On May 20, the Centers for Medicare and Medicaid Services (CMS) announced a proposed rule aimed at curbing state Medicaid payment practices that federal regulators have driven excessive federal spending without clear improvements in care. The rule, which implements new statutory requirements approved as part of the 2025 budget reconciliation act (P.L. 119-21, OBBBA) proposes to cap certain state-directed and targeted provider payments and is seeking to better align them with Medicare payment levels. These financial arrangements include healthcare related provider taxes and intergovernmental transfers.
If finalized, CMS projects the rule will result in significant federal savings over time and will refocus Medicaid funding on patient care, strengthen oversight, and ensure that supplemental payments are tied to measurable improvements in quality, access, and outcomes rather than financing strategies that increase costs without corresponding value. Health Management Associates (HMA) experts are continuing to review the proposed Medicaid payment reform and will provide additional analysis in future newsletters and communications to interest-holders.