Message from the National Council for Mental Wellbeing:
Yesterday, the Centers for Medicare and Medicaid Services (CMS) released its proposed rule,
Medicaid Managed Care State Directed Payments and Medicaid Fee-for-Service Targeted Medicaid Practitioner Payments, implementing provisions of H.R.1 to establish new limits on certain Medicaid managed care State directed payments (SDP). Additional information on the proposal can be found in the
press release and
fact sheet.
In alignment with H.R.1, total SDP rates are capped at 100% of Medicare in expansion states and 110% in non-expansion states for inpatient hospital services, outpatient hospital services, nursing facility services, and qualified practitioner services at an academic medical center.
Where a Medicare benchmark is unavailable, the payment limit would be 100% of the state-plan-approved rate.
However, most significantly, the proposed rule would extend the SDP limits beyond the four original services under H.R.1 (listed above) to all SDPs, regardless of service type, in all states, Washington, D.C., and all territories beginning Jan. 1, 2029. The proposed rule would also apply similar limits to certain targeted Medicaid fee-for-service payments.
This would include behavioral health SDPs and could lead to significant disruption in 2029.
Additional provisions in the proposed rule include proposals to:
- Eliminate uniform increase SDPs as a permissible type of SDP for rating periods beginning on or after January 1, 2028, with a limited exception for grandfathered SDPs.
- Permit states to adopt minimum or maximum fee schedules that are no greater than the applicable payment rate limit without CMS prior approval for rating periods beginning on or after January 1, 2028.
- Establish new claims-level compliance and reporting requirements, including submission of provider-specific (NPI-level) data, identification of applicable benchmark rates, and documentation of controls to ensure that each individual service payment does not exceed the cap.
- Introduce new reconciliation requirements for value-based payment SDPs, requiring states to demonstrate post-period compliance with the cap at the service level.
- The rule specifies that payments exceeding the cap constitute Medicaid overpayments subject to recovery and reporting requirements, explicitly linking SDP limits to existing overpayment regulations.
- The rule is set to be formally published in the Federal Register on May 22, with a 60-day comment period following its publication.
The National Council will continue to further review this proposal, provide you with timely updates, and will plan to submit comments on this rule. We are here to support you every step of the way through these changes. For additional information on H.R.1, please visit the
National Council’s H.R.1 Hub. If you have any questions, please reach out
via email.
