HMA’s issue brief on the Medicaid Community Engagement Interim Final Rule provides a clear, actionable summary of new Medicaid work requirements and community engagement requirements for states, Medicaid health plans, providers, community-based organizations, and technology vendors. The report explains key policy changes issued by CMS on June 1, 2026, including exemptions such as medical frailty, verification and reporting expectations, enrollee notification requirements, and the state systems changes needed to prepare for the January 1, 2027 implementation deadline. If you are searching for a summary of Medicaid work requirements, a summary of Medicaid community engagement requirements, the medical frailty definition, or guidance on Medicaid work requirements state systems changes, this brief helps translate complex federal regulation into practical next steps to support compliance, reduce coverage loss risk, and inform implementation strategy.
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Medicaid State Directed Payments: CMS Proposes Major Changes to Financing and Oversight
The Centers for Medicare & Medicaid Services (CMS) proposed changes to state directed payments mark a significant inflection point for Medicaid financing. For states, plans, and providers, the coming months will be critical in understanding the rule’s final shape—and how they can position themselves for a more constrained and standardized payment environment.
Federal Medicaid policy is entering a period of rapid change. Policymakers are advancing a series of interconnected proposals—including Medicaid community engagement (work) requirements, program integrity initiatives, and new scrutiny of financing mechanisms that shape how dollars flow through the program.
Among the most significant developments: the CMS’s proposed changes to Medicaid state directed payments (SDPs). As outlined in HMA’s recent Issue Brief, the proposal signals a meaningful shift in how federal policymakers approach provider reimbursement, managed care financing, and oversight of supplemental payment arrangements.
Health Management Associates (HMA) will further examine these developments in future articles, briefs, and its Medicaid summer webinar series, which will focus on SDPs, work requirements, and program integrity—three policy areas now moving in parallel and reshaping the Medicaid landscape. This article provides an executive overview of the SDP rule.
What are Medicaid State Directed Payments?
State directed payments (SDPs) are a key Medicaid financing tool that allows states to direct how managed care organizations reimburse providers.
States use SDPs to:
- Increase provider payment levels
- Target specific provider types or services
- Support delivery system reforms
Over time, SDPs have become a central component of Medicaid managed care financing. As the HMA issue brief emphasizes, their growing scale and complexity have drawn increased federal scrutiny.
What Does CMS Propose to Change?
The CMS proposed rule implements the statutory changes approved in the 2025 budget reconciliation act (P.L. 119-21, which CMS refers to as the Working Families Tax Cut Act, or WFTCA). The rule introduces a new framework for how SDPs are structured, regulated, and reviewed. Based on HMA’s analysis, the proposal advances several core policy shifts:
- Expanded Federal Limits on Payment Levels. CMS proposes new constraints on how much states can direct plans to pay providers, extending payment limits across a broader range of services and delivery systems. Specifically, CMS proposes to lower the payment ceiling for all SDPs to either 100 percent of Medicare for states administering Affordable Care Act (ACA) expansion programs or 110 percent of Medicare for states without an ACA expansion program. CMS plans to grandfather certain SDPs at levels above Medicare and provide a transition period with an annual 10 percent reduction until the payments are reduced to Medicare levels. In addition, this rule proposes limiting SDPs to the total published Medicare payment rate at the service level—a departure even from Medicaid fee-for-service (FFS) upper payment limits, which are limited to a reasonable estimate of what Medicare would pay but are calculated at the aggregate level by ownership class.
- Extends Limits Across Programs and Delivery Systems. The proposal seeks to align the limitations on practitioner payments under fee-for-service with the new limitations on SDPs. If a state makes payments to a subset of targeted practitioners, the new proposed limit would be actual Medicare payment rates applicable to the practitioner or provider for the same time period as the Medicaid state plan rate year. The crosswalk of Medicaid payment rates to Medicare will likely be administratively burdensome—especially for states that set Medicaid rates using an entirely different methodology than Medicare’s. Applying the Medicare payment limit at the service level will limit states’ ability to incentivize certain service types that may need enhanced reimbursement amounts to preserve access to care (e.g., primary care, neonatal, etc.).
- Broader Applicability Across Providers. The changes extend beyond a narrow set of provider types, affecting a wider range of stakeholders participating in Medicaid financing and delivery. For example, the WFTCA called for the reduced payment ceiling to be applied to the specified four classes of providers. This rule proposes that all providers be limited to the same ceiling and that the revised limits also apply to US territories.
Why Is CMS Focusing on State Directed Payments Now?
As highlighted in the HMA Issue Brief, federal policymakers are increasingly focused on the growth and complexity of SDPs as well as the role of SDPs in broader Medicaid financing strategies. In addition, CMS policy officials are prioritizing program integrity and fraud, waste, and abuse and have couched the current SDP policies as inefficient use of taxpayer dollars.
These priorities align with a broader shift toward tighter federal oversight of Medicaid funding mechanisms.
What Are the Implications for States, Plans, and Providers?
The proposed changes have wide-ranging implications across the Medicaid ecosystem.
States: SDPs have been a flexible tool for shaping payment policy and directing resources. New federal parameters may limit that flexibility and require states to reassess existing financing strategies.
Health Plans: Plans may face a more standardized and regulated environment for implementing SDP arrangements, with less variation driven by state policy choices.
Providers: Many providers rely on SDPs to supplement base Medicaid payment rates. Changes to these payments could affect reimbursement levels and financial stability, particularly for organizations serving large Medicaid populations.
As the HMA brief underscores, the impact will vary significantly by state, depending on how SDPs are currently structured.
How This Fits into Broader Medicaid Policy Changes
CMS is advancing a broader recalibration of how SDPs fit within Medicaid policy. However, the SDP proposal is also part of a larger set of federal Medicaid policy developments, including:
- Medicaid community engagement (work) requirements and other changes to eligibility and redetermination rules included in a June 1, 2026, interim final rule
- Program integrity and oversight initiatives
- Changes to financing structures and supplemental payments
Taken together, these policies signal a transition toward greater federal standardization and increased oversight of funding flows.
What Should Stakeholders Watch Next?
CMS’s proposed changes to Medicaid state directed payments mark a turning point in Medicaid financing policy.
Stakeholders should expect continued movement toward greater oversight, tighter payment parameters, and increased consistency across the program. They should begin planning now for a more constrained and standardized payment environment. Key questions center on:
- How CMS will implement and phase in payment limits across states
- The extent to which existing arrangements will be grandfathered in or phased down
- How states respond in redesigning Medicaid payment strategies
The proposed SDP rule is open for public comment through July 21, 2026, with final policy decisions expected following federal review. As pending issues are resolved, stakeholders across the Medicaid landscape will need to reassess financial models, policy approaches, and operational strategies.
Stakeholders should begin evaluating potential impacts now, as the policy direction is clear, even if final details are still evolving.
Staying Ahead of Medicaid Financing Changes
Given the pace and breadth of these developments, staying informed is critical. HMA’s upcoming Medicaid summer webinar series will provide timely analysis of the SDP proposal alongside related policy changes, including community engagement and work requirements and program integrity initiatives. These sessions are designed to help states, plans, and providers understand policy changes and prepare for operational and financial implications, identify compliance gaps, and address sustainability issues. Register for one or multiple webinars here.
To understand how these Medicaid policy changes affect your organization, contact one of HMA’s Medicaid experts.
A Summer Webinar Series: How New Program Integrity Expectations Affect Medicaid Payments
As federal regulators introduce new Medicaid program integrity expectations to reshape the landscape, states, providers, and insurers across the country are facing intense pressure to adapt to changing eligibility and enrollment rules and financing policies while sustaining access to services and improving outcomes.
This webinar series will deliver timely analysis and actionable insights on the evolving policy and operational environment affecting Medicaid funding, enrollment, and access to services. Each session will feature up-to-the-moment information and perspectives from our subject matter experts, with content tailored to reflect the latest federal guidance, waiver activity, litigation, state implementation decisions, and market developments.
A Summer Webinar Series: The Future of Medicaid State Directed Payments
As federal regulators seek to reshape the Medicaid landscape, states, providers, and insurers across the country are facing intense pressure to adapt to changing eligibility and enrollment rules and financing policies while sustaining access to services and improving outcomes.
This webinar series will deliver timely analysis and actionable insights on the evolving policy and operational environment affecting Medicaid funding, enrollment, and access to services. Each session will feature up-to-the-moment information and perspectives from our subject matter experts, with content tailored to reflect the latest federal guidance, waiver activity, litigation, state implementation decisions, and market developments.
A Summer Webinar Series: Understanding Work and Community Engagement Requirements
As federal regulators seek to reshape the Medicaid landscape, understanding work and community engagement requirements has become crucial. States, providers, and insurers across the country are facing intense pressure to adapt to changing eligibility and enrollment rules and financing policies while sustaining access to services and improving outcomes.
This webinar series will deliver timely analysis and actionable insights on the evolving policy and operational environment affecting Medicaid funding, enrollment, and access to services. Each session will feature up-to-the-moment information and perspectives from our subject matter experts, with content tailored to reflect the latest federal guidance, waiver activity, litigation, state implementation decisions, and market developments.
Special Alert: CMS Proposes Major Medicaid Payment Reform to Cap State-Directed Payments and Align Rates with Medicare
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.
Join us at HMA’s 2026 National Conference: Signals, Signs & Flashing Lights
Registration is now open for the Health Management Associates (HMA) 2026 National Conference, US Healthcare 2026: Signals, Signs & Flashing Lights, October 5–7 in New Orleans, LA.
HMA’s conference is intentionally structured to bring together leaders who are shaping decisions across sectors—those setting policy, managing risk, leading clinical operations, and innovating approaches to improve outcomes—to engage in candid conversations about what is working, what is not, and what is changing in Medicare, Medicaid, Marketplace and adjacent programs. In an environment defined by new challenges and “flashing lights,” even the most seasoned healthcare leaders will find value in stepping out of their day‑to‑day roles to compare strategies, test assumptions, and learn from peers facing similar pressures.
This year’s conference is designed to reflect the environment healthcare leaders are navigating today—one defined less by policy certainty and more by shifting expectations and competing pressures on cost, access, and performance. Our experts are crafting discussions to address how organizations are approaching policy engagement in this environment, including new strategies for interpreting signals from federal and state policymakers and negotiating policy frameworks that directly shape market dynamics.
Across plenary sessions, breakout discussions, and HMA’s signature coffee conversations, the conference will focus on how organizations are interpreting these signals and translating them into practical strategies.
Programming will center on four cross-cutting themes shaping healthcare decision-making:
- Managing risk and cost amid continued financial pressure. Discussions will examine the drivers of utilization and affordability trends across Medicare, Medicaid, and commercial markets and which strategies are demonstrating measurable impact.
- Sustaining access and system stability. The agenda also will focus on how providers, health systems, and state programs are maintaining access amid workforce challenges, coverage transitions, and ongoing financial strain.
- Turning innovation into impact. Sessions will explore where artificial intelligence (AI) and digital health tools are delivering measurable operational or clinical impact and what it takes to implement them effectively.
- Building partnerships that last. Conversation will highlight how stakeholders are aligning incentives, funding, and strategy to move from short-term responses to long-term, sustainable solutions.
As in prior years, the HMA National Conference is structured to support candid dialogue, actionable takeaways, and meaningful connections. Attendees consistently highlight the opportunity to move beyond high-level trends and engage in practical discussions that inform decision-making in their organizations.
Early-bird registration is now available for a limited time. The 2026 Sponsor Prospectus includes new opportunities for your organization. Additional agenda details, featured speakers, and interactive programming announcements will be released in the coming weeks.
The New Uninsured: State Policy Options for Californians Losing Medi-Cal Coverage
HMA’s new report for the California Health Care Foundation explains how recent federal and state policy changes could cause up to two million Californians to lose Medi-Cal coverage. These changes will place new strains on the state budget and safety-net system. The report outlines practical short-term program paths California could use to preserve access to care while full-scope coverage is restored. It summarizes the policy and fiscal context (including work requirements, more frequent eligibility checks, and immigrant eligibility restrictions), describes stakeholder-informed design goals (statewide access, privacy protections, fiscal prudence, scalability, and safety-net stability), and presents two illustrative coverage alternatives with modeled cost ranges and key trade-offs in benefits, provider payment rates, cost sharing, and bridge-period design.
CMS Proposes Modest Hospital Payment Updates and Signals Expanded Use of Mandatory Value-Based Models
On April 10, 2026, the Centers for Medicare & Medicaid Services (CMS) released the proposed rule for the Fiscal Year 2027 Hospital Inpatient Prospective Payment System (IPPS) and Long-Term Care Hospital Prospective Payment System (LTCH PPS). The proposal combines a modest net increase in hospital payments with policy signals around quality reporting and mandatory episode-based payment models—most notably a proposed nationwide expansion of the Comprehensive Care for Joint Replacement (CJR) model.
These proposed updates underscore CMS’s continued emphasis on value-based purchasing, episode accountability, and alignment across quality programs. In addition, CMS resurfaces ongoing debates with hospital stakeholders about the adequacy of Medicare payment updates amid rising costs and coverage disruptions.
This article reviews several key provisions in the FY 2027 proposed rule.
Hospital Payment Updates: Headline Increase Masks Net Impact
Under the proposed rule, CMS would increase base IPPS and LTCH PPS payment rates by 2.4 percent in FY 2027. However, after accounting for proposed reductions to uncompensated care payments for disproportionate share hospitals (DSH) and changes in outlier payments for extraordinarily high-cost cases, CMS estimates the effective payment increase would be closer to 1.2 percent.
In aggregate, CMS projects the proposed update would translate to approximately $1.4 billion in additional payments to acute care hospitals next year. Hospital industry groups—including the American Hospital Association (AHA) and the Federation of American Hospitals (FAH)—have pushed back, arguing that the proposed update does not sufficiently reflect medical inflation, workforce pressures, or anticipated growth in the uninsured population.
These concerns reflect a long-standing dynamic in annual hospital payment rules: CMS seeking to balance statutory updates and budget neutrality constraints against the hospital industry’s concern that Medicare payments are lagging behind underlying costs.
Quality Reporting and Program Alignment
The proposed rule would also make notable updates to the Hospital Inpatient Quality Reporting (IQR) Program. CMS proposes adding three new quality measures to be phased in during 2029 and 2030, while modifying eight existing measures to include Medicare Advantage patients. CMS also proposes shortening the performance period for certain measures from three years to two—a change designed to accelerate feedback and better align measures across programs.
These changes continue CMS’s broader effort to harmonize quality measurement across Medicare payment and value-based programs, reduce reporting lag, and incorporate a more comprehensive view of patient populations.
Updates to Mandatory TEAM Model
CMS also proposes several updates to the Transforming Episode Accountability Model (TEAM), the mandatory episode-based payment model finalized last year. Key proposals include:
- Expanding the list of MS-DRGs included in the spinal fusion episode
- Aligning TEAM quality measurement performance periods with the IQR Program
- Making targeted technical refinements to payment methodology
In addition, CMS is seeking stakeholder feedback on whether ambulatory surgery centers (ASCs) should participate in TEAM and whether participation should be voluntary for physician-owned hospitals, signaling potential future expansion or recalibration of the model.
Proposed Expansion of Joint Replacement Bundles
CMS proposes to expand the existing Comprehensive Care for Joint Replacement Expanded (CJR-X) Model nationwide beginning October 1, 2027. The agency also plans to make participation mandatory for most IPPS hospitals.
CMS tested the original CJR model in 34 metropolitan areas between 2016 and 2024, generating improved patient outcomes and net Medicare savings, according to agency evaluations. CJR-X would become the fifth Center for Medicare and Medicaid Innovation model to meet the statutory criteria for nationwide expansion.
Under CJR-X, hospitals performing lower extremity joint replacements would be accountable for the cost and quality of care for the initial procedure and most related spending during the subsequent 90 days. Although the overall structure mirrors the original CJR model, CMS proposes several important updates:
- Expansion of episodes to include ankle replacements, in addition to hip and knee procedures
- Adoption of a more robust risk adjustment methodology with significantly more variables, aligning closely with the TEAM model
- Introduction of a 5 percent stop-loss policy for hospitals that serve higher proportions of dually eligible beneficiaries and certain smaller hospitals
Participation would be mandatory for most IPPS hospitals, with exceptions for hospitals already participating in TEAM, which includes a lower extremity joint replacement episode; Maryland hospitals operating under global budgets; and hospitals not paid under both IPPS and the Outpatient Prospective Payment System, such as Critical Access Hospitals.
Why It Matters
The 2027 IPPS and LTCH PPS proposed rule reinforces several clear policy signals:
- Pressure on hospital margins is likely to persist, as payment updates continue to trail hospital-reported cost growth.
- Mandatory episode-based models remain central to CMS’s value-based strategy, with CJR-X representing a significant escalation in scope and scale.
- Program alignment and MA inclusion are accelerating, with implications for hospital data systems, care coordination strategies, and reporting infrastructure.
Hospitals and health systems will need to assess not only the near-term financial impact of the proposed payment updates, but also their readiness to accept expanded episode accountability and meet evolving quality measurement requirements.
Comments on the proposed rule will shape final decisions regarding payment levels, quality program changes, and the scope of mandatory participation in CJR-X. Stakeholders will be watching closely to see whether CMS moderates its approach to mandatory models or doubles down on episode-based accountability as a cornerstone of Medicare payment reform.
In parallel, CMS has released several other proposed payment rules this month, including those that would affect skilled nursing facilities, hospice providers, inpatient rehabilitation facilities, and inpatient psychiatric facilities. For these entities, CMS generally proposes payment updates of approximately 2.4 percent and 2.3 percent for inpatient psychiatric facilities. As part of its broader program integrity focus, CMS also has proposed new transparency measures for hospice providers; this follows recent enforcement actions related to fraudulent enrollment.
Connect with Us
Health Management Associates, Inc. (HMA), monitors federal regulatory and legislative developments in the inpatient setting and assesses the impact on hospitals, life science companies, and other stakeholders. Our experts interpret and model hospital payment policies and assist clients in developing CMS comment letters and long-term strategic plans. Our team replicates CMS payment methodologies and model alternative policies using the most recent Medicare fee-for-service and Medicare Advantage (100%) claims data. We also support clients with DRG reassignment requests, New Technology Add-on Payment (NTAP) applications, and analyses of Innovation Center alternative payment models.
For more information about the proposed policies, contact one of our Medicare experts.
Medicaid Managed Care Enrollment: Q4 2025 Trends and Early Signals Ahead of New Eligibility Policies
This week Health Management Associates (HMA), draws on its database of monthly Medicaid managed care enrollment to present its latest quarterly analysis, offering a snapshot of enrollment trends across 37 states.
The analysis comes at a critical time. As states prepare for Medicaid eligibility policy changes that take effect in 2027—including more frequent eligibility determinations and expanded work and community engagement requirements—current enrollment trends provide an early signal of how policy decisions and administrative practices are already influencing coverage levels.
The HMA Information Services (HMAIS) analysis shows that Medicaid managed care accounted for 85.6 percent of total Medicaid enrollment in December 2025. This analysis, available to HMAIS subscribers, uses data from nearly 300 health plans in 41 states. The report provides by-plan enrollment plus corporate ownership, program inclusion, and for-profit versus not-for-profit status, with breakout tabs for publicly traded plans.
Key Insights from Q4 2025 Data
The 37 states included in this review have released monthly Medicaid managed care enrollment data through public websites or in response to a public records request from HMA. The report includes the most recent data obtained and illustrates the effect of state-level choices around eligibility and administration. Key findings include:
- As of December 2025, Medicaid managed care enrollment across the 37 states declined by 2.2 million members year over year, falling to 62.5 million—a 3.4 percent decrease.
- Of the 37 states, eight—Colorado, Delaware, Mississippi, Missouri, New Jersey, North Carolina, North Dakota, and Oregon—did not experience year-over-year managed care enrollment declines, and instead showed flat enrollment or modest gains. With the exception of Mississippi, these are all Medicaid expansion states.
- Arizona and Indiana experienced double-digit percentage declines. Notably, Indiana began requiring enrollees to actively respond to renewal mailers, which aligns with enrollment declines that began in March 2025.
- Among the expansion states in the analysis, enrollment declined by 1.7 million (-3.3%) to 50.8 million. The seven non-expansion states experienced a similar decline (-3.6%), bringing enrollment to 11.7 million enrollees.
Data Considerations. The data have some important limitations. States report enrollment figures at different points during the month, with some data reflecting beginning of the month totals and others capturing end of the month enrollment. In addition, some state datasets encompass all Medicaid programs offering managed care plans, whereas others reflect only a subset of the managed Medicaid population. As a result, the findings should be viewed as indicative of broader trends rather than a comprehensive state-by-state comparison.
Market Share and Plan Dynamics
Using our data repository for 300 health plans across 41 states, HMAIS analyzes corporate ownership, program participation, and tax status among Medicaid managed care plans. As of December 2025, Centene maintained the largest share of the national Medicaid managed care market at 17.8 percent, followed by Elevance (10.4%), United (8.5%), and Molina (6.0%) (see Figure 1). These figures highlight continued concentration among large national plans, even as overall enrollment declines.
Figure 1. National Medicaid Managed Care Market Share by Number of Beneficiaries for a Sample of Publicly Traded Plans, December 2025
What to Watch
Enrollment trends observed in the fourth quarter (Q4) of 2025 and continuing into 2026 indicate increasing state attention to eligibility policy and program integrity. State legislative activity, budget pressures, and federal regulatory developments are prompting many states to assess and strengthen certain aspects of their programs related to eligibility, particularly as they prepare to implement redetermination and work and community engagement requirements.
Several states are already moving toward implementation. Nebraska is scheduled to launch Medicaid work requirements on May 1, 2026, while Montana plans to begin implementation on July 1, 2026. With additional federal guidance still emerging, most other states are working toward compliance ahead of January 2027 deadlines. In expansion states, policymakers retain authority to tighten administrative processes, alter optional benefits, or adjust provider payment levels—actions that may materially affect enrollment.
These developments underscore why Medicaid managed care enrollment trends deserve close attention. Declines in enrollment are often an early indicator of broader system impacts, including rising uncompensated care for providers, shifts in payer mix, and increased financial pressure on safety‑net systems. For managed care organizations, even modest enrollment changes can mask more significant shifts in risk profiles, geographic concentration, or service needs.
Connect with Us
HMA is home to experts who know the Medicaid managed care landscape and how it is evolving. HMAIS’s Medicaid enrollment data, financials, procurement tracking, and a robust library of public documents equips stakeholders with timely, actionable intelligence.
For more information about the HMAIS subscription, contact Andrea Maresca and Alona Nenko.
HMA Resource Provides Key Insights about the Evolving Medicare-Medicaid Integration Landscape
People who are dually eligible for Medicare and Medicaid remain a central focus for policymakers and healthcare organizations, given their complex care needs, disproportionate share of spending, and the long-standing challenge of coordinating coverage across two programs. One of the primary vehicles for advancing integration has been Dual Eligible Special Needs Plans (D-SNPs), which continue to play an increasingly prominent role as federal and state policymakers encourage tighter Medicare-Medicaid alignment.
As states play a more active role in shaping enrollment rules, Medicaid contracting, and procurement strategies, the duals market is becoming more structured and more explicitly guided by state policy decisions. Health Management Associates (HMA’s) 2026 Duals Integration Environmental Inventory, examines how this shift shapes the integration landscape in 2026. This comprehensive inventory is based on a review of the 2026 market, insights from states, and other publicly available resources.
This article examines key trends from HMA’s 2026 inventory and addresses federal policy changes scheduled to take effect for 2027, which contribute to this dynamic environment.
What to Expect in 2026
As the landscape for duals integration evolves, the central question has shifted from whether D-SNPs operate in a state to the more consequential question of how states are using Medicaid policy levers (i.e., enrollment rules, procurement, contracting, and managed care structures) to drive tighter alignment between Medicare and Medicaid.
At the federal level, recent Medicare Advantage and Part D rulemaking is reinforcing that movement. The Contract Year 2025 Medicare Advantage and Part D Final Rule finalized the second phase-down of the D-SNP look-alike threshold to 60 percent for 2026 and established 2027 rules that limit enrollment in certain D-SNPs to members of an affiliated Medicaid managed care organization. The rule also limits the number of D-SNP benefit packages that can be offered alongside an affiliated Medicaid managed care organization. More recently, the Contract Year 2026 Medicare Advantage and Part D Final Rule requires certain D-SNPs to use integrated member ID cards and integrated health risk assessments beginning in 2027.
Together these rules signal a continued federal emphasis on linking D-SNP enrollment and operations more closely to Medicaid coverage and delivery systems, with states playing a greater role in determining how alignment is achieved.
What the 2026 Inventory Shows
HMA’s 2026 Duals Integration Environmental Inventory shows how these policy signals are translating into state action. More specifically:
- Statewide exclusively aligned enrollment appears in 16 states in the 2026 inventory, up from nine in 2025.
- Applicable Integrated Plans (AIPs) are present in 22 states, up from 14, and default enrollment is in place in 21 states, up from 16.
- The inventory also captures 6,084,997 total D-SNP enrollees, including 1,975,250 in Highly Integrated SNPs (HIDE) and 743,683 in Fully Integrated SNPs (FIDE-SNPs).
Those changes are already visible in state markets:
- Illinois, Massachusetts, Ohio, and Rhode Island entered 2026 with a greater FIDE-SNP presence tied to legacy Medicare-Medicaid Plan transitions.
- Michigan launched MI Coordinated Health as a HIDE-SNP in selected regions in 2026, with statewide expansion planned for 2027.
- Delaware also stands out: Although it already had AIPs in the 2025 inventory, it adds statewide exclusively aligned enrollment in 2026 and shows both HIDE-SNPs and coordination-only D-SNPs.
A Resource to Track State Market Direction
HMA’s 2026 Duals Integration Environmental Inventory, available to HMA Information Services (HMAIS) subscribers, includes a state-by-state view of the Medicaid policy, contracting, and program structures shaping duals integration and D-SNP markets. In addition to enrollment trends, the inventory documents the integration model each state is pursuing, whether long-term services and supports or behavioral health are included in managed care, and how procurement and contract decisions may inform future market activity.
HMA experts work with clients to apply this information and deepen their understanding of state integration approaches, inform assessments of their market readiness and alignment opportunities, and develop strategies that support more effective Medicare-Medicaid integration.
Looking Ahead
Notably, HMA’s inventory reflects a point in time understanding of where an individual state is today and what is known at this time about their next steps and plans. However, we expect changes in many states as they seek guidance from the Centers for Medicare & Medicaid Services and the D-SNP community to implement required changes and adopt new regulatory provisions that support state goals and priorities.
The 2026 inventory suggests that more states are using formal alignment tools, that more enrollment is concentrated in integrated products, and that more markets are being shaped by the interaction between Medicaid structure, procurement, and D-SNP strategy.
Connect with Us
For organizations seeking to understand where the market is headed, the Duals Integration Inventory offers a clear view of how state policy and market structure are evolving and where tighter Medicare-Medicaid alignment is taking hold.
Contact Holly Michaels Fisher and Julie Faulhaber to discuss your organization’s questions and needs regarding an integration strategy and market analysis. For information about the HMAIS subscription, access to the Duals Environmental Inventory contact Andrea Maresca and Gabby Palmieri.
CMS’s LEAD Model: A New Phase for Accountable Care and Application Considerations
The Long‑term Enhanced Accountable Care Organization (LEAD) Model represents the next major step in the Centers for Medicare & Medicaid Services (CMS) accountable care strategy and reinforces a federal commitment to value-based participation in Traditional Medicare. Announced as the successor to ACO REACH, LEAD is a voluntary, nationwide, 10‑year model that will operate from 2027 to 2036, making it the longest-running accountable care organization (ACO) model the Center for Medicare and Medicaid Innovation has tested.
Momentum around the LEAD ACO model has accelerated since CMS’s recent release of the Request for Applications (RFA), which formally moves LEAD from policy design to implementation. The RFA requires prospective participants to evaluate program design choices, financial implications, and operational readiness on a compressed timeline. Notably, CMS has indicated that additional opportunities to express interest will follow for organizations that are not prepared to apply for participation in the initial cohort.
This article explains key design elements of the LEAD model and identifies considerations for organizations assessing whether and when to pursue participation in LEAD.
Core Design Evolutions of the LEAD Model
While LEAD builds on many of the elements from ACO REACH, its design reflects how the Innovation Center intends to address challenges with previous ACO models, such as the Medicare Shared Savings Program (MSSP). At its core, LEAD seeks to establish a pathway to long‑term engagement in value-based care that creates an attractive option for all types of providers, including ACOs with a history of engaging in value-based care and providers that have yet to meaningfully participate.
LEAD introduces a set of targeted design changes intended to improve predictability, alignment accuracy, and long‑term participation in accountable care—most notably through revised benchmarking, updated beneficiary alignment, and expanded flexibility for engaging specialists and high‑needs populations.
1. Revising Benchmarking Policies to Support Predictability and Success
- LEAD provides a major win for ACOs seeking long-term predictability by setting a long-term benchmark that will not rebase for the entirety of the 10-year model. In MSSP, many ACOs eventually face the “ratchet effect” in which benchmarks erode after rebasing to reflect the ACO’s more recent spending patterns. It can create a significant hurdle for ACOs that have already successfully reduced spending, as their own prior success lowers their benchmark. By not rebasing for the entirety of the model period, LEAD provides an attractive alternative to the MSSP, which rebases every five years.
- LEAD will also support historically successful ACOs by transitioning to a fully regional rate book by the end of the model period. As a result, benchmarks will be set based on overall spending in the region where an ACO operates rather than an ACO’s historical spending. While ACO REACH also used a regional rate book to inform some ACO benchmarks, LEAD goes further by seeking to transition all ACOs to a benchmark based fully on a regional rate book while also adding protections for higher-spending ACOs by transitioning regions at different timelines to ensure that newer ACOs have the opportunity to implement the kinds of care delivery changes that lead to lower spending before they are subject to penalties.
- Other notable changes to benchmarking include a variety of ACO-specific adjustments and the addition of an administrative component to benchmarking. ACOs will be eligible to receive a boost to their benchmarks with either a regional efficiency adjustment for ACOs with lower spending or a prior savings adjustment for ACOs with a demonstrated history of achieving savings. LEAD also introduces an administratively set component to benchmarking—the Accountable Care Prospective Trend—which already is used in the MSSP, though LEAD adds a new guardrail policy to promote predictability.
2. Improving Accuracy in Beneficiary Alignment
- LEAD’s new “hybrid” alignment option increases accuracy and responsiveness. Monthly additions of voluntarily aligned beneficiaries and mid-year recognition of new participant taxpayer identification numbers (TINs) adopted after the start of the performance year (PY) allow alignment to better reflect real-time care relationships, averting lag and operational friction.
3. Adding Support for High-Needs Beneficiaries
- LEAD expands support for beneficiaries with complex needs through a universal High Needs category and recalibrated risk adjustment. By moving away from ACO REACH’s population‑exclusive model, LEAD lowers barriers for organizations that serve a disproportionate share of high‑needs and dually eligible populations. In addition, CMS will test Medicare‑Medicaid alignment in two states, and help states develop arrangements supporting the provision of value-based care between ACOs and state Medicaid agencies or managed care organizations.
4. Promoting Deeper Engagement with Specialists
- LEAD increases flexibility for engaging specialists in value‑based arrangements. New Non‑Primary Care Capitation options and episode-based risk arrangements (CMS‑Administered Risk Arrangements (CARAs)), allow ACOs to share risk with specialists without Total Care Capitation, reducing operational complexity while expanding accountability beyond primary care.
5. Advancing Technology Adoption and Innovation
- LEAD introduces structured pathways to promote technology adoption. Planned Artificial Intelligence (AI)‑inferred risk adjustment will be phased in following successful testing and validation, while the Tech Enabler Initiative and Rapid Cycle Innovation Program seek to reduce administrative burden and accelerate evidence generation—particularly for smaller or resource‑constrained ACOs.
Next Steps
The Innovation Center is operating on an accelerated timeline for the initial LEAD cohort. Prospective ACOs have fewer than 50 days to digest a detailed Request for Applications and model potential performance. Applications are due May 17, 2026. ACOs that participated in ACO REACH in PY 2026 will be well-positioned, as many of the provisions in LEAD will be familiar, and the agency is permitting this group of ACOs to submit an abbreviated application for participation.
For organizations not ready to apply for the first cohort, CMS will release a standardized Letter of Interest form by April 17, 2026, to gauge interest in future application rounds. In this context, organizations considering LEAD participation should be assessing not only near‑term application readiness, but also longer‑term strategic alignment with the model’s 10‑year commitment, risk structure, and operational requirements. Key considerations include benchmarking predictability, readiness to manage regional benchmarks, capacity to engage specialists and high‑needs beneficiaries, technology capabilities, and alignment with broader value‑based care strategies across Medicare and Medicaid.
Connect with Us
Health Management Associates (HMA), supports organizations across the LEAD decision continuum, including those pursuing immediate application and those preparing for future cohorts. HMA can help organizations:
- Interpret LEAD’s policy and financial design relative to existing ACO and MSSP participation
- Model performance scenarios under alternative benchmark, alignment, and risk configurations
- Assess operational readiness across care management, contracting, analytics, and compliance
- Develop application strategies and supporting materials, including responses to the LEAD RFA
- Choose to defer application on steps that preserve future optionality
As CMS advances LEAD under an ambitious timeline, early analysis and disciplined decision‑making will be critical for organizations seeking to align participation with their long‑term value‑based care strategies.
For questions contact Amy Bassano and Rebecca Nielsen.