated the reconciliation bill, there may be lingering confusion as to who remains eligible. MCOs are well positioned to communicate with their members about immigrant eligibility requirements. Advocates can urge states to use the MCO contracting process (or other oversight mechanisms) to require plans to proactively identify and reach out to members who may be at risk of not renewing coverage even if they remain eligible (due to misinformation or assumptions about eligibility).
• Many state applications do not ask for country of origin. MCOs may support identifying Cuban and Haitian enrollees through outreach to members and notifying the state when the country of origin supports continued enrollment.

• Provider taxes are an important mechanism that states use to fund the state’s share of Medicaid expenses. The U.S. Government Accountability Office (GAO) has estimated that provider taxes accounted for approximately 17% of the non-federal share of total Medicaid payments in state fiscal year (FY) 2018, though the share varies by state.
• H.R. 1 sets a freeze on current provider taxes (as of date of enactment) and requires future reductions on certain provider taxes in states that have expanded Medicaid under the Affordable Care Act (ACA) Medicaid expansion. The changes are applicable for fiscal years beginning on or after October 1, 2026.
  • For FY 2026 and FY 2027, all states can keep their current provider tax rates in place (assuming the tax amount is within the current “safe harbor” threshold of 6% or less of net patient revenue). However, taxes are frozen in place: Whatever taxes were in place as of the date of enactment (July 4, 2025) are permissible and no state may increase taxes or tax any new health care provider types.
  • For Medicaid expansion states, starting in FY 2028 (October 1, 2027) the provider tax threshold will be reduced overtime down to 3.5% (by FY 2032) for all tax types except nursing home and institutional intermediate care facilities.
  • For nonexpansion states, whatever tax rate is in place today is considered the new “safe harbor” threshold and the state cannot tax above that rate (if one state has hospital taxes in place at 4.0%, that’s the new threshold for that state; another state may be at 5.0%, and that state will have the benefit of being at a higher threshold).

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Freezing provider taxes at 2025 rates hamstrings states’ ability to raise new Medicaid revenues to respond to state needs. The Congressional Budget Office (CBO) estimates significant reductions in Medicaid dollars flowing to states as a result — a $191.1 billion cut to state Medicaid budgets over 10 years (2025 to 2034). These savings result both from the progressively lower safe harbor thresholds and from states being unable to introduce new provider taxes over time to help close Medicaid budget shortfalls or finance improvements to Medicaid programs and services.
  • CBO estimates that in 2026 reduced state Medicaid budgets due to this provision will cause 200,000 people to become uninsured. Overtime, CBO projects the uninsured to grow, with 1.1 million more people expected to become uninsured by 2034.
  • Note: A second provider tax provision in H.R. 1 (§ 71117) sets restrictions on Section 1115 Demonstration Waivers related to provider taxes. Depending on how states have structured their waivers related to provider taxes, they may have to significantly restructure them to meet statutory requirements. CBO anticipates at least some states will not be able to restructure their taxes and will have to drop them, resulting cuts to state Medicaid budgets as a result: $34.6 billion over 10 years (2025 to 2034).
• Medicaid expansion states are severely impacted by this change. Expansion states that tax at a lower level to begin with will not see a large change in funding, but many expansion states currently have hospital, MCO and ambulance taxes in place above 5%, and these will reduce over time down to 3.5%. The exemption for nursing home and intermediate care facility taxes is significant as many states have these types of taxes in place (as written, the law would allow states to keep those taxes at current rates going forward).
• While the impact is less severe for nonexpansion states, provider taxes are still a critical funding stream supporting Medicaid and the entire state budget in all nonexpansion states. Nonexpansion states finance a larger portion of their Medicaid program through provider taxes and will not have the future flexibility to increase or expand this tax base going forward.
• With provider tax cuts, states will have less revenue available to fund their Medicaid programs, potentially leading to lower capitation rates for MCOs and reduced payments to providers. If capitation rates are set too low, they may create incentives to restrict services, for example, through use of preauthorization policies or limits on benefits.

Potential State Policy Considerations

With sharply reduced provider taxes on the horizon, state Medicaid programs may be looking at curtailing benefits, eligibility or provider payment in response to funding gaps. However, these cuts do not happen all at once (Medicaid expansion states have until FY 2028 before provider tax reductions start), so states have time to plan. Amid reduced state Medicaid funding may lie an opportunity to rethink how health care is financed and delivered. Where states have been slow to adopt innovation, the challenging new Medicaid funding environment may open discussion among stakeholders regarding options for testing and implementing new models of health care delivery that improve care quality while reducing costs.

• Stakeholder participation in Medicaid MCO rate setting is essential to ensure that rates are fair, adequate and reflect the needs of both enrollees and providers.
• Advocates should uplift promising financing and care delivery models that may help their state retain Medicaid services while addressing cost (for example, pursuing models described here, here and here).
• As of July 9, 2027, states must comply with network adequacy standards as described in Managed Care Rule (§ 438.68(b)(1)). Advocates can use this forthcoming rule change to leverage alternative payment models. State directed payments (SDPs) may be an appropriate lever to nudge MCOs to increase provider reimbursement or implement value-based care approaches that serve to expand MCO provider networks. States can also set a goal for primary care investment as a percentage of total health spending for commercial insurers. Efforts like these can ensure higher payment to primary care and safety-net providers even in a time of reduced Medicaid funding.

Medicaid funding cuts caused by new limitations on provider taxes may pressure states to scale back or eliminate optional Medicaid benefits (such as long-term services and supports [LTSS], behavioral health services, dental care and postpartum maternal health coverage). Benefit cuts ultimately reduce the scope of Medicaid services and decrease quality and patient outcomes, and they can lead to increased expenses elsewhere in the system.

• Proactive collaboration between MCOs, states and consumer stakeholders (including the Medicaid Advisory Committee [MAC]/ Beneficiary Advisory Council [BAC]) will be critical in identifying which optional benefits should be prioritized amid constrained funding and how innovative service delivery can help mitigate benefit cuts. Advocates should engage in discussions wherever possible and provide the evidence base for retaining optional benefits that bring high value critical services to Medicaid beneficiaries in the state.
• Medicaid funding challenges may bring opportunity to focus on quality and preventive care programs by expanding coverage for evidence-based services provided in non-traditional settings (for example, telehealth services or services in community-based locations) and provided by non-traditional provider types (for example, community health workers). Advocates should determine where barriers exist (for example state laws/policies that limit Medicaid reimbursement for community health workers) and engage with lawmakers to ensure that MCO enrollees have access to a robust set of evidence-based and cost-effective services outside traditional settings (where appropriate).
• Advocates should pay close attention to any state efforts to pursue Medicaid Section 1115 Demonstration Waivers to adjust Medicaid coverage and ensure that states do not use this mechanism to reduce access to care.

The Managed Care Final Rule and Medicaid Access Final Rule advance a number of priorities critical to the discussion of optional Medicaid benefits.

• As states determine Medicaid coverage priorities, advocates must be aware of the ongoing changes under the Managed Care and Medicaid Access Rules and ensure that states still implement these important improvements to state systems and to managed care (for example, provisions related to improving home- and community-based services and enhancing MCO provider networks).
• The 2024 Medicaid Managed Care Rule allows for a broader definition of what is allowable under “in lieu of services” (ILOS) (those services offered by MCOs as a substitute for traditional state Medicaid plan services). The broader definition allows states to make investments in services that address prevention or health-related social needs that go beyond the traditional state plan services (for example, medically tailored meals for people with diabetes, which are expected to reduce the future need for diabetes-related hospital use). Advocates can uplift evidence-based and cost-effective services that could qualify as ILOS and encourage states to include these services in MCO contracts.

• The Medicaid Access Final Rule requires states to use and report on the HCBS Quality Measure Set, previously a voluntary option for states, and sets a formal process for measurement development, including input from a variety of stakeholders.
• The Secretary of the U.S. Department of Health and Human Services (HHS) must update the HCBS Quality Measure Set no later than December 31, 2026 (and no more frequently than every other year thereafter). States must comply with the HCBS Quality Measure Set reporting requirements by July 9, 2028. States will be required to report every other year on all mandatory measures and are required to establish reporting targets.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• This improves transparency of HCBS programs and provides another lever to ensure that state Medicaid agencies and Medicaid MCOs comply with regulations related to HCBS.

Potential State Policy Considerations

States will need to update MCO contracts to reflect the HCBS Quality Measure Set to ensure that MCOs begin reporting no later than the contract period following July 9, 2028. States will need to decide what, if any, additional documentation Medicaid MCOs must provide to ensure accurate measure set calculations. Additionally, states will need to ensure interoperability of data systems between MCOs and the state Medicaid agencies so that quality measure information can seamlessly transfer for utilization. States will also need to ensure that their data systems are able to take in relevant information to accurately inform reporting requirements.

• HCBS are considered an “optional” Medicaid benefit. As states look to address fiscal shortfalls in the wake of Medicaid cuts brought by H.R. 1, they may be looking to decrease benefits provided to Medicaid beneficiaries. Information from the HCBS Quality Measure Set may serve a critical role in defending the need for state Medicaid programs to continue to offer these services; such information may help document what types of services are provided and their value to Medicaid beneficiaries (both in general and among beneficiaries who receive Medicaid through managed care).
• The rule requires the U.S. Department of Health and Human Services (HHS) Secretary to update the HCBS Quality Measure Set through a public process. Advocates can engage in the public comment process as an opportunity to identify measures that should be included or removed. In addition, as the rule allows the Secretary to stratify and phase in various quality measures, advocates may want to offer comment on which measures should be stratified and how to structure phase-in periods. Advocates can leverage local, state and national coalitions to ensure their priorities are known through the public comment process.
• Advocates can ensure quality metrics are publicly posted and that state Medicaid agencies adhere to their chosen reporting targets and quality improvement strategies.

• The Medicaid Eligibility and Enrollment Final Rule (Medicaid E&E Rule), as finalized in April 2024, eliminates waiting periods for children enrolling in CHIP and CHIP premium assistance programs. Prior to this rule change, states were allowed to impose a CHIP waiting period for up to 90 days. The rule prohibited states from adopting a new waiting period as of June 2024, but states with waiting periods in place had until June 2025 to come into compliance.
• In addition, the rule phased out annual and lifetime dollar limits on CHIP benefits by June 2025. Non-monetary limits on benefits (such as limitations on the number of physical therapy visits) are still allowable.

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• Eliminating waiting periods allows children who qualify for CHIP to have access to healthcare immediately, rather than experiencing gaps in coverage that put families at financial risk. This rule change eases coverage barriers in ways that should be welcome to MCOs covering CHIP-eligible populations.
• While Medicaid has never allowed annual or lifetime limits, prior to this rule change, separate CHIP programs (where CHIP-eligible children are not enrolled in the state’s Medicaid program) have been permitted to impose annual or lifetime dollar limits. This has largely been done through limits to specific CHIP benefits (most often dental and mental health care). This is an important change for CHIP enrollees, as aggregate annual and lifetime dollar limits can act as barriers to care, which may delay treatment and exacerbate medical conditions.

Potential State Policy Considerations

States are facing new challenges to Medicaid eligibility and enrollment due to H.R. 1. In particular, the new law places a moratorium on implementation of other aspects of the Medicaid E&E Rule (on all other sections of the rule not already implemented by H.R. 1’s passage in July 2025, see § 71102. While implementation of the above CHIP-related provisions is not impacted by H.R. 1, there was much back-and-forth in Congress about which portions of the rule would be included under the moratorium set by that bill. Subsequently, there may be lingering confusion in states about the status of the rule’s implementation requirements.

• Advocates can monitor states to ensure they follow through with these requirements, particularly in the several states that have historically utilized CHIP waiting periods or that have historically placed annual or lifetime limits on certain CHIP benefits.

As most states use MCOs to deliver CHIP-covered services, managed care plans may have to change their processes to ensure CHIP enrollees do not face waiting periods and annual/lifetime limits. Depending on the MCO, limiting CHIP benefits may have been done through prior authorization practices. In a separate rule — the Interoperability and Prior Authorization Final Rule — the Centers for Medicare & Medicaid Services (CMS) outlines new transparency and reporting requirements for MCOs to follow regarding their prior authorization practices.

• Advocates can urge states to monitor MCOs to ensure they follow through with new CHIP requirements and that prior authorization practices reflect this change.
• Advocates can monitor the MCO procurement process to ensure states include contracting language that underscores the prohibition on CHIP waiting periods and annual/lifetime limits.

• Delays implementation of numerous sections of the Medicaid Eligibility and Enrollment Final Rule (Medicaid E&E Rule) through September 30, 2034, including sections that: require eligibility renewals for nonmodified Adjusted Gross Income (non-MAGI) groups once (and only once) every 12 months; disallow in-person interviews for non-MAGI enrollees at renewal; allow for ex parte processes and require states to use available data to establish eligibility for non-MAGI; require states to send out pre-populated renewal forms if states cannot determine eligibility through data-matching (and allow at least 30 days for individuals to respond); require states to accept renewal via online, mail, phone or in-person; require states to reconsider eligibility without requiring a new application after coverage termination if individual provides information within 90 days; require timely decisions (90 days for applicants who apply for Medicaid based on disability; 45 days for all other applicants).

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• The goal of the Medicaid E&E Rule, released in April 2024, was to keep people enrolled in Medicaid by reducing paperwork burden and enrollment hurdles. Delaying the rule means fewer adults and children will have access to Medicaid, even if they remain eligible: The Congressional Budget Office estimates this moratorium will cut $55.9 billion in federal spending over 10 years (2025 to 2034) due to reduced enrollment of an estimated 400,000 individuals per year.
• For both Medicaid agencies and MCOs, the moratoria on resource-intensive technical changes may temporarily reduce administrative burden at the outset. However, delaying implementation of these provisions will result in disenrollments and increased churn — both of which are administrative expenses for states and MCOs.
• In addition, the moratorium may have an impact on risk pools: People more likely to jump through eligibility hoops to remain on Medicaid may be those most in need of expensive health care services (e.g., people with chronic diseases). In addition, disruptions in care caused by disenrollments can lead to higher costs for patients down the road when they reenroll.

Potential State Policy Considerations

States and Medicaid managed care plans still can do most of the things called for in the Medicaid E&E Rule; all H.R. 1 does is remove the federal requirement that these enrollment/eligibility practices must be put into place. H.R. 1 does not prevent states/plans from doing more to ease enrollment hurdles.

• Advocates should urge states to continue to implement the changes laid out in the Medicaid E&E rule. Originally, the rule required most all improvements to Medicaid enrollment to be in place by June 2027, so some states may have already started the process of implementing these features. Those states lawfully can, and should, continue on that path.
• Advocates should ensure that states implement those portions of the Medicaid E&E Rule that are still intact (e.g., prohibition against lifetime/annual CHIP limits, elimination of CHIP waiting periods, prohibition on lockout periods under CHIP).

States have recently completed the unwinding of COVID-19 era continuous enrollment provisions, with many lessons learned about enrollment and impact on churn, procedural disenrollments, member acuity, etc. Medicaid enrollment continues to decline post-unwinding with many people falling through the cracks due to procedural issues. MCOs have every incentive to reverse this trend to retain members and balance risk pools. States should have every incentive to prevent more residents from becoming uninsured (which adds to states costs to prop up hospitals and other safety-net providers who see uninsured patients).

• Advocates can remind states of important lessons learned from the unwinding and help states determine where they need to improve enrollment processes and where they may want to take up aspects of the Medicaid E&E Rule despite H.R. 1’s moratorium.
• Advocates can push for changes in state policy to better enable MCOs to assist with enrollment. CMS has issued specific guidance allowing states to permit MCOs to update enrollee contact information and facilitate continued enrollment, but states can take this further. For example, states can allow plans to submit applications and track eligibility determinations on behalf of the individual. States can also update enrollment transaction fields to include the disenrollment reason (e.g., procedural denial, ineligible due to income change, etc.) and provide plans with monthly termination files, allowing plans to conduct outreach to individuals terminated for procedural reasons.
• Advocates can encourage states to use the MCO contracting process to advance enrollment. For example, requirements for MCOs to identify and reach out to enrollees who are at high risk for not renewing coverage in a timely fashion (especially cases where parents lose coverage but children remain eligible) or requirements to partner with community organizations to reach vulnerable populations.

States will soon be required to implement new community engagement requirements for Medicaid expansion populations (see H.R. 1 § 71119) and, within that, are being asked to put in place many of the same components of the Medicaid E&E Rule (data matching, outreach, noncompliance procedures). In addition, other provisions of H.R. 1 require states to verify enrollee address information (§ 71103) and conduct more frequent eligibility determinations for Medicaid expansion enrollees (§ 71107).

• As states and MCOs design IT/enrollment systems for determining expansion population eligibility, advocates can push state leaders to extend any enrollment simplifications to other Medicaid populations.
• States will receive H.R. 1 implementation funding for IT/enrollment upgrades; advocates can push states to deploy that funding in ways that improve enrollment for all Medicaid beneficiaries.

• The goal of the Streamlining Medicaid; Medicare Savings Program Eligibility Determination and Enrollment (MSP Rule) was to make it easier for eligible seniors to enroll in Medicare Savings Programs (MSPs), also known as Medicare Buy-In Programs or Medicare Premium Payment Programs. These are programs run by state Medicaid agencies that help low-income Medicare enrollees pay their Medicare premiums and cost-sharing requirements.
• H.R. 1 delays implementation through September 30, 2034 of nearly all of the MSP Rule’s provisions, including sections of the rule that: require states to enroll individuals into an MSP using Medicare Part D low-income subsidy (LIS) data; encourage states to adopt LIS definitions for defining financial eligibility in an MSP; and require states to accept member (or family) attestation for assessing certain MSP eligibility criteria (including income and asset tests).

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• Delaying portions of this rule will make it much more difficult for vulnerable seniors to receive the help they need to manage rising Medicare costs. As a result, fewer seniors are expected to enroll in MSPs.
• MSPs are particularly important for dual eligible beneficiaries (people eligible for both Medicare and Medicaid), as nearly all dual eligibles are also enrolled in a MSP.

Potential State Policy Considerations

Despite the moratorium, states can do most of the things called for in the MSP rule; all H.R. 1 does is remove the federal requirement that these enrollment/eligibility practices be put into place. H.R. 1 does not prevent states from doing more to ease MSP enrollment hurdles.

• Advocates can urge states to continue to implement the MSP rule, for example, by linking MSP enrollment to LIS data which could increase MSP enrollment by 63%. The MSP rule encourages states to adopt income and asset requirements that are at least as permissive as LIS requirements, but states can go further, for example to eliminate counting assets when determining MSP eligibility.
• Other aspects of the MSP Rule are still intact, including the requirement that states automatically enroll Medicare beneficiaries with Supplemental Security Income (SSI) into MSPs. Advocates can ensure that states properly implement these portions of the rule.
• As states and MCOs design IT/enrollment systems that meet other aspects of H.R. 1 requirements (for example, to track new community engagement requirements), advocates can push for inclusion of elements of the MSP Rule into these systems as they develop (for example, to ensure automatic MSP enrollment of Medicare beneficiaries on SSI).

As states often rely on managed care plans to coordinate Medicare and Medicaid benefits for dual eligibles, MCOs may be the entity best situated to help eligible enrollees apply for MSPs to cover their Medicare costs. This may become increasingly important given the other moratorium H.R. 1 sets on the Medicaid Eligibility and Enrollment Final Rule (Medicaid E&E Rule) (H.R. 1 § 71102). Where the Medicaid E&E Rule moratorium makes it more difficult for people to enroll in and maintain Medicaid coverage, it may impact Medicaid enrollment for people on Medicare who are Medicaid-eligible. Along with assisting in MSP enrollment, MCOs have a role in facilitating Medicaid eligibility for dual eligibles as well.

• Advocates can urge states to require MCOs to help eligible beneficiaries maintain Medicaid enrollment and enroll in MSPs. For example, requirements for MCOs to identify and reach out to dual eligible enrollees to ensure they remain enrolled in Medicaid and apply for MSPs if they meet eligibility requirements. States can also require MCOs to partner with community organizations to reach dual eligible populations.
• Advocates can push for changes in state policy to better enable MCOs to assist with MSP enrollment. For example, states can allow plans to submit applications and track eligibility determinations on behalf of the individual.

• The Nursing Facility Rule (Medicare and Medicaid Programs; Minimum Staffing Standards for Long-Term Care Facilities and Medicaid Institutional Payment Transparency Reporting), published in April 2024, established, for the first time, national minimum staffing requirements for nursing homes. The regulation was aimed at addressing well-documented concerns about substandard nursing facility conditions, inadequate staffing levels and poor patient care. H.R. 1 delays implementation of the full rule through September 30, 2034.
• For certain portions of the rule, the law blocks implementation entirely (no sunset date). These include requirements for facilities to meet certain minimum staffing standards; the rule had required that nursing facilities meet a minimum of 3.48 hours per resident day (HPRD), with 0.55 HPRD for registered nurses and 2.45 HPRD for nurse aides. As of May 2024, fewer than one in five (19%) of nursing facilities met all three staffing minimums required in the final rule, with significant variation across states (where states had existing state staffing rules, facilities were better positioned to meet the rule’s requirements).

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• By delaying and rescinding portions of the staffing rule, the Congressional Budget Office estimates that $23.1 billion fewer Medicaid dollars will go toward supporting nursing home care at the same time the U.S. population aged 65 and older is growing rapidly.
• While many nursing facilities may welcome this moratorium as relieving their facility from having to hire and train additional staff (especially where nursing shortages make this difficult), this is a blow for improving patient care quality.

Potential State Policy Considerations

Medicaid is the primary payer for more than 6 in 10 nursing facility residents, but MCOs contract with nursing facilities to make nearly one-third of those Medicaid payments. Depending on the state, MCOs are a major stakeholder to drive nursing facility care quality.

• Advocates can encourage states to use the MCO contracting process as a lever to improve nursing home care quality. Through the procurement process, states can require MCOs to participate and invest in quality improvement or management strategies aimed at improving care in nursing homes.

States should have the incentive to do what they can to provide adequate payment rates for nursing care to help ease staffing shortages and ensure that nursing facilities can at least meet state-level staffing standards (if not reach staffing levels envisioned by the Nursing Facility Rule). While reduced state Medicaid funding caused by H.R. 1 and the law’s new limitations on state directed payments (SDPs) (§ 71116) may make this difficult, states are still able to direct MCOs to pay higher reimbursement to nursing facilities to address staffing shortages can care quality.

• Where states do not have SDPs in place for nursing homes up to Medicare rates, advocates can encourage state policymakers to set SDPs at the Medicare rate to help address nursing home staffing shortages and enhance patient care. MCOs should require facilities to demonstrate adequate facility staffing to maintain contracts and their reimbursement rates should reflect staffing levels.
• States can also pursue value-based purchasing models through SDPs as a way of leveraging the managed care market to enhance payment and care quality in nursing facilities.

The changes to retroactive coverage under H.R. 1 (§ 71112) have a concerning impact on nursing home care as well. Retroactive coverage protects residents and families from substantial nursing home expenses incurred prior to application and incentivizes facilities to accept “Medicaid pending” residents with the expectation that outstanding bills will be paid when a resident is approved for benefits. When retroactive eligibility is reduced from 90 to 30 days (Medicaid expansion enrollees) or to 60 days (all other Medicaid enrollees), nursing facilities may have to reject residents who cannot (or whose families cannot) pay for care while they go through the application process.

• MCOs can address changes in retroactive coverage by prioritizing proactive enrollment and increasing communication with members and providers. Advocates can push for changes in state policy to better enable MCOs to assist with enrollment (see § 71102).

• Federal law already prohibits federal Medicaid dollars from covering abortion services, but H.R. 1 prohibits all Medicaid reimbursement to certain providers that offer abortion services, even if many of the services rendered are otherwise covered under the Medicaid program (such as contraceptive services, cancer screening, testing and treatment for sexually transmitted infections, and prenatal and postpartum care for mothers). The payment ban is effective for one year (through July 4, 2026).
• This ban is applicable to non-profit, essential community providers primarily engaged in family planning and reproductive health and related medical care that (1) provide abortions in circumstances beyond rape, incest or lifesaving, and (2) received more than $800,000 in Medicaid expenditures in 2024.

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• This ban will impact access to reproductive health care nationwide. Health clinics that see a large portion of Medicaid-enrolled patients (for example, Planned Parenthood clinics) will either have to cease offering abortion services while the ban is in effect (even in states where abortion is legal) or else forgo accepting Medicaid. Where clinics refuse Medicaid payment, Medicaid patients would not be able to use their coverage for birth control, cancer screenings, sexually transmitted infection (STI) testing, and other preventive care. Planned Parenthood has estimated the ban will force the closure of 200 clinics across the country.
• Three quarters of women of reproductive age in Medicaid are enrolled in managed care. Managed care plans rely on family planning clinics to provide a wide range of reproductive and comprehensive health care to their members, and many MCOs contract with free-standing family planning providers, like Planned Parenthood, to provide family planning services to their enrollees.

Potential State Policy Considerations

The closure of Planned Parenthood or similar clinics significantly impacts access to care and the adequacy of MCO provider networks at a time when MCO plans already have challenges assuring their members have access to reproductive health services.

• MCOs may need to contract with new reproductive health providers to meet network adequacy standards (both those in place today and forthcoming under new managed care rules). Given the additional challenges H.R. 1 places on access to reproductive health care, it may be beneficial for states to pursue value-based payment options that attract and reward strong reproductive health care networks. Advocates should engage with state leaders in designing any new payment options that impact reproductive health care.
• Where states do not have state directed payments (SDPs) in place for reproductive health services up to Medicare rates, advocates can encourage state policymakers to set SDPs at the Medicare rate to help encourage new providers to contract with MCOs to provide reproductive health care.

H.R. 1 bans Medicaid funding to certain health clinics, but it does not take away freedom of choice protection under Medicaid that allows MCO enrollees to obtain family planning services and supplies from out-of-network providers of their choice without a referral. As clinics are at risk of closure, seeking reproductive health care out of network may be more important than ever before.

• State MCO contracts do not always adequately clarify which services are eligible for freedom of choice protection. Advocates can urge states to have more detailed specifications in contracts to ensure enrollees have access to a wide array of reproductive health services out of network (including postpartum services, STI treatment and testing and cancer screening).

• Currently Medicaid managed care organizations (MCOs) are required to post provider directories on their websites, to make them available to enrollees in paper form, and to update them regularly. At minimum, the directories must provide information for the following types of providers: physicians, hospitals, pharmacies and behavioral health providers.
• To make MCO provider directories more useful to enrollees, the Managed Care Final Rule requires each MCO to make its directory available in searchable electronic format. In addition, the directory must distinguish mental health and substance use disorder providers. After the rule was released, the Centers for Medicare & Medicaid Services (CMS) issued further guidance outlining the specific information to be included in MCO provider directories: provider’s cultural and linguistic capabilities, including languages; whether the provider is accepting new Medicaid patients; which accommodations the provider facility has for patients with physical disabilities; and whether the provider offers covered services via telehealth.
• To ensure the accuracy of MCO provider directories, the rule provides for secret shopper surveys. In addition, state Medicaid agencies are required to post provider directories on their websites beginning July 1, 2026.

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• Patients rely on provider directories to make informed choices when selecting health plans or locating in-network providers. However, studies suggest widespread inaccuracies in provider directories and concerns over phantom provider networks where providers listed as participating in the network do not actually provide care to enrollees (for example, providers that are clinically inactive or have closed their panels to new patients). Such networks may satisfy network adequacy requirements on paper but not in practice.
• This change is intended to ensure that MCO enrollees have access to a robust provider network and a user-friendly system that allows them to find providers that address their health needs.

Potential State Policy Considerations

The many restrictions H.R. 1 sets on Medicaid may impact provider networks. For example, the one-year ban on Medicaid reimbursement to clinics that provide abortion services (H.R. 1 § 71113) may mean that reproductive health providers in current MCO networks can no longer see Medicaid patients in their clinics. Reduced payments to providers due to state directed payment restrictions (H.R. 1 § 71116) may cause some providers to stop accepting Medicaid patients, again impacting provider networks. Medicaid budget holes may cause rural hospitals or safety-net clinics to cut services or close altogether, reducing access to services for MCO plan enrollees in these regions.

• States are not required to conduct secret shopper surveys under the Managed Care Rule until 2028. In the meantime, advocates can conduct their own secret shopper surveys of managed care plans to determine how well their provider directories match true access to providers and provide feedback to their state. Advocates with limited resources can focus their surveys on certain provider types (for example, reproductive health) or certain regions (for example, rural areas that may be hit hard by the loss of Medicaid funding caused by H.R. 1).

• Medicaid has long-standing requirements for states to operate Medical Care Advisory Committees (MCACs), which are stakeholder advisory committees that include individuals enrolled in Medicaid and provide the state Medicaid agency with recommendations on how to improve its program. The Medicaid Access Final Rule renames the MCAC to the Medicaid Advisory Committee (MAC) and sets numerous new standards for MACs.
• The rule creates a new parallel entity, the Beneficiary Advisory Council (BAC), which will also provide direct advice to the state Medicaid agency. BAC members can be individuals enrolled in Medicaid (including youth), as well as their families and caregivers.
• Once fully implemented, the rule will require BAC members to comprise at least 25 percent of MAC membership. MAC membership must also include at least one of each: a consumer advocacy organization, a provider group, a managed care entity and one other relevant state agency (the state agency is in a non-voting role).
• MACs and BACs must meet at least quarterly, with at least two meetings open to the public each year. MACs must publicly publish an annual report, which details recommendations made to the state as well as state responses. States are required to provide financial and research/informational resources to support MAC/BAC members.

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• BACs established by the rule represent an enormous opportunity to leverage the experiences of people enrolled in Medicaid to improve state Medicaid programs. In most states, the former MCACs have not lived up to their potential and state Medicaid offices have not always actively engaged beneficiaries and other stakeholders in decision-making.

Potential State Policy Considerations

The new regulations allow the MAC and BAC to advise on both health and medical services (as before), as well as additional areas, with a minimum of the following topics: changes to services; care coordination; service quality; eligibility, enrollment and renewal processes; beneficiary and provider communications; and cultural competency issues. Given sweeping changes brought by H.R. 1, engagement with the new BACs and MACs is incredibly important.

• Advocates should attend all public meetings and, where possible, join the MAC.
• Unfortunately, the Medicaid Access Rule limits BAC membership to a one-year term. This means states will be consistently looking to fill BAC positions. This is an opportunity for state-based organizations to help states identify leaders with lived experience and a range of perspectives (e.g., balance of rural and urban participants, non-native English speakers, parents of young children, representation of members with disabilities). In addition, it may be important to bring in perspectives of groups heavily impacted by H.R. 1; for example, people subject to the community engagement requirements or who would qualify for an exception (H.R. 1 § 71119).
• New BAC members may have little background in Medicaid policy; advocates can help BAC members learn about key Medicaid topics impacting their state so participants can have meaningful input. Creating easy-to-comprehend explainers on H.R. 1 will also be important so BAC participants can understand the new law and its impacts.
• The MAC and BAC will advise states on a range of important issues, including eligibility, enrollment and renewal processes. As H.R. 1 contains multiple provisions that impact eligibility and enrollment, MAC/BAC leadership is critical to ensuring that states implement changes required by the law in a manner that minimizes coverage loss. Advocates can and should advise the MAC/BAC (and the state Medicaid department) on how enrollment hurdles established under the new law impact various populations (for example, immigrants, seasonal workers, SNAP recipients, people with disabilities who do not receive Supplemental Security Income [SSI], people with substance use disorders or mental health conditions).

• Under prior regulations, each state contracting with Medicaid managed care organizations (MCOs) was required to implement a written quality strategy for assessing and improving the quality of health care services furnished by MCOs and setting forth measurable goals and targets for quality improvement and network adequacy.
• The Managed Care Final Rule increases opportunities for the public (e.g., health care providers and consumer advocates) to provide input on the state’s managed care quality strategy. Regulations require states to obtain input from the Medicaid Advisory Committee (MAC), Beneficiary Advisory Council (BAC), beneficiaries, and other key stakeholders in the development or revision of the quality strategy before submission to the Centers for Medicare & Medicaid Services (CMS). The quality strategy must be made available for public comment at the three-year renewal mark, regardless of whether the state intends to make significant changes.

Impact (on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs)

• This rule change creates an important opportunity for the public to weigh in on their state’s strategy for improving care quality within the managed care system.

Potential State Policy Considerations

State strategies concerning the managed care system have even greater importance considering the funding cuts, coverage losses and operational challenges brought by H.R. 1. The current and future impacts of H.R. 1 need to be considered within the state’s managed care quality strategy.

• Advocates can weigh in on a state’s managed care quality strategy by participating in official public comment periods, joining the MAC/BAC, and engaging in direct communication with Medicaid agencies. Advocates can also use the managed care procurement process to influence the quality metrics and performance targets stated within contractual obligations.
• Advocates will need data to illustrate systematic problems that can be addressed in the managed care quality strategy (for example, poor network adequacy or barriers to accessing care). Advocates can mine External Quality Review (EQR) and Healthcare Effectiveness Data and Information Set (HEDIS) measures reports for evaluations of MCO performance. In addition, as information from individuals affected by the system can highlight critical issues, advocates can collect documentation of member complaints and grievances. Member complaints may be especially helpful to document challenges brought by H.R. 1 (for example, impacts on access to providers) and advocates can use this information to highlight how their state can use the tool of quality improvement to mitigate harms.
• States often incorporate sanctions into their Medicaid managed care quality strategies by imposing financial penalties, corrective action plans or other enforcement actions on MCOs that fail to meet quality performance standards. Sanctions aim to incentivize future compliance and better service delivery. However, not all types of sanctions are effective and states vary widely in how often they impose sanctions and for what causes. Advocates can urge states to use sanctions more effectively as an accountability tool to have more direct impact on beneficiaries’ health and well-being.

• The medical loss ratio (MLR) is a metric that measures the percentage of health insurance premiums that are spent on medical services and quality improvement activities (versus administrative expenses and profits). A higher MLR indicates that a larger proportion of premiums are being spent on medical care.
• The Managed Care Final Rule sets a requirement for states to submit more detailed MLR information for each plan in their state to the Centers for Medicare & Medicaid Services (CMS), rather than just an annual summary of MLR. These reporting requirements are already in effect (as of September 9, 2024), including the requirement that states must include state directed payment (SDP) spending data in MLR reporting to help CMS better understand how states use SDPs to increase payments to providers who contract with managed care organizations (MCOs).
• For contract rating periods on or after July 9, 2025, new requirements go into effect for how provider incentive and bonus payments are counted in the MLR calculation. To be includable within the MLR numerator (in other words, to count as a medical service/quality improvement activity), provider bonuses and incentive arrangement payments are required to be tied to clearly defined, objectively measurable, and well-documented clinical standards.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• The reason for this rule change was to address the concern that MCOs artificially inflate provider payments (through incentives/bonuses) without tying these to quality care as a means of manipulating MLR percentages to avoid paying remittances (if applicable) for non-compliance with state’s minimum MLR requirements. If this rule change is implemented well, beneficiaries will see higher quality care as MCO plans will have to construct new incentive contracts with providers in their networks and tie them to appropriate quality improvement or quantitative clinical metrics.

Potential State Policy Considerations

To effectuate this rule change, state managed care plan contracts need to outline the documentation required to be maintained by the managed care plan, require that the managed care plan make the payment contracts and supporting documentation available to the state and explicitly prohibit attestations from network provider(s) as suitable documentation.

• Advocates can review state contracts with MCOs, both current and future, to ensure they require appropriate documentation of provider incentive arrangements. Advocates can also encourage states to use other oversight tools to ensure compliance (quality measures reporting, external quality reviews, etc.).

H.R. 1 sets new SDP limitations (see H.R. 1 § 71116) to effectively cap SDPs at the Medicare rate (which is often much lower than average commercial rates). However, H.R. 1 does not prevent states from pursuing SDP arrangements in general, and SDPs related to value-based purchasing models (e.g., pay-for-performance incentives, shared savings arrangements or other alternative payment models that tie payment to patient outcomes) or quality incentive payments (where payment is linked to various metrics such as patient satisfaction, reduced hospital readmissions or improved chronic disease management) may still be worth pursuing, particularly as these could help mitigate Medicaid cuts or other impacts from H.R. 1.

• As states and MCOs may want to explore these types of models as a means of increasing payment to high-performing providers, advocates can provide public comments on SDP preprints and work with state Medicaid agencies (and provider associations) to develop SDP arrangements that are value-based and focused on increasing access to care in underserved areas and among certain provider types (e.g., primary care and behavioral health).
• Advocates can also encourage states to contract for incentive payments linked to specific outcomes that may be important for their residents given funding cuts, coverage losses and other impacts of H.R. 1. For example, North Carolina’s medical debt relief incentive program requires participating hospitals to implement policies intended to prevent low- and middle-income residents from incurring further medical debt.
• Advocates can help their states evaluate whether using Rural Health Transformation Program dollars (see H.R. 1 § 71401) to pursue incentive payments or other alternative payment models through managed care can help address provider payment in ways that strengthen the rural health system and ensure that rural providers participate in MCO networks to enhance patient access to care.

There are other MLR reforms that states could undertake to increase the value of managed care plans offered to beneficiaries in their state. For example, not every state sets a minimum MLR for MCO plans or requires MCOs to pay remittances when they do not meet minimum MLR requirements. In addition, while CMS now requires MCOs to submit MLR data using a standardized template to ensure more accurate MLR reporting, there is no requirement for states to make MLR data public. This makes it difficult for consumers to know how MCO plans in their state spend Medicaid dollars.

• As states now need to pay more attention to how plans calculate the MLR as it relates to provider incentive arrangements, there may be new opportunities to engage with states on other aspects of MLR reform, including publication of individual plan MLR reports, minimum MLR standards and remittance requirements (or other oversight). States may also need to reexamine MLR in this new dynamic environment, where future MCO enrollment and utilization levels are uncertain and risk mitigation tools (like MLR and remittance requirements) can help states and MCOs plan for the unknown. Advocates should engage with states as decisions around MLR are being made and call to their states’ attention the need for reforms.

• H.R. 1 requires states to redetermine Medicaid eligibility every six months (rather than once a year) for individuals enrolled in the Affordable Care Act’s Medicaid expansion, starting in January 2027. However, H.R. 1 includes an exemption for people who receive Supplemental Security Income (SSI) benefits. By December 31, 2025, the Centers for Medicare & Medicaid Services (CMS) will release guidance to states to implement this change.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Requiring more frequent or more onerous Medicaid eligibility checks will force individuals off Medicaid coverage for failure to comply with burdensome paperwork requirements. The Congressional Budget Office estimates that in 2027 (the year this provision becomes effective), these new eligibility redeterminations will cause 700,000 people to become uninsured, resulting in considerable drops in federal Medicaid spending due to people falling off coverage: $62.5 billion over 10 years (2025 to 2034).
• To meet more frequent redetermination requirements (and to implement the community engagement provisions for the Medicaid expansion population – see H.R. 1 § 71119), states may need to build or procure new IT systems, overhaul operational and compliance procedures and invest in public educational campaigns. Guidance from CMS will spell out some of these requirements but will likely give flexibility to states to design their systems.

Potential State Policy Considerations

Presumably, guidance from CMS on implementing the new community engagement requirements of the law (see H.R. 1 § 71119) will also intersect here, as both provisions of H.R. 1 impact eligibility and enrollment for the Medicaid expansion population (H.R. 1 instructs that interim final rules from CMS related to community engagement must be published by June 1, 2026).

• Advocates should remain engaged as CMS releases implementing guidance on these provisions and be on the lookout for where guidance gives states flexibility or otherwise leaves key decisions up to state policymakers.
• Advocates can look for where CMS guidance implicates (or could implicate) the managed care system in their state, as MCOs are a key stakeholder that can and should assist with redeterminations.
• Advocates can engage in public forums as states plan and design new enrollment systems in light of CMS guidance and should highlight for state policymakers where state MCO contracting or other oversight mechanisms are needed to ensure MCOs participate in new enrollment systems in ways that minimize coverage loss.

• States use state directed payments (SDPs) to require Medicaid managed care organizations (MCOs) to increase provider rates (in general or for specific provider types) or to carry out other objectives to improve care quality for Medicaid beneficiaries. Prior to H.R. 1, SDPs could be set up to direct MCOs to pay providers at rates comparable to those paid by commercial insurance companies (“average commercial rate” or ACR). H.R. 1 sets a limitation on SDPs to the Medicare rate:
  • Limitations on New SDPs: H.R. 1 limits the level of all new SDPs to 100% of Medicare rate (for states that have expanded Medicaid) and 110% of Medicare rate (for non-expansion states).
  • Reductions on Existing SDPs: Allows certain existing SDPs to remain in place under a “grandfathering” clause (even if they are above the applicable Medicare rate) but starting with the rating period on or after January 1, 2028, reduces existing SDPs by 10 percentage points per year until they reach 100% Medicare rate (expansion states) or 110% Medicare rate (non-expansion states). Whatever SDPs were in place (had “written prior approval” by U.S. Department of Health and Human Services) as of May 1, 2025, (all SDPs except those related to rural hospital payments) and July 4, 2025 (SDPs for rural hospitals) are eligible under the grandfathering clause. Otherwise, SDPs put in place beyond these dates are considered “new” and subject to the new limitations, as above. The Centers for Medicare & Medicaid Services (CMS) released initial guidance on September 9, 2025, describing which SDPs will meet the grandfathering clause.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• Limiting SDPs to Medicare rates significantly reduces payment rates to Medicaid providers (commercial rates are often 1.5 to 3 times higher than Medicare rates). The Congressional Budget Office projects this provision will result in significant savings to the federal government of $149.4 billion over 10 years (2025 to 2034); these savings come as a direct result of reduced payments to Medicaid providers.
• The value of existing SDPs will erode quickly, with the gap between payments and costs growing each year.
• SDP limitations greatly confine states’ ability to direct higher reimbursement for rural hospitals and clinics and other safety-net providers, drastically reducing the payment rates that have been essential to keep provider doors open and serving Medicaid patients and the wider community. While this policy will affect all providers, it hits hospitals, pediatric providers and rural providers particularly hard; these providers serve a relatively high number of Medicaid patients, and many have relatively little commercial revenue to rely on.
• Reduced provider payments may also impact provider willingness to accept Medicaid and join MCO networks. To the extent rural hospitals/safety-net providers struggle to stay open because of lower payment rates, this may further reduce MCO networks, with significant implications for patient access to care.

Potential State Policy Considerations

States should have the incentive to do what they can to ensure adequate payment rates for safety-net providers so they may stay open and serving the wider community, especially at a time of significant Medicaid funding cuts overall. Higher payments — at least up to Medicare rate, as allowable under H.R. 1 — are needed to grow the pool of providers that serve Medicaid patients and improve access to providers that limit the number of Medicaid patients they serve. Even under new limitations, states still can use the tool of SDPs to increase Medicaid provider reimbursement.

• Advocates can encourage state policymakers to put new SDPs in place to direct higher payment to Medicaid providers (up to Medicare rates in expansion states or 110% of Medicare rates in non-expansion states).
• Advocates can push for more provider types to be included within existing SDPs or proposed SDP arrangements (for example, ensure that federally qualified health centers [FQHCs] are able to receive SDPs and clarify that those services are eligible as an addition to any wrap-around payments the FQHC is due from the state or the MCO).
• Advocates can provide public comments on SDP preprints and work with state Medicaid agencies (and provider associations) to develop SDP arrangements that are value-based and focused on increasing access to care in underserved areas and among certain provider types (e.g., primary care and behavioral health).

MCOs are in the process of implementing a set of network adequacy standards from the Medicaid Managed Care rule intended to increase access to care for MCO enrollees. Reduced provider payments caused by H.R. 1’s SDP changes may impact provider willingness to accept Medicaid and join MCO networks. Consumer advocates, providers and MCOs may all be aligned here in wanting to implement higher payment rates that yield strong MCO provider networks that, in turn, help meet federal standards and patient access to care.

• Advocates may be able to leverage ongoing network adequacy requirement implementation as a way to secure MCO support for higher payment rates (at least up to Medicare rate).

• H.R. 1 establishes a $50 billion rural health fund ($10 billion per year for each fiscal year from 2026 to 2030). Half of the funds ($25 billion) will be distributed equally among states with approved applications. The Centers for Medicare & Medicaid Services (CMS) has more flexibility in determining how to distribute the second half of the funds ($25 billion) to states that apply, but the law requires CMS to consider certain factors when distributing these funds (for example, the percentage of the state population that lives in a rural census tract, the share of rural health facilities in the state as a share of all rural health facilities nationwide, etc.).
• Funding is provided to states, not directly to individual rural providers.
• States must submit a comprehensive rural health transformation plan to CMS to become eligible for funds. The application requires a detailed plan on how the state will use the funds to: improve access to services; promote technology like telehealth and remote patient monitoring; foster collaborations between rural health providers; enhance the health workforce; and increase the financial solvency of rural hospitals. CMS opened applications in September of 2025, will process applications in November 2025 and will distribute the first batch of funds at the end of the year.

Impact (on enrollees, state Medicaid agencies and/or Medicaid MCOs)

• While the rural health fund will support rural health care infrastructure and operations, the $50 billion fund represents only one-third (37%) of the estimated loss of federal Medicaid funding in rural areas, so it does not offset the Medicaid cuts caused by other provisions in H.R. 1. In addition, the rural health fund is temporary, while most other cuts to Medicaid funding are permanent.
• The rural health fund does not directly fund MCOs. However, it provides resources for states to improve health care delivery, which could influence MCO operations and access to care for Medicaid beneficiaries in rural areas.

Potential State Policy Considerations

States must use rural health funds to meet at least three of 10 “health-related activities” delineated in the statute, one of which states: “Developing projects that support innovative models of care that include value-based care arrangements and alternative payment models, as appropriate.” Should states select this as a focus area for rural health funds, this may implicate care delivery through MCOs. Other aspects of H.R. 1 may push states toward value-based payment (VBP) models — for example, state directed payment (SDP) rate limitations set by the law may encourage states to instead pursue SDPs that tie payment to performance in ways that ensure higher payment to primary care and safety-net providers even in a time of reduced Medicaid funding. As states have more limited dollars to fund these types of objectives (due to the provider tax freeze, under H.R. 1 § 71115, and other Medicaid funding cuts), states may view the rural health fund as a way of increasing payment for certain rural health providers.

• While every state will have unique needs for rural health funds, advocates can help their states evaluate whether using fund dollars to pursue VBP arrangements or alternative payment models through managed care can help address provider payment in ways that strengthen their rural health system and ensure that rural providers participate in MCO networks to enhance patient access to care.

States may use rural health transformation funds for several other “health-related activities,” including to implement technology solutions, strengthen infrastructure or recruit and retain clinical workforce talent to rural areas. MCOs can leverage these improvements to serve rural Medicaid beneficiaries.

• As state projects stemming from H.R. 1’s rural health fund evolve, advocates should be thinking about how these projects may impact access to care and services for Medicaid beneficiaries who are enrolled in managed care. It is important to ensure that MCO enrollees are able to take advantage of any improvements in rural health care services and that improvements in rural health provider infrastructure are reflected in MCO networks.

• States have ongoing requirements to contract with an approved external quality review organization (EQRO) to perform an annual external quality review (EQR) review for each contracted managed care entity. The EQR must be conducted for specific mandatory activities including validation of performance measures and improvement projects, compliance with disenrollment and enrollment requirements, and evaluation of network adequacy.
• The Managed Care Final Rule improves transparency by requiring EQR technical reports to include specific data on network adequacy, the results of outcomes data or quantitative assessments (for example, patient satisfaction data or outcomes of a performance improvement project) and assessment of MCO’s strengths and weaknesses for quality, timeliness and access to care. The EQR must also include recommendations for improving the quality of health care services and how the state can target goals and objectives in the quality strategy to improve quality and access.
• No later than December 31, 2025, states are required to maintain at least five years of EQR technical reports on their website.

Impact on enrollees, state Medicaid agencies and/or Medicaid managed care organizations (MCOs) 

• External quality review is one of the few statutory tools that the federal government and states have to engage in oversight of Medicaid managed care. A 2023 Medicaid and CHIP Payment and Access Commission (MACPAC) study found that state EQR activities did not always align with the state’s managed care quality strategy and are often focused on process measures rather than emphasizing outcomes. In addition, MACPAC found that states vary in using enforcement/oversight in light of EQR findings.
• Improving transparency in the process will help consumers and advocates better understand weaknesses in managed care and opportunities for improvement.

Potential State Policy Considerations

Given Medicaid funding cuts, coverage losses and operational challenges brought by H.R. 1, current EQR reports may provide an important baseline of quality in the managed care system. Comparison and analysis of historical EQRs with EQRs going forward can be a tool to monitor the impact of H.R. 1, along with the impact of other changes brought by the Managed Care Rule and Access Rule.

• MCOs are a key stakeholder in making sure their members have access to the information they need to properly enroll in Medicaid if they remain eligible. EQR activities that monitor compliance with enrollment requirements are particularly important in the wake of H.R. 1, as the statute has many provisions that impact eligibility and enrollment. EQR assessments may need to be adjusted in light of H.R. 1’s requirements (and any new state contracting terms) to ensure they appropriately account for new MCO responsibilities. Advocates should urge their states to pay attention to this issue.
• The Managed Care Rule contains a new provision that allows states to evaluate, as an optional part of the EQR, state directed payments (SDPs) and how these impact outcomes, quality or access to health care services. As H.R. 1 impacts SDPs and may influence how states use this tool to advance care for managed care beneficiaries, it seems important for EQRs to evaluate SDPs. Advocates can push for inclusion of this optional measure.
• Assessing network adequacy through the EQR process is important given the impact of Medicaid funding cuts and cuts to provider payment caused by H.R. 1 provisions. EQR assessments may need to be adjusted to effectively measure and track network adequacy going forward and advocates should urge their states to pay attention to this issue.
• Advocates can use data from EQRs to influence the state’s managed care quality strategy and to call for other changes to state laws or policies that are needed to improve managed care quality.