Presidential Memo, Pending Proposed Rule Aim to Reduce Medicaid Payments

In a June 6 presidential memorandum, the Trump Administration directed the Secretary of Health and Human Services (HHS) to "take appropriate action to eliminate waste, fraud, and abuse in Medicaid, including by ensuring Medicaid payments [sic] rates are not higher than Medicare, to the extent permitted by applicable law."

On June 9, the Centers for Medicare & Medicaid Services (CMS) submitted a proposed rule related to Medicaid Managed Care-State Directed Payments (SDPs) to the Office of Management and Budget for review. Although the text of the proposed rule is not yet available, the rule likely will implement the June 6 memorandum by lowering the upper limit on SDPs.

The association issued a statement expressing concern that the new memorandum appears to reverse the Trump administration's 2018 policy of allowing states to make SDPs up to the average commercial rate. As discussed in the association's recent policy briefs, these SDPs have been important for helping to close gaps in Medicaid payment, keep rural hospitals open; reduce infant and maternal mortality; and improve care quality, value, and access in other ways.

The association is monitoring how the proposed changes in this rule and memorandum might interact with the SDP provisions under consideration in the budget reconciliation process. The House-passed One Big Beautiful Bill Act (H.R. 1) would allow existing SDPs at current rates and limit future SDPs to Medicare published rates (or 110% of the rate for non-expansion states). These limits are projected to increase hospitals' Medicaid shortfall substantially, according to the association's most recent analysis.

The association is also reviewing how the June 6 memorandum could affect Medicaid fee-for-service payments.

Contact Director of Policy Rob Nelb, MPH, at [email protected] or 202.585.0127 with questions.