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CMS Proposes New Budget Neutrality Framework for Medicaid Section 1115 Demonstrations 

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New guidance outlines how CMS intends to implement Chief Actuary certification and a fundamentally different approach to budget neutrality beginning January 1, 2027.

[HMA’s analysis on this and related Medicaid changes is ongoing; this blog reflects an initial understanding of the 6/11 SMDL; additional analysis is forthcoming.]

On June 11, 2026, the Centers for Medicare & Medicaid Services (CMS) released State Medicaid Director Letter (SMDL) #26-003, which provides long-anticipated guidance on how the agency intends to implement new statutory budget neutrality requirements for Medicaid section 1115 demonstrations beginning January 1, 2027.

The SMDL provides guidance on CMS’s implementation of provisions enacted in Public Law 119-21 (the One Big Beautiful Bill Act, or OBBBA), which CMS now refers to as the Working Families Tax Cut (WFTC) Act. The law requires the CMS Chief Actuary to certify that Medicaid section 1115 demonstrations will not increase federal Medicaid expenditures before CMS may approve new demonstrations, amendments, or renewals.

While the SMDL includes discussion of CMS’s preference that states rely on Medicaid state plan and other Title XIX authorities when available, the guidance primarily focuses on implementing the new budget neutrality requirements under section 1115(g).

The result is a proposed framework that could fundamentally change how states design, finance, evaluate, and renew section 1115 demonstrations.

Key Takeaway #1: Budget Neutrality framework is changing to become more accurate, detailed, and subject to enhanced review.

For decades, Medicaid Demonstrations under Section 1115 required budget neutrality calculations that relied on comparisons of projected with and without waiver expenditure. Retrospective assessments against established “without waiver” budget neutrality limits then occurred.

CMS now proposes a different model that includes enhancements to how the budget neutrality calculations are developed and reviewed. This will include an actuarial certification requirement that shows how the budget neutrality meets actuarially sound principles.

Beginning with applications, renewals, or amendments submitted after January 1, 2027, the following must occur:

  • CMS’ Chief Actuary must certify that there will be no increase in federal expenditures compared to the expenditures projected in the absence of the Demonstration.
  • A rigorous actuarial analysis of the projected financial impacts of individual demonstration activities must be performed. The budget neutrality analysis is certified by CMS’ Chief Actuary prior to Demonstration approval. This is a change from the historical “without waiver” expenditure cap calculation.
  • With the review above, there is now no expenditure limit or budget neutrality cap. Instead, the budget neutrality is not approved if there is a projected increase in Federal Medicaid expenditures. (Note, approval of historical Demonstration applications and budget neutrality required a projection of reduced overall expenditures.)
  • Monitoring budget neutrality in the Demonstration time period will utilize new special terms and conditions (STCs). There will be corrective actions implemented if expenditure substantially deviates from the State projections. Historically, quarterly and annual reporting was required, and States were subject to return to CMS any excess federal funds. The new guidance appears similar in that ongoing monitor will occur and action will be needed to the extent expenditures are not at or below projections.

For states to be compliant with this guidance, detailed actuarial analyses, methodology, assumptions, data, and documentation demonstrating the federal fiscal impact of each demonstration component will be necessary. States must provide sufficient information for CMS’s Chief Actuary to evaluate and certify budget neutrality, including the populations affected, covered services, payment methodologies, payment rates, administrative costs, and estimated federal expenditures associated with demonstration authorities.

Key Takeaway #2: Beginning January 1, 2027, certain benefits and services may be treated differently under Medicaid section 1115 demonstrations.

A central feature of the new framework is CMS’s proposed classification of demonstration activities into two categories.

The first category is Medicaid Authorizable Populations and Services (MAPS). These are populations and services that could otherwise be covered through the Medicaid state plan or another Title XIX authority. For budget neutrality purposes, CMS proposes treating MAPS expenditures as having a zero net financial impact because they represent expenditures that could have occurred absent the demonstration. This is similar to how current hypothetical expenditures are treated.

The second category consists of section 1115-only activities; that is, activities that could not otherwise be authorized through existing Medicaid authorities. These activities would become the primary focus of budget neutrality review.

States would be required to identify, measure, and document both the costs and savings associated with each section 1115-only activity, including administrative costs. CMS would then evaluate the aggregate financial impact of those activities when determining whether a demonstration qualifies for certification.

Key Takeaway #3: Medicaid 1115 demonstration savings will become more difficult to accumulate and carry forward.

CMS also proposes significant changes to the treatment of demonstration savings.

Historically, states have been able to accumulate budget neutrality savings and, under certain circumstances, carry those savings into future renewal periods. Many demonstrations have relied on these accumulated savings to support cost-not-otherwise-matchable expenditures and other demonstration initiatives.

Under the new approach, savings generally would be limited to those generated during the current demonstration period and could only be applied to the next immediate renewal period. CMS also proposes limiting rollover calculations to the most recent five years of demonstration experience and eliminating the longstanding ability to carry forward legacy savings across multiple renewal cycles.

CMS would provide a transition period for the first renewal after January 1, 2027, allowing states to use savings calculated under the current methodology. Over time, however, the proposed framework is expected to reduce the amount of demonstration savings available to states.

For states that have historically relied on demonstration savings as a key financing mechanism, these changes could require significant strategic and financial planning.

Key Takeaway #4: States and Medicaid-focused organizations should begin to identify alternative approaches, authorities, and partnerships to continue to advance the goals of certain 1115 demonstration initiatives.

One of the more closely watched aspects of the guidance involves CMS’s discussion of the relationship between section 1115 authority and other Medicaid authorities.

The final guidance stops short of directing states to systematically move authorities out of section 1115 demonstrations. Instead, CMS encourages states to reduce reliance on section 1115 authority when alternative Medicaid authorities are available, noting that doing so would strengthen oversight while reserving section 1115 authority for innovation and demonstration purposes. The agency specifically references Medicaid state plan authorities and other Title XIX authorities as potential alternatives where appropriate.

At the same time, CMS recognizes that, in certain circumstances, states may require concurrent section 1115 authority layered over other Medicaid authorities to achieve program goals and has indicated that it will provide technical assistance in those situations.

The interaction between this policy and the new MAPS framework may be particularly important. CMS provides examples showing that many authorities currently treated as hypothetical expenditures—including certain home- and community-based services (HCBS), managed care-related authorities, and other services that could be authorized elsewhere under Medicaid—would now be treated as MAPS activities for budget neutrality purposes.

For states, the immediate significance may be less about whether authorities remain within a section 1115 demonstration and more about how those authorities are treated under the new budget neutrality framework. As states assess the implications of the guidance, they may want to consider how various authorities are structured across section 1115 demonstrations, state plan authorities, and other Title XIX pathways. CMS’s discussion suggests that these decisions may increasingly be informed by both programmatic objectives and budget neutrality considerations.

Key Takeaway #5: States and Medicaid organizations can begin scenario planning and assessments now and monitor additional guidance and clarifications critical to operational issues.

Although CMS provides substantial detail regarding its intended direction, several important implementation questions remain unanswered. Among the issues states are likely to focus on over the coming months:

  • How will CMS apply the new requirements to renewals that are already under review—or that are submitted before January 1, 2027—but remain pending after that date?
  • How long will CMS’s Chief Actuary review take, and how should states adjust renewal and amendment timelines to account for the new certification process?
  • How aggressively will CMS apply its stated preference for using state plan and other Title XIX authorities when alternative pathways exist?
  • What level of documentation, modeling, and actuarial support will CMS ultimately require to support certification?
  • How will CMS define acceptable methodologies and assumptions in the forthcoming rulemaking process?

CMS repeatedly notes that additional technical guidance, technical assistance, and formal rulemaking are forthcoming, suggesting that many operational details remain under development.

Key Takeaway #6: States should build additional time into future section 1115 renewal and amendment planning

Although significant details remain unresolved, the overall direction of federal policy is becoming clearer.

States with upcoming section 1115 renewals, amendments, or major demonstration redesign efforts should begin assessing which components of their demonstrations are likely to be classified as MAPS activities versus section 1115-only activities. They should also evaluate the extent to which future financing strategies depend on rollover savings or other elements of the current framework that may no longer be available after January 1, 2027.

In addition, states may want to assess whether certain demonstration authorities could be more appropriately administered through state plan, managed care, HCBS, or other Medicaid authorities, particularly given CMS’s stated preference for relying on alternative Title XIX pathways when available.

Most importantly, states should prepare for a future in which section 1115 approval decisions are increasingly driven by prospective actuarial analyses of the financial impact of individual demonstration activities that include detailed supporting documentation for CMS’s Chief Actuary to utilize for approval.

The forthcoming proposed rule will provide critical details; however, this guidance makes clear that CMS intends to reshape how section 1115 demonstrations are financed, evaluated, and renewed in the years ahead.

How HMA Can Help

HMA is actively helping states, health plans, providers, and other stakeholders assess the implications of CMS’s proposed budget neutrality framework and prepare for upcoming section 1115 renewals and amendments, as well as other changes due to recent guidance on community engagement requirements, state directed payments, and program integrity. Our experts bring deep experience in section 1115 demonstrations, Medicaid financing, budget neutrality modeling, actuarial analysis, managed care authorities, HCBS programs, waiver strategy, and federal negotiations.

As states evaluate the operational, financial, and policy implications of the new requirements, HMA can support strategic assessments, renewal planning, demonstration redesign, financial modeling, actuarial coordination, federal negotiations, and implementation planning. We are also tracking forthcoming rulemaking and additional CMS guidance that will further shape how section 1115(g) is implemented.

Be sure to register for our upcoming webinar, Understanding Work and Community Engagement Requirements and New Section 1115 Guidance, on July 15.

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Act Now to Implement Community Engagement Requirements

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On June 2, 2026, the Centers for Medicare & Medicaid Services (CMS) issued the highly anticipated Interim Final Rule (IFR) on implementing the Medicaid work and community engagement requirements set forth in the 2025 budget reconciliation act, P.L. 119-21. States are expected to implement the requirements by January 1, 2027, leaving Medicaid authorities, health plans, providers, and community-based partners with a compressed timeline to design, test, and deploy new workflows that will fundamentally change how eligibility and compliance are administered.

This article builds on Health Management Associates (HMA) colleagues’ ongoing analysis of federal Medicaid policy changes stemming from the Working Families Tax Cut Act and evolving federal priorities (see Connecting the Dots here and here) and explores the implications for enrollees, state agencies, health plans, and providers. 

Community engagement requirements create risk and exposure for all of these interest-holders, opening them to the possibility of increased enrollment churn, particularly during the early stages of implementation as enrollees and administrators adapt to new processes. Even Medicaid enrollees who meet compliance requirements or qualify for exemptions could experience temporary coverage losses or disruptions because of delays in documentation, notice response, or case processing.

Plans and providers, meanwhile, may encounter downstream effects on capitation rate adequacy, financial and membership forecasting, risk adjustment, care management continuity, quality performance, and network stability.

From Policy to Practice: A Systemwide Operational Shift 

Many elements of the IFR align with statutory provisions; however, it introduces new operational expectations that will reshape eligibility processes, including: 

  • Structured verification and documentation requirements 
  • Expanded exemption frameworks tied to functional ability to work 
  • New reporting and oversight obligations 
  • Increased reliance on enrollee notifications and engagement 

Collectively, these changes introduce a new layer of administrative expectations that extend beyond traditional eligibility and enrollment functions and require coordination across state and local agencies, health plans and providers, and community partners. 

Notably, CMS has provided targeted flexibilities—particularly through income-based compliance pathways—which will allow states to leverage existing data sources and potentially reduce administrative burden, if implemented effectively. 

States Need to Build an Operational Foundation 

For state Medicaid agencies, the immediate priority is translating federal requirements into scalable, consistent processes. 

Key actions include: 

  • Redesign eligibility and compliance workflows. States will need to identify affected populations, track compliance, adjudicate exemptions and hardships, and manage appeals—all within tight implementation timelines. 
  • Invest in verification infrastructure. Although automation opportunities exist, particularly using income and existing eligibility data, many determinations (e.g., medical frailty, caregiving, hardship) will require individualized review and new documentation standards. 
  • Strengthen cross-agency coordination and data integration. Effective implementation will depend on integrating data from workforce, social services, and other programs to support compliance and reduce manual processes. 
  • Develop robust communication strategies. Experience from prior Medicaid initiatives demonstrates that coverage loss often results from administrative barriers, not ineligibility, making clear, proactive communication essential. 
  • Balance automation and administrative complexity. States that effectively leverage automation and streamline enrollee-facing processes will be better positioned to maintain coverage continuity while meeting federal requirements. 

Implications for Health Plans: Expanding the Role of Member Engagement 

Health plans will play a pivotal role in implementation, although they cannot determine enrollee compliance with the new requirements. States rely on plans to identify members who may be subject to community engagement requirements, to assist with member communications, and to connect members with resources that support compliance or exemption eligibility. Even though these activities occur outside the traditional managed care financing framework, plans may be called upon to accomplish the following: 

  • Enhance outreach and education capabilities. Plans are often the primary point of contact for members and will need to support awareness, compliance, and navigation of new requirements. 
  • Identify and support at-risk populations. Plans can help flag members likely to qualify for exemptions and assist with documentation and care coordination to reduce inappropriate disenrollment.
  • Prepare for enrollment volatility. Increased churn driven by documentation delays and administrative barriers may affect financial performance, care continuity, and quality outcomes. 
  • Align with state expectations and funding constraints. Because these activities fall outside traditional Medicaid benefits, states and plans must carefully define roles, accountability, and funding mechanisms. 

Implications for Providers: A New Interface with Eligibility Systems 

Providers, particularly safety net organizations, will be directly affected by new documentation and enrollee support responsibilities and should be prepared to address the following: 

  • Expand administrative and clinical workflows. Providers will increasingly be asked to support medical frailty determinations, document functional limitations, and provide verification related to exemptions. 
  • Prepare for increased administrative burden. New documentation requirements and coordination with plans and states will require operational adjustments, particularly for organizations serving large Medicaid populations. 
  • Mitigate impacts of coverage disruption. Gaps in coverage—often tied to procedural barriers—may disrupt care continuity, particularly for high need populations, and increase uncompensated care. 
  • Serve as a critical partner in engagement efforts. Providers are uniquely positioned to identify at-risk individuals, educate patients, and support compliance, making them essential to implementation success. 

Many of the most complex determinations—such as medical frailty and caregiving—cannot be fully automated, requiring nuanced policy design and consistent operational execution. As a result, successful implementation will depend on the following: 

  • Standardized documentation and review processes 
  • Integrated data systems and verification pathways 
  • Clear division of responsibilities across interest-holders 
  • Coordination across policy, operations, and frontline personnel 

Act Now to Influence Community Engagement Rollout 

States and stakeholders face dual, immediate priorities—preparing for implementation and engaging in the federal rulemaking process. CMS is accepting comments on the IFR through July 31, 2026, creating a critical opportunity to shape final policy while building operational readiness. At the same time, the compressed timeline to 2027 for implementation underscores the need for rapid decision-making on policy design, systems investments, and partner engagement. 

The Medicaid community engagement requirements represent one of the most significant operational transformations in the program’s 60-year history. To succeed, organizations should act early, coordinate with interest-holders, and design implementation strategies that balance compliance, administrative efficiency, and coverage continuity. 

Now is the time to: 

  • Establish cross-functional governance and implementation plans 
  • Evaluate verification strategies and data integration opportunities 
  • Define roles and expectations across plans, providers, and partners 
  • Develop targeted communication and engagement strategies 
  • Conduct readiness assessments and system testing 

HMA can actively support state policymakers, health plans, and providers as they in navigate these challenges. For details, access the full HMA Issue Brief and explore the Community Engagement State Support Hub.

Blog

New Funding Approaches Prompt Maryland Healthcare Leaders to Reassess Strategies for Affordable Coverage

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Strategies to improve healthcare delivery, sustain coverage, and manage growing cost pressures resulting from federal policy changes and state budget dynamics were key topics of discussion at this year’s Maryland health policy conference, May 21, 2026, in Baltimore, MD. Hosted by State of Reform (SOR), an HMA Company, the program convened state policymakers and leaders of health plans, provider groups, and community-based organizations to examine the most pressing healthcare issues in Maryland.

Across sessions, participants explored key policy priorities, including Maryland’s implementation of the Rural Health Transformation Program (RHTP), efforts to stabilize and expand health insurance coverage, and early lessons from implementing the AHEAD (Achieving Healthcare Efficiency through Accountable Design) total cost of care (TCOC) model. 

Sustaining Medicaid and Marketplace Accessibility Amid Federal Policy Changes 

Throughout the conference speakers and attendees engaged on myriad issues and concerns resulting from the 2025 budget reconciliation act, now referred to as the Working Families Tax Cuts (WFTC) Act, and its potential impact on state Medicaid programs and coverage stability. Maryland Deputy Secretary for Healthcare Financing and Medicaid Director Perrie Briskin joined Johanna Fabian-Marks, Deputy Executive Director of the Maryland Health Benefit Exchange (MHBE), and Melissa Horn, Director of State Legislative Affairs at the Arthritis Foundation, to examine strategies for mitigating coverage loss and maintaining affordability. 

Speakers emphasized the need for improved coordination between Medicaid and the MHBE, including clear and consistent consumer communications and targeted outreach in counties most affected by federal policy changes. 

For example, Maryland leaders described several innovative approaches the MHBE is using to help people in the state maintain Marketplace coverage, including state-funded subsidies to offset the expiration of enhanced premium tax credits, streamlined auto-renewals, and simplified enrollment pathways for individuals identified as uninsured based on their tax and employment records. The state reported an 8 percent decline in enrollment in April 2026, noting that without these mitigation strategies, enrollment could have dropped by as much as one-third. 

The MHBE is using artificial intelligence (AI) to support document verification and is deploying a chatbot to help consumers navigate common questions. 

On the Medicaid side, the state is consulting multiple data sources—including CRISP (Chesapeake Regional Information System for our Patients), labor, and education data—to verify eligibility and, compliance with community engagement requirements to reduce administrative burdens.

Rural Health Transformation Program Implementation and Early Priorities 

Maryland’s RHTP, supported by nearly $168.2 million in first-year funding from the Centers for Medicare & Medicaid Services (CMS), was a hot topic at the conference. State leaders and implementation partners emphasized the program’s role in addressing rural health disparities, strengthening care delivery infrastructure, and improving chronic disease outcomes.

Elizabeth Kromm, PhD, Assistant Secretary, Maryland Department of Health, outlined the three pillars of the state’s RHTP plan: 

  • Expand the rural healthcare workforce 
  • Increase access to integrated primary, specialty, and behavioral health services 
  • Address the underlying drivers of chronic disease through nutrition and food system interventions 

Together, these initiatives highlight Maryland’s focus on both clinical care delivery and broader population health strategies. 

State officials also discussed the funding opportunities announced in April 2026, one of which seeks to support care delivery innovation, improve chronic condition management, and advance value-based care models. Speakers emphasized that connection is central to the program’s success—both the strength of community relationships, the connections enabled through technology, and the integration of clinical and nonclinical services. 

AHEAD Model: Advancing Total Cost of Care and Population Health 

Maryland’s participation in CMS’s AHEAD Model represents a significant shift toward healthcare cost containment and system transformation. As one of the first states to implement the framework, Maryland is testing a statewide approach to managing TCOC while improving quality and population health outcomes. 

A panel discussion including leaders from the MedChi, Johns Hopkins, CareFirst Blue Shield, and Kaiser Permanente, addressed implementation considerations, open policy implications, and how providers and payers were approaching these changes in payment for healthcare services. Reimbursement strategies for primary care services were still uncertain and may differ significantly from those used under the Maryland TCOC model. Panelists also discussed what this model means in the broader healthcare environment of reductions in Medicaid payments resulting from the reconciliation legislation and additional funding coming from the Rural Health Transformation Fund. They also described how Maryland could serve as an example for other states working to implement AHEAD in the coming years. 

Speakers noted that successful implementation will require strong coordination among providers, payers, and state agencies, and more details are necessary to fulfill the requirements. The model’s 10-year timeline positions Maryland as a leading test case for future federal and state efforts to scale TCOC approaches. 

AI in Healthcare: From Innovation to Real-World Impact 

AI’s role in healthcare delivery and policy continues to evolve, with growing attention on its practical applications and regulatory implications. A session led by Health Management Associates (HMA) Principal Brandon Greife, JD, and speakers from Microsoft AI, the Pair Team, the Center for Virtual Care, and b.well Connected Health explored how healthcare organizations conceptualize AI use cases to deploy solutions that demonstrate measurable impact. 

AI holds promise for improving care delivery, but realizing that potential requires navigating ethical, regulatory, and operational challenges. Mr. Greife led a panel discussion on how the healthcare industry is transitioning from abstract use cases for AI toward evaluating the real-world impact of deployed solutions. 

Session speakers also explored how healthcare is advancing from AI tools that support clinicians and payers to patient-facing AI that supports care navigation, chronic disease management, and community outreach. They rounded out the session with a focus on fundamentals of healthcare—concepts like data quality, clinical trust, patient safety, and demonstrated value at the point of care. 

Looking Ahead 

If you are looking for strategies and solutions to address urgent healthcare policy and operational challenges, HMA experts are available to help you navigate these complex changes and identify practical paths forward. 

Through the HMA National Conference, State of Reform partnership events, and other HMA convenings across the country, we connect state leaders, providers, health plans, and community stakeholders to share insights, elevate lessons, and advance solutions. Join us at an upcoming event—including our next HMA National Conference in New Orleans, LA on October 5-7, 2026—or explore additional opportunities to engage with HMA and access the full schedule of conferences and resources. 

State of Reform develops its conference agendas through collaboration with HMA subject matter experts/market leads and stakeholders across the public and private sectors, including state officials, community-based organizations, providers, payers, and more. 

Blog

Medicaid State Directed Payments: CMS Proposes Major Changes to Financing and Oversight

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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: 

  1. 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. 
  2. 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.). 
  3. 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. 

Blog

Connecting the Dots: Key Trends, Plan Shifts, and 2027 NBPP Changes Affecting ACA Marketplace Enrollment

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Explore how 2026 ACA Marketplace enrollment shifts, plan selection trends, and the 2027 NBPP changes are impacting affordability, market stability, and state strategies. 

Recent Health Management Associates (HMA) webinars and reports discussed that Affordable Care Act (ACA) Marketplace enrollment trends are evolving rapidly and the takeaways go beyond total enrollment numbers. In addition in May, the Centers for Medicare and Medicaid Services (CMS) finalized the 2027 Notice of Benefit and Payment Parameters (NBPP), introducing new flexibility for plans and states alongside stronger program integrity requirements. 

To understand how these changes are reshaping the ACA Marketplace,  Andrea Maresca spoke with Zach Sherman, Managing Director for Coverage Policy and Program Design at HMA as well as Michael Cohen, PhD, Principal at Wakely, and Liz Wroe, Principal at Leavitt Partners, both HMA companies.

Q: The recent Wakely analysis has been central to understanding what’s happening with ACA enrollment. What should people be paying closest attention to? 

Michael Cohen: The key takeaway is that ACA Marketplace trends are about much more than the enrollment numbers. The plans consumers choose, how long they maintain coverage over the course of 2026, and the evolving picture of the morbidity and demographics of the enrolled population are all critical factors for understanding the ACA Marketplace.

Our recent Wakely analysis found that only about 86 percent of enrollees paid their firstpremium in 2026. That’s a strong indicator that affordability pressures are already affecting coverage stability.  

Q: Where are these enrollment changes showing up most clearly?  

Michael Cohen: One data point that stood out is the number of new consumers in 2026, which was down 13 percent compared with prior years.  

The impact also shows up in coverage losses and consumer plan selection. Some consumers are dropping coverage altogether, while others are making tradeoffs to stay covered. These consumers are moving to lower-premium products—particularly from silver to bronze plans—which offer less robust coverage and higher out-of-pocket costs. Both trends matter, especially when thinking about access and financial risk. 

Q: How are enrollment shifts affecting broader ACA Marketplace stability? 

Zach Sherman: It varies by state, but there are notable trends. States that are using the Federally Facilitated Exchange (FFE) and expanded Medicaid saw the largest enrollment declines.  

Notably, non-expansion states on the FFE significantly outperformed expansion states. This was surprising because, with enhanced subsidies ending, the biggest net premium hit consumers would feel is at the lowest income levels, yet that’s where we saw most enrollment growth. 

Across the individual states, the enrollment shifts have real implications for stability. When healthier individuals leave the market—or shift to less comprehensive coverage—it can put pressure on premiums and risk pools. Issuers are taking this information to begin to make estimates for their 2027 pricing and what this means for their 2026 performance.  

At the same time, CMS is introducing new flexibilities in the final 2027 Notice of Benefit and Payment Parameters. 

Q: What are the most important changes in the 2027 final rule? 

Zach Sherman: Broadly, the rule makes a clear push toward increased flexibility for consumers, plans, and state regulators. 

One of the categories of changes is around expanded availability of lower premium plans with higher out-of-pocket costs. For example, catastrophic plans can now be offered for up to 10 years. 

CMS also removed certain requirements for standardized plans and relaxed limits on non-standard plan offerings. That gives issuers more room for plan design innovation, but it also means a more complex landscape and plan selection experience for consumers. 

One of the most notable changes is the introduction of non-network plans as qualified health plans. These plans don’t rely on traditional provider networks, which could lower costs while introducing new considerations for access and consumer experience.  

We’re seeing a shift toward allowing more tailored options and potentially less standardized marketplace programs. It will require a different approach from regulators, and it creates a different type of experience for consumers.  

Q: CMS is intensely focused on addressing fraud, waste and abuse. How is that playing out in the Marketplace program? 

Zach Sherman: Program integrity is a central theme in the 2027 final rule, too. It includes stronger eligibility verification, increased oversight of brokers and marketing practices, and new safeguards to reduce improper enrollments. So while there’s more flexibility in plan design, CMS is pairing it with more scrutiny on how the system operates. 

Q: Where do states fit in all of this? 

Zach Sherman: The final rule gives states more authority in key areas, including oversight of plan network adequacy and essential community provider compliance. We’re deep into discussions with states and health plan issuers about the changes they’re interested in exploring for their state. States will have to decide how to use that flexibility to balance affordability, access, and stability. 

Although many of the provisions take effect in the 2027 plan year, regulators and plans are receiving this information fairly late in the cycle which will make it difficult to incorporate some of the flexibilities. We’re anticipating robust discussions to continue next year and expect to see more variation starting in plan year 2028. 

Differences and Alignment in Federal ACA Marketplace Policy Discussions  

Q: Stepping back from the 2027 NBPP, what should interest-holders know about the evolution of the broader policy landscape? 

Liz Wroe: Members of Congress will need to see the 2027 rates being filed before they consider taking action. Even then, there’s no consensus on several key issues that prevented a bipartisan deal to bring back enhanced subsidies in 2025. 

Instead everyone has transitioned to a larger affordability conversation, and we’ll spend this year working on the policies with a goal of moving forward in 2027.  

There are different approaches to affordability and coverage that are driven by fundamentally different philosophies on how to structure the market. Some proposals focus on expanding subsidies, reducing cost sharing, and strengthening ACA protections. Others emphasize consumer-directed models like defined contributions, health savings accounts, and expanded use of ICHRAs [Individual Coverage Health Reimbursement Accounts] as well as broader access to lower premium plans. 

There are also several areas of bipartisan alignment. Prior authorization reform is a big one. There’s broad agreement that the current system creates administrative burden and delays in care. 

We’re also seeing common interest in policy approaches to strengthen medical loss ratio [MLR] requirements, expand price transparency, and address provider consolidation. 

Even if there is divided government after the November elections, these are areas where policy action may be more likely. States, health plans, providers, and other interest holders will want to monitor these issues now for signals of what may move forward later this year or in the next Congress. 

Stakeholder Opportunities to Inform Marketplace Programs 

Q: What should stakeholders be focused on right now? 

Michael Cohen: For issuers, it’s about understanding how these changes affect pricing, enrollment, and risk. There’s more uncertainty in how plans should be priced. 

Zach Sherman: For states, the focus should be on strategy. The choices they make now on plan oversight, market structure, and consumer protections will shape outcomes for several years. Additionally, there were several proposed Marketplace policies that CMS did not finalize in the 2027 rule—State-Based Exchange Enhanced Direct Enrollment Model—that CMS is likely to revisit in future rules, including the 2028 NBPP.   

Liz Wroe: Broadly, stakeholders should recognize that we’re in a transition period. The market is evolving, and policy is still catching up. 

Connecting the Dots: Enrollment, Rules, Regulators, and the ACA Marketplace 

For stakeholders across the healthcare landscape, navigating this environment requires both technical expertise and strategic insight. 

HMA works across policy, actuarial, and operational domains to help states, health plans, and other stakeholders translate these developments into actionable strategies—whether that means evaluating market risk, designing programs, or preparing for future policy scenarios. 

To explore these issues in more detail, access HMA’s webinar discussions and briefs, including: 

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What you missed in 2025—and why you should join us in 2026 

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Last year’s HMA conference brought together healthcare leaders to confront a changing landscape across Medicare, Medicaid, and the Marketplace. The agenda reflected the issues shaping the industry in real time: public policy in motion, the future of value-based care, behavioral health innovation, digital transformation, population health, and the partnerships needed to turn strategy into results. From keynote and plenary conversations to focused workshops and collaborative small-group sessions, attendees were immersed in practical discussions about what comes next. 

Want a quick look at what made the 2025 conference so valuable? Watch the recap video here. 

Those conversations matter even more now. Join HMA’s annual conference, US Healthcare 2026: Signals, Signs & Flashing Lights, October 5–7 in New Orleans. This year’s event is designed for executives and leaders across providers, payers, government, and the organizations that enable care delivery, with a clear focus on helping attendees navigate financial pressure, performance demands, and AI-driven change. Early registration is already underway, with early-bird pricing available through August 7. 

If you look back at last year’s agenda, you can see how well it anticipated this moment. In three fast-moving days, this year’s conference will help attendees read policy and market signals earlier and translate them into decisions, manage risk and costs while protecting outcomes and access, learn what is working to sustain systems of care amid uncertainty, how to apply AI and emerging technology through real operational and clinical use cases, and build relationships through structured networking across sectors. These priorities come to life across four central themes: managing risk and costs, sustaining systems of care, AI and innovation, and partnerships and collaboration. Together, they reflect exactly what healthcare leaders need now: practical strategies for a more complex environment, clearer paths to stability, measurable approaches to innovation, and stronger models for delivery and community impact. 

The 2026 conference is not just another industry event. It is an opportunity to step away from day-to-day demands and engage with peers facing the same questions about cost, risk, performance, access, and technology adoption. Whether you lead strategy, operations, policy, clinical transformation, product development, or partnerships, you will leave with practical insights you can put to work right away. The value is not only in hearing what is next, but in understanding what to do now. 

Attendees this year can expect the same cross-sector depth that stood out last year, paired with even greater urgency. The forces affecting Medicare, Medicaid, Marketplace, and adjacent programs are not moving in isolation. Payment reform connects to access. Digital transformation connects to quality and workforce realities. Behavioral health connects to community capacity, and long-term sustainability, and governmental policy changes drive all of the above. The organizations that succeed will be the ones that can see these connections early and act on them thoughtfully. 

Last year’s conference showed the value of bringing more than 350 policymakers, providers, payers, advisors, innovators, and community leaders into the same conversation. This year offers the chance to continue that conversation at exactly the right time. If you want insight that is strategic, grounded, and immediately relevant to the decisions in front of you, come join us in New Orleans this October. 

Register now to take advantage of Early Bird pricing, which ends August 7. 

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Michigan Health Policy Conference 2026: Medicaid, OBBBA, and State Budget Impacts

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Michigan is preparing for significant Medicaid and budget changes under the 2025 federal budget reconciliation law (P.L. 119-21, OBBBA), with more than 200,000 residents at risk of losing healthcare coverage. At the 2026 Michigan State of Reform Conference, state leaders and stakeholders highlighted implementation challenges, fiscal pressures, and strategies to maintain access to care. 

On May 5, 2026, State of Reform (SOR), an HMA Company, hosted its annual Michigan health policy conference, bringing together over 200 interest-holders, including providers, policymakers, and community-based organizations to examine how Michigan is adapting to rapid change and implementing new federal requirements.

The conference fostered candid discussion of the implications of the 2025 federal budget reconciliation act (P.L 119-21, OBBBA), with a particular focus on community engagement requirements, behavioral health, Michigan’s budget outlook, and the Rural Health Transformation Program (RHTP). 

Michigan DHHS’s Top Health Policy Priorities in 2026 

The day opened with a presentation from Meghan Groen, Chief Deputy Director of the Michigan Department of Health and Human Services (DHHS). Ms. Groen shared her department’s priorities and strategies, including implementation of OBBBA requirements and RHTP.  

Medicaid community engagement requirements and six-month eligibility redeterminations are the most immediate operational challenges for DHHS. Michigan also is advancing a set of readiness activities, including internal assessments, coordinated planning, leadership alignment, and regular communication with the Centers for Medicare & Medicaid Services (CMS). 

Another top priority Ms. Groen identified was expanded access to behavioral health. In a discussion focused on programmatic changes in behavioral health, panelists discussed how Michigan is using multiple tools, including Certified Community Behavioral Health Centers (CCBHCs), crisis stabilization units, and psychiatric residential treatment facilities (PRTFs), to address access gaps. Panelists Kristen Morningstar, Director of Michigan’s Bureau of Specialty Behavioral Health Services and Robert Sheehan, Chief Executive Officer, Community Mental Health Association of Michigan, shared how DHHS continues to collaborate with behavioral health providers to optimize service delivery and better meet member needs. 

How OBBBA Will Affect Michigan Medicaid Coverage and the State Budget 

Across sessions, speakers—including Danielle Devine, Market President at McLaren Health Plan, and Jen Flood, Budget Director for the State of Michigan—highlighted how OBBBA is already reshaping Michigan’s Medicaid program and broader fiscal outlook. These changes have direct implications for Medicaid financing and long-term planning and are a driver for the state’s $1 billion budget shortfall. Significantly, Michigan Gov. Gretchen Whitmer has recommended approximately $800 million in new taxes from tobacco and vaping to supplement the budget. The governor has also formed a working group of hospitals, health plans, providers, and other stakeholders to identify options for saving $150 million. 

DHHS projects that more than 200,000 individuals in Michigan are at risk of losing Medicaid coverage. Panelists discussed the downstream effects, including disruptions in care, a rising rate of uninsured residents, and increased financial strain on families and providers. Stakeholders shared concerns about increases in uncompensated care, food insecurity, and household debt. 

Panelists emphasized that navigating this environment will require close collaboration across the delivery system. 

How Michigan Is Using the Rural Health Transformation Program 

Amid the broader changes in the healthcare landscape, RHTP is emerging as a key strategy for sustaining and strengthening access to care in Michigan’s rural communities. Speakers such as Lauren LaPine-Ray, DrPH, MPH, Vice President, Policy & Rural Health at the Michigan Health & Hospital Association, emphasized the importance of aligning financing strategies, partnerships, and policy levers to optimize the impact of these investments. Michigan has already awarded RHTP funding to multiple entities to support implementation at the local level. 

Looking Ahead 

The challenges that Michigan is facing are not unique, and the need for shared insight and practical solutions is only growing. 

If you are looking for strategies and solutions to address urgent healthcare policy and operational challenges, HMA experts are available to help navigate these complex changes and identify practical paths forward. 

Health Management Associates (HMA), State of Reform brings together state leaders, providers, plans, and community organizations to surface real-world strategies for navigating federal change. Join us in Baltimore, MD, on May 21, 2026, or visit the SOR website to view the full conference schedule and register for an upcoming event. 

State of Reform develops its conference agendas through collaboration with HMA subject matter experts/market leads and stakeholders across the public and private sectors, including state officials, community-based organizers, providers, payers, and more. 

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National Collaborative Launched to Strengthen US Behavioral Health Crisis System

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National Alliance on Mental Illness (NAMI) and Health Management Associates (HMA) launch the National Collaborative for Crisis Systems Innovation 

The United States is facing an escalating behavioral health crisis, with growing demand for mental health and substance use services and persistent gaps in access to timely, appropriate care. In response, the National Alliance on Mental Illness (NAMI) and Health Management Associates (HMA) have launched the National Collaborative for Crisis Systems Innovation, a new initiative focused on improving how the United States responds to people in mental health crisis. 

This collaborative effort comes at a critical moment for the national crisis response system, as policymakers, providers, and communities work to build on recent investments and make further progress on sustainable, systemwide changes so that people experiencing a mental health crisis receive the care they need and deserve. 

The Crisis Response System Still Needs Improvement 

The launch of the 988 Suicide & Crisis Lifeline in 2022 marked a major milestone, making it easier for individuals to access immediate behavioral health support. Although the 988 Suicide & Crisis Lifeline has driven recent progress, significant challenges remain in the US mental health crisis system, including: 

  • Rising demand for crisis services 
  • Limited access to community-based behavioral health services 
  • Fragmentation across crisis responses systems 
  • Overreliance on emergency departments and law enforcement 

Experts increasingly agree that 988 is only one component of a comprehensive crisis system. Effective systems must also include: 

  • Mobile crisis response teams 
  • Crisis stabilization facilities 
  • Ongoing care coordination and follow-up services 

The National Collaborative represents the next phase of work and will focus on connecting these pieces into a more integrated and sustainable system. 

The National Collaborative Is a New Phase of Crisis System Transformation 

Building on four years of foundational work since the 988 Suicide & Crisis Lifeline launched in 2022, the National Collaborative is designed to strengthen the full continuum of behavioral health crisis care, from initial contact to stabilization and follow-up services. 

Its overarching goal is to ensure that individuals experiencing a mental health crisis receive timely, appropriate care rooted in dignity and support. The National Collaborative will: 

  • Serve as a nationwide hub for coordination, learning, and action 
  • Bring together public and private stakeholders across sectors 
  • Support states and communities in building coordinated, person-centered crisis response systems 
  • Advance innovation and shared solutions to improve outcomes 

The launch of this collaborative also reflects a broader shift in national focus—from expanding access to improving system performance and long-term sustainability. This approach recognizes that meaningful progress will require coordination across healthcare, social services, and community-based organizations. 

Why This Matters 

For state Medicaid agencies, health plans, and providers, the collaborative provides a platform to: 

  • Learn from peers across states and sectors 
  • Access emerging policy and implementation insights 
  • Align local strategies with national priorities in crisis care 

As crisis system transformation accelerates, coordinated efforts like this one will be essential to sustain momentum and improve outcomes. 

In the coming months, NAMI and HMA will engage key interest-holders and experts to identify and elevate the urgent needs in crisis response and ensure alignment on shared outcomes to improve crisis systems. Public and private organizations interested in improving behavioral health crisis systems are encouraged to engage with the National Collaborative for Crisis Systems Innovation. 

For more information on HMA’s work in Crisis services, contact Monica Johnson, Managing Director, HMA. 

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Special Alert: CMS Proposes Major Medicaid Payment Reform to Cap State-Directed Payments and Align Rates with Medicare

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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.  

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Turning Insight into Action: The New Operating Reality in Behavioral Health

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Thousands of behavioral health leaders, clinicians, advocates, and industry partners convened during NatCon 2026, April 27–29 in Denver, CO—one of the sector’s largest annual gatherings. This year, the event was more focused and pragmatic than in recent years. Although behavioral health providers still face significant pressure, there was also a noticeable shift toward how organizations can move toward sustainable models for growth, technology adoption, and integrated care delivery.

Health Management Associates (HMA) colleagues attended the event to listen, connect, and contribute to the meaningful conversations. Many of the themes and industry trends we have been tracking emerged consistently throughout the conference. In this article, our behavioral health experts discuss their collective insights and the road ahead for behavioral health interest-holders.

Key Themes from NatCon 2026 

Financial resilience remained at the forefront.

Behavioral health organizations continue to respond to constrained funding conditions, evolving reimbursement dynamics, and the need to diversify revenue beyond unstable and uncertain grant support and rate reimbursement volatility.

Operational visibility was closely tied to financial resilience.

Leaders discussed the need for a clearer, more real-time understanding of their performance. Performance was considered broadly to include financial indicators, clinical outcomes, and workforce capacity. Data and measurement have moved from a “nice to have” to “essential” for effective engagement with payers.

Innovation conversations are shifting toward implementation.

Artificial intelligence (AI) and digital tools were still hot topics, but the discussion has moved toward implementation and effective deployment. Conversations centered on practical use cases such as clinical documentation support, measurement-based care linked to improved health outcomes, and better integration with electronic health records (EHR).

This year’s conference highlighted enduring opportunities and challenges for the field, including:

  • Core service priorities, such as crisis response, suicide prevention, collaborative care and increased opportunities around Certified Community Behavioral Health Clinics (CCHBCs), and value-based payment strategies for financial resilience 
  • Workforce sustainability, with organizations looking to reduce administrative burden, strengthen recruitment and retention, and support staff well-being while demand for services continues to rise

Behavioral Health Industry Trends

The industry trends emerging from NatCon 2026 suggest that behavioral health organizations are entering a more disciplined operating environment to maximize efficiencies and ensure long-term sustainability in what seems sometimes to be a chaotic environment. Organizations are placing greater emphasis on their Medicaid strategy, managed care contracting, and value-based arrangements that reward outcomes and continuity of care. There is also continued momentum behind integrated models that connect behavioral health with primary care, public health, and community-based supports. Rather than treating mental health and substance use services as isolated programs, providers are increasingly building coordinated systems that address whole-person needs across settings.

Another notable trend is that technology is becoming a clearer differentiator. Some organizations are piloting or scaling technology, while others are taking a more cautious approach. Discussions surrounding AI in particular appeared to have matured significantly, with attention moving from abstract concerns toward change management, sequencing of use cases, return on investment, governance, and clinician trust. In that sense, technology is moving from being a side initiative to a strategic differentiator.

Transformation in the Behavioral Health Field

We were struck by the level of alignment across different parts of the field. Many of the themes we heard reinforced what providers experience daily—the need to manage uncertainty while continuing to meet the growing demand for services and more intentional use of data, infrastructure, and outcomes measurement.

More broadly, the conversations throughout the conference pointed to a field that is moving toward greater pragmatism. There is still a clear need for additional resources, but there is also growing recognition that adaptability will serve an equally important role.

How We Can Help

One of the most valuable aspects of NatCon is the opportunity to compare experiences across organizations and regions. The themes emerging from this year’s conference reflect broader shifts happening across the behavioral health landscape. 

A key role of our team is to connect what we hear in different settings and share it in a way that is useful for others in the field—highlighting emerging approaches, surfacing common challenges, and creating opportunities for peer exchange.

For questions about the market dynamics or approaches to strengthen your organization’s adaptability,  contact one of our HMA experts.

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Why Children’s Behavioral Health Demands Action Now

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Practical Strategies for Medicaid, Schools, Hospitals, and Communities

During Children’s Mental Health Awareness Week, May 3–9, and Mental Health Awareness Month, we are spotlighting actionable solutions across the US children’s behavioral health system. This post is intended for children’s behavioral health providers, state Medicaid agencies, school-based health centers, hospitals, local government agencies, local education agencies (LEAs), child welfare agencies, and philanthropic organizations that are working to strengthen prevention, crisis response, care coordination, and community-based continuums of care. HMA has a robust and growing team of behavioral health experts who support this work and have developed a series of case studies showcasing practical strategies implemented with clients—from crisis system design and referral pathway improvements to financing and implementation roadmaps.

Children’s Mental Health Awareness Week is a reminder that children’s behavioral health and youth mental health are not niche issues. They are systemic issues that require coordinated action across Medicaid, education, public health, hospitals and health systems, child welfare, and local government—especially where schools and community partners are on the front line.

The need remains substantial. The Centers for Disease Control and Prevention’s (CDC’s) 2023 Youth Risk Behavior Survey results, released in 2024, showed that 40% of high school students reported persistent feelings of sadness or hopelessness, even as some measures improved from 2021 levels. CDC also highlighted how bullying, safety concerns at school, racism, unfair discipline, and frequent social media use are tied to youth mental health risks.

The Substance Abuse and Mental Health Services Administration’s (SAMHSA’s) 2024 National Survey on Drug Use and Health, released in 2025, adds another important dimension. Among adolescents ages 12–17, the 2024 survey found that:

  • 15.4% experienced a major depressive episode within the past year
  • 10.1% had serious thoughts of suicide
  • About 40% who had a major depressive episode in the past year did not receive mental health treatment

The data show that progress is possible when systems respond with real capacity, access, and support. That is why this moment calls for more than awareness. It calls for action that is operational, financeable, and grounded in what works.

At HMA, we work with child-serving systems that are trying to solve real problems, including how to strengthen crisis response, improve referral pathways, build a more coherent continuum of care, and connect strategy with implementation.

Over the coming weeks, we will feature three examples that reflect different parts of the children’s behavioral health landscape.

1. Children’s hospital mental health strategy and crisis response

This case study will highlight work to help a children’s hospital strengthen its mental health approach and support next-stage crisis system design.

In this engagement, HMA partnered with Rady Children’s Hospital Orange County to move pediatric behavioral health from strategy to implementation—aligning emergency department (ED) mental health workflows, clarifying pediatric crisis pathways, building an investment-ready fiscal pro forma, and advancing priority programs to strengthen access and care coordination. This work can inform hospitals and health systems, Medicaid agencies, and community partners seeking to reduce ED boarding and improve pediatric crisis response.

2. County-level ecosystem and referral system improvement

This case study will show how local systems can bring multiple stakeholders together to improve referral pathways and make behavioral health more accessible for children, youth, and families.

HMA supported a county-led effort to strengthen cross-system referral pathways by aligning agencies around shared intake and triage practices, clearer roles and accountability, and more navigable access points for families. This approach is relevant for local government agencies, LEAs, school-based health centers, child welfare agencies, and community providers working to reduce fragmentation and speed connection to the right level of care.

3. Building a stronger children’s behavioral health continuum in New Orleans

This case study will focus on assessing gaps, identifying opportunities, and supporting a more coherent community-based continuum for children’s behavioral health.

HMA helped deliver the first integrated view of pediatric behavioral health in New Orleans, LA, aligning schools, healthcare, philanthropy, and government around a shared understanding of unmet needs and critical system gaps, as well as charting a prioritized roadmap to strengthen and better coordinate the continuum of care.

What It Means for Key Child-Serving Audiences

  • Children’s behavioral health providers: Prepare for stronger care coordination expectations (warm handoffs, follow-up after crisis, shared care plans) and increased demand for community-based alternatives to the ED
  • State Medicaid agencies: Focus on financeable crisis continuums (including pediatric crisis response), payment and contracting approaches that support access and continuity, and data/reporting that demonstrates outcomes
  • School-based health centers and LEAs: Strengthen referral pathways, clarify roles between schools and providers, and build protocols that support early identification while keeping students connected to safe learning environments
  • Hospitals and health systems: Improve pediatric ED mental health workflows, create clearer crisis pathways, and develop investment-ready business cases for behavioral health capacity and partnerships
  • Local government agencies: Convene cross-system partners, establish shared intake/triage and accountability, and use implementation roadmaps to move from planning to operational change
  • Child welfare agencies: Align behavioral health access for children and youth involved with child welfare, reduce handoff failures, and integrate crisis planning into placement stability and permanency strategies
  • Philanthropy: Target catalytic investments that fill continuum gaps, build capacity for implementation (not just planning), and support cross-system governance and measurement

The common thread among these examples is a simple belief: Children’s behavioral health improvement does not happen through aspiration alone. It happens when organizations and public systems translate urgency into design, partnerships, financing strategies, and implementation steps.

That is also why children’s behavioral health is so relevant. National data still point to high levels of distress and suicide risk among adolescents, despite recent improvements. CDC’s findings show how strongly youth mental health is shaped by the environments in which they live, learn, and play—especially their schools and communities.

For leaders in Medicaid, behavioral health, child welfare, education, county government, hospitals, and provider organizations, the question is not whether children’s behavioral health deserves attention, but rather is how to build systems that respond earlier, coordinate better, and support children and families more effectively.

We hope this series contributes to that conversation by sharing practical examples of work that can inform future action.

Other Resources on Children’s Behavioral Health and Youth Mental Health

Contact us to discuss how HMA can support your children’s behavioral health strategy—whether you work for a Medicaid agency, hospital/health system, school-based health partner, LEA, local government agency, child welfare agency, provider organization, or philanthropic funder. We can help with crisis continuum planning, care coordination design, referral pathway improvement, financing and pro forma development, and implementation support.

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Join us at HMA’s 2026 National Conference: Signals, Signs & Flashing Lights

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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. 

Ready to talk?