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Blog

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.

Solutions

What Medicaid Policy Changes Should Healthcare Leaders Be Paying Attention to Right Now? 

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HMA Solutions

What Medicaid Policy Changes Should Healthcare Leaders Be Paying Attention to Right Now? 

Medicaid policy is undergoing a massive regulatory shift driven by the One Big Beautiful Bill Act (OBBBA) legislation. 

To maintain financial stability, compliance, and continuity of care during these Medicaid policy changes, healthcare leaders must focus their attention on four highly critical, interconnected policy domains. 

Changes to Section 1115 Demonstration Waivers

The federal approach to approving, extending, and evaluating Section 1115 waivers is experiencing a significant pivot, holding space for true innovation and pilots.

Shifting Federal Alignments: CMS is reshaping the criteria for waiver flexibilities. For instance, recent guidance has rolled back certain previous pathways used to cover health-related social needs (HRSNs) under Section 1115 authority. CMS issued a letter to State Medicaid Directors explaining its planned revisions to the program.

Strategic Scenario Planning: As outlined in HMA’s analysis on CMS Proposes New Budget Neutrality Framework for Medicaid Section 1115 Demonstrations, state changes or extensions will trigger comprehensive CMS reviews. Leaders must transition toward alternative authorities (such as 1915(c) or managed care options) while monitoring emerging federal priorities around substance use disorders (SUD) and carceral reentry initiatives

Updated Eligibility & Community Engagement/Work Requirements

The eligibility path for Medicaid enrollees is tightening dramatically, introducing significant risks of coverage disruption that will create coverage churn in state insurance markets. 

Mandatory Community Engagement: Under federal mandates, able-bodied adults without young children must demonstrate at least 80 hours per month of qualifying activities (employment, education, or community service). 

Accelerated Churn Risks: As evaluated in HMA’s report on the Medicaid Community Engagement Interim Final Rule, states are shifting to an accelerated six-month redetermination cycle for expansion populations. Managed care organizations (MCOs) and health systems face immediate operational hurdles to track compliance and prevent massive lapses in continuous enrollment. 

Focus on Managed Care Oversight & Program Integrity to Reduce Fraud, Waste, & Abuse

Federal regulators are pairing stricter oversight with direct financial consequences to reduce administrative inefficiencies and improper payments and crack down on fraud and abuse. 

Error Rate Financial Sanctions: Beginning in FY 2030, states exceeding a 3% eligibility error rate face severe pullbacks in federal funding for files lacking insufficient verification data. 

Aggressive Auditing and MCO Risk: Enhanced program integrity frameworks require monthly network audits to root out terminated providers and quarterly data matching for deceased enrollees. Healthcare leaders must brace for tighter risk adjustments, standardized plan requirements, and intensive fraud, waste, and abuse (FWA) strategies.

Changes to State Directed Payments (SDPs) & Reimbursement 

CMS is fundamentally altering provider reimbursement limits and closing localized financing mechanisms to ensure a more regulated environment. 

Medicare-Linked Caps: Moving away from average commercial rate benchmarks, CMS is establishing rigid ceilings. As captured in HMA’s brief on Proposed Changes to Medicaid State Directed Payments, new limits cap SDPs at 100% of Medicare rates for expansion states and 110% of Medicare rates for non-expansion states. 

Choking Provider Tax Revenue: Effective October 2026, states are restricted from implementing new provider taxes beyond July 2025 thresholds. Furthermore, as detailed in HMA’s commentary on Medicaid State Directed Payments: CMS Proposes Major Changes to Financing and Oversight, existing provider taxes in expansion states will steadily choke down from 6% to 5.5% in 2028, and ultimately down to 3.5% by 2032, forcing health systems to rapidly recalibrate their financial baselines. 

How HMA Helps Leaders Respond 

Health Management Associates (HMA) turns high-stakes statutory mandates into functional, compliant operational strategies. We offer end-to-end strategic guidance, actuarial analytics, and technical assistance:

  • Strategic Planning & Financing Modeling: Developing innovative strategies to model state-directed payment caps, analyze provider tax restrictions, and structure financial baseline adjustments.
  • Operational & Workflow Overhauls: Redesigning eligibility systems to execute 6-month redeterminations and building automated tracking platforms for community engagement. 
  • Program Integrity & Compliance: Aligning FWA shielding strategies and conducting pre-audit assessments to mitigate the risk of eligibility error-rate penalties. 
  • Workforce & Stakeholder Alignment: Delivering targeted training and managing cross-functional change management to ensure seamless communication between state agencies, MCOs, and providers. 

With a deep bench that includes 10 former Medicaid and CHIP directors and active project experience across more than 35 state programs, HMA equips healthcare leaders to navigate this shifting regulatory landscape with absolute confidence. 

Watch our Recent Medicaid Webinars:

Webinar Replay – Summer Webinar Series: How New Program Integrity Expectations Affect Medicaid Payments

Webinar Replay – Summer Webinar Series: The Future of Medicaid State Directed Payments 

Webinar Replay – Summer Webinar Series: Understanding Work and Community Engagement Requirements and New Section 1115 Guidance

Stay Ahead of Medicaid Changes with our Latest Insights:

Briefs & Reports

CMS’s Proposed Provider Tax Rule Could Reshape Medicaid Financing

Article

Connecting the Dots: Medicaid Program Integrity Enters a New Era of Strategy and Operational Readiness

Article

SFY 2027 Budgets Signal How States Are Responding to Medicaid and SNAP Funding Provisions in the WFTCA

Article

Early Bird Pricing Ends August 7 for HMA’s National Conference: US Healthcare 2026: Signals, Signs & Flashing Lights

Article

Connecting the Dots: What CMS’s Proposed Rule on Provider Taxes Rule Could Mean for States, Marketplaces, and Health Insurers

Briefs & Reports

CMS Proposed Rule (CMS-2452-P) Could Reshape State Health Insurer Assessments—and Put Marketplace and Reinsurance Funding at Risk

Brief & Report

Medicaid Community Engagement Interim Final Rule: Key Implications for States, Payers, and Providers

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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.

Please fill out this form to receive a copy of the issue brief.

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. 

Webinar

Webinar Replay – Summer Webinar Series: How New Program Integrity Expectations Affect Medicaid Payments

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This webinar was held on August 12, 2026.

Medicaid program integrity is entering a new era as states, health plans, providers, and other Medicaid stakeholders face increased expectations around payment accuracy, fraud, waste, and abuse prevention, provider oversight, and accountability. In this webinar, HMA experts explore how program integrity is evolving from a largely retrospective compliance function into a proactive, enterprise-wide approach to managing risk and strengthening performance. Attendees will learn about key themes emerging across the country, what successful program integrity looks like, and practical approaches for moving from assessment and planning through implementation, monitoring, and reporting. The discussion will also highlight how data, analytics, and technology-enabled strategies can help organizations identify issues earlier, improve payment integrity, and build more sustainable program integrity programs.

Webinar

Webinar Replay – Summer Webinar Series: The Future of Medicaid State Directed Payments 

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This webinar was held on June 10, 2026.

As CMS advances a proposed rule that would significantly reshape Medicaid State Directed Payments (SDPs), states, health plans, hospitals, and other providers face growing uncertainty around Medicaid financing, reimbursement, and access to care.

In this webinar, HMA experts examine the proposed SDP changes, including new Medicare-based payment limits, phase-down requirements for existing programs, and restrictions on supplemental payment structures. The discussion explores the potential financial, operational, and policy implications for Medicaid stakeholders and highlights key considerations for planning, advocacy, and implementation.

Learning Objectives

  • Explain the major provisions of CMS’s proposed Medicaid State Directed Payment rule.
  • Assess how new Medicare-based payment limits could affect provider reimbursement and Medicaid financing strategies.
  • Identify potential impacts on value-based payment arrangements, provider sustainability, and access to care.
  • Evaluate key considerations for states, health plans, and providers as they prepare for implementation and future policy changes.
Webinar

Webinar Replay – Summer Webinar Series: Understanding Work and Community Engagement Requirements and New Section 1115 Guidance

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This webinar was held on July 15, 2026.

This webinar examined significant changes to the Medicaid program, including new federal requirements related to work and community engagement and newly released guidance on Section 1115 demonstrations. HMA experts discussed the policy and operational implications for states, providers, health plans, and community organizations, highlighting key considerations for financing, program design, eligibility, benefits, compliance, and implementation. The session also explored how states were responding to these changes and what they could mean for beneficiaries and other stakeholders moving forward.

Download our supporting FAQ.

Blog

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.  

Blog

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. 

Brief & Report

The New Uninsured: State Policy Options for Californians Losing Medi-Cal Coverage

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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.

Blog

CMS Proposes Modest Hospital Payment Updates and Signals Expanded Use of Mandatory Value-Based Models

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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. 

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Medicaid Managed Care Enrollment: Q4 2025 Trends and Early Signals Ahead of New Eligibility Policies

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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. 

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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.  

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