CMS's proposed rule would significantly restrict state directed payments in Medicaid managed care by imposing Medicare-based payment caps not only on the four service categories specified by Congress (inpatient, outpatient, nursing facility, and academic physician services) but also on other non-grandfathered SDPs beyond the statutory text. The rule threatens a critical Medicaid financing mechanism states use to ensure provider access and system stability, with stakeholders arguing CMS has overreached its authority. Despite broad potential impact across states and provider types, public comment volume has been unexpectedly low compared to other recent Medicaid rulemakings, creating advocacy opportunities for MCOs and affected stakeholders.

The federal Rural Health Transformation Program has distributed $50 billion to states with tight Year 1 spending deadlines and Year 2 funding dependent on demonstrated progress by August 2026. States are using varied contracting approaches and investment strategies, and must now assess early results to guide more targeted Year 2-5 investments. While the program is federal health policy with state implementation components, it operates outside the Medicaid managed care framework and focuses broadly on rural health infrastructure rather than managed care delivery systems.

Milliman's 18th annual benchmarking report analyzes financial performance for 186 Medicaid MCOs representing $305 billion in revenue, finding composite underwriting margins improved slightly to -0.1% in 2025 from -0.6% in 2024, though still well below the 2.5-3.5% gains seen during 2021-2023. The report shows medical loss ratios at 94.3%, declining risk-based capital ratios, and administrative costs rising on a per-member basis as enrollment fell post-PHE unwinding, providing state directors and MCO executives critical benchmarks for assessing rate adequacy and financial health heading into 2026.

This piece analyzes the implementation challenges facing health plans that signed CMS's Payer Pledge to adopt outcomes-based payment for technology-enabled chronic disease management by 2028. While CMS's ACCESS model provides a framework for Original Medicare, participating plans—including Medicaid MCOs—must independently determine which conditions to target, how to structure payment, what outcomes to measure, and how to operationalize vendor relationships. The authors outline strategic considerations for plans to translate the pledge into functional payment models that can genuinely improve quality and cost outcomes.

A new whitepaper examines strategies for rural hospitals, FQHCs, and community health organizations to leverage operational data for better workflow efficiency and patient outcomes. The analysis focuses on how safety-net providers—which serve large Medicaid populations and often contract with MCOs—can close gaps in their use of performance intelligence. While not exclusively focused on Medicaid managed care, the operational improvements discussed directly affect how these providers participate in value-based arrangements and meet MCO quality standards.

Federal Medicaid work requirements mandating 80 hours monthly of community engagement for expansion adults aged 19-64 take effect January 2027, with states responsible for defining exemptions, compliance pathways, and verification processes. The rule creates significant operational and financial uncertainty for Medicaid managed care plans, which must prepare enrollment systems and work with state agencies on implementation decisions that will vary substantially by jurisdiction. Stakeholders including MCOs should engage now during the comment period and state planning phase to shape exemption policies, hardship provisions, and compliance demonstration approaches that will directly affect coverage continuity and plan operations.

Sellers Dorsey breaks down a new CMS State Medicaid Director Letter that implements statutory budget neutrality requirements for Section 1115 demonstrations approved after January 2027, stemming from federal legislation. The guidance previews forthcoming rulemaking and provides states with early direction on compliance with these new fiscal guardrails. This matters for MCOs because 1115 waivers often define managed care program structure, covered populations, and available funding—and tighter budget neutrality requirements may constrain demonstration scope and financing approaches.

CMS's June 2026 interim final rule establishes Medicaid community engagement requirements effective January 2027, applying to non-pregnant adults 19-64 in expansion populations across 43 states and DC. The rule includes a stricter-than-expected medical frailty exemption requiring ADL impairment and prohibits states from delegating eligibility verification to MCOs, while CMS projects combined 15% disenrollment from noncompliance and procedural issues. MCOs must now prepare operational strategies to mitigate enrollment loss and support members in meeting requirements, even as they cannot directly perform eligibility verification.

Milliman's quarterly financial analysis of Texas Medicaid managed care plans through Q4 SFY 2025 documents how the end of continuous coverage protections affected MCO enrollment, net income, and medical loss ratios across STAR, STAR Kids, STAR+PLUS, CHIP, and dual-eligible programs. The report examines financial metrics including directed payment pass-through expenses, administrative costs, and experience rebate impacts as plans navigated large-scale eligibility redeterminations. State Medicaid directors and MCO finance teams can use these program-specific benchmarks to assess operational performance during the unwinding period and inform rate-setting discussions.

CMS has published an interim final rule implementing federally mandated Medicaid community engagement (work) requirements, establishing narrow definitions for exemptions like medical frailty and family caregiving while limiting state flexibility to define these terms independently. The rule places specific constraints on what managed care plans can do regarding these requirements and projects that 15 percent of affected enrollees will lose coverage due to noncompliance or procedural issues. For MCO compliance teams and state Medicaid officials, this creates immediate operational challenges around member identification, verification processes, and disenrollment protocols effective July 31, 2026.

Federal disruption to ACIP has created challenges for Medicaid managed care organizations as they manage immunization coverage policies amid fragmented guidance from multiple clinical bodies. While a March 2026 injunction preserved broad vaccine coverage requirements, the uncertainty has forced states and health plans to independently maintain coverage policies, creating implementation complexity. The article explores how public health stakeholders are adapting to fill federal policy gaps through alternative recommendation pathways and trust-building efforts.

Sellers Dorsey experts discuss how CMS and state pressure for Medicare-Medicaid integration is forcing health plans to fundamentally restructure operations beyond basic D-SNP compliance toward fully integrated dual-eligible models. The conversation covers critical pain points including care coordination architecture, provider incentive misalignment, and the operational differences between traditional D-SNPs and FIDE SNPs. The firm emphasizes that successful integration requires comprehensive organizational change affecting data systems, member experience design, and value-based contracting strategy across both programs.

This analysis examines how states are using federal Rural Health Transformation Program dollars to tackle maternal health challenges in rural Medicaid populations, focusing on maternity care deserts affecting one-third of U.S. counties. State strategies include financial incentives to sustain low-volume labor and delivery units, workforce expansion through doulas and midwives, and telehealth-enabled prenatal care—all with direct implications for MCOs serving rural maternal populations. With states facing an October 2026 deadline to obligate first-year awards, MCOs should understand how these rural infrastructure and workforce investments will affect their provider networks and member access.

CMS has released a proposed rule that would formalize state directed payment limits under recent federal legislation and introduce new restrictions on targeted fee-for-service provider payments in Medicaid. The rule clarifies existing SDP payment limits, grandfathering provisions, and phase-down requirements that will directly affect how states structure supplemental payments through managed care arrangements. Sellers Dorsey provides a detailed breakdown of the key provisions during the 60-day comment period.

States are adapting Community Care Hub models—originally designed to connect Medicaid plans with community organizations addressing social needs—to serve as backbone infrastructure for rural health system transformation under the $50 billion Rural Health Transformation Program. Several states including North Carolina, Missouri, and Rhode Island are deploying hub-like entities to centralize contracting, referrals, payment, and coordination across fragmented rural providers and CBOs. The expansion raises questions about sustainability, capacity, and whether CCHs can successfully scale from Medicaid social care coordination to broader regional health system transformation.

This analysis examines how H.R. 1's Medicaid work requirements, shortened retroactive coverage, new cost-sharing rules, and the end of enhanced ACA premium subsidies will drive an estimated 14 million people to lose coverage by 2028, with approximately 6 million losing Medicaid alone. The piece argues that Medicaid MCOs and dual-market plans must prepare for significant membership attrition, adverse risk selection as healthier members disenroll, and increased administrative complexity from new verification and redetermination processes. Provider-sponsored plans and those heavily reliant on Medicaid expansion populations face particularly acute financial and operational risk requiring data-driven retention strategies and product realignment.

Manatt's 50-state survey finds that despite COVID-era expansions, state pharmacy laws still impose inconsistent restrictions on adult vaccine administration—including narrow vaccine lists, prescription requirements, and limits on technician authority. These variations can delay access when FDA approves new vaccines or CDC updates recommendations. The analysis recommends three policy reforms: broad vaccine authorization tied to FDA/CDC approval, eliminating prescription requirements for pharmacists, and extending administration authority to trained pharmacy technicians.

This white paper argues that state child welfare agencies should strategically realign funding by expanding Medicaid coverage for behavioral health and clinical services while reserving Title IV-E federal funds for safety and permanency supports that Medicaid cannot cover. The authors contend that better coordination between Medicaid and child welfare financing can reduce fragmentation, decrease reliance on congregate care settings, and stabilize state budgets as federal Title IV-E reimbursement declines. For Medicaid managed care leaders, this presents both an opportunity and a challenge: MCOs may see expanded behavioral health service obligations for foster and at-risk children while state agencies seek stronger cross-system data sharing and care coordination.

Rural providers now have basic data infrastructure but lack the ability to translate information into actionable clinical and operational decisions, creating ongoing challenges in value-based care participation and care coordination. State programs like the Rural Health Transformation Program are shifting investment toward analytics integration and workflow tools rather than just connectivity. For Medicaid MCOs operating in rural markets, this highlights the gap between data exchange requirements and providers' actual capacity to use shared information effectively in care management.

New ONC data shows that while 68% of substance use and mental health treatment facilities have adopted electronic health records, only 20% participate in health information exchanges—a gap that directly affects Medicaid MCOs' ability to coordinate care for members with behavioral health needs. The exclusion of behavioral health providers from HITECH Act incentives continues to create care coordination challenges, particularly for complex Medicaid populations requiring integration across physical and behavioral health settings. State-operated facilities lag significantly behind federally-operated ones in EHR adoption, presenting varied challenges depending on a state's Medicaid delivery system structure.