Sellers Dorsey outlines approaches for state Medicaid programs to balance community integration commitments with fiscal pressures in home and community-based services. The piece addresses operational challenges including 607,000 people on HCBS waiting lists, workforce shortages, and cost growth outpacing enrollment, while noting evolving federal expectations for transparency and program integrity. The analysis is framed around maintaining ADA compliance while managing waiver capacity constraints and rising per-member costs.

This white paper argues that while fraud enforcement in healthcare has reached record levels, waste and abuse represent larger sources of overspending that require different strategies than traditional program integrity approaches. The authors distinguish between fraud, waste, and abuse as separate problems requiring tailored solutions, and propose five evidence-based approaches for Medicaid and Medicare payers to address waste and abuse through collaboration with providers rather than purely adversarial enforcement. The analysis is particularly relevant for MCO compliance teams balancing program integrity requirements with provider network relationships.

Avalere's new explainer video series addresses regulatory changes affecting health plans, with episodes covering Medicare Advantage risk adjustment methodology shifts, the Clover Health Stars lawsuit implications, and heightened federal program integrity enforcement. While focused primarily on Medicare Advantage rather than Medicaid managed care, the compliance and regulatory themes—particularly around fraud, waste, and abuse oversight—have parallel implications for Medicaid MCO operations and state oversight strategies.

The SUSTAIN 340B legislation codifies point-of-sale discounts for covered entities including Medicaid safety-net providers, requires manufacturers to honor 340B pricing regardless of contract pharmacy arrangements, and introduces new program integrity standards including clearinghouse oversight for duplicate discount prevention. For Medicaid MCOs and state agencies, the bill would formalize contract pharmacy protections while adding transparency requirements that could affect claims processing, pharmacy network management, and coordination between 340B discounts and Medicaid rebates. The proposal would also sunset CMS's planned rebate model pilot within a year of enactment.

CMS's proposed standardized refund methodologies under the Medicare Drug Negotiation Program would calculate manufacturer rebates differently depending on whether drugs have deep existing discounts or not, creating varying financial impacts across competitive drug classes. This matters for Medicaid managed care because the Medicare negotiated prices will serve as benchmarks and could reshape manufacturer pricing strategies and discount structures that MCOs rely on for pharmacy benefits. Plans with formularies weighted toward either high-discount or low-discount competitive classes may face different financial exposure as these Medicare pricing policies take effect.

CMS's Center for Program Integrity is dramatically scaling up its fraud prevention efforts using AI-powered claims screening and a centralized fraud operations center, achieving a 22:1 return on investment in 2025. The agency is shifting from a pay-and-chase model to pre-payment intervention, using real-time risk scoring to flag suspicious claims before funds are released. While the article focuses on Medicare fee-for-service examples, the fraud detection infrastructure and analytic capabilities discussed apply across CMS programs including Medicaid managed care, where program integrity is a core compliance responsibility for MCOs and state oversight agencies.

State prescription drug affordability boards are increasingly tying their price caps to Medicare negotiated prices rather than developing independent methodologies, with Colorado and Maryland leading this approach for products like Enbrel and Ozempic. However, no upper payment limit has actually taken effect yet, some states have dissolved their boards entirely, and aggressive bills in Virginia have faced repeated vetoes. The shift matters for Medicaid MCOs because these state pricing controls would directly affect pharmacy reimbursement rates and formulary strategies if they ultimately go into effect.

This quarterly tracker reviews the expanding landscape of AI regulation affecting health care, noting that 20 states enacted AI legislation in the first half of 2026 with particular attention to health plan and provider AI use, patient-facing chatbots, and transparency mandates. The piece highlights several federal developments including proposed changes to CMS payment for AI-enabled software services and potential liability frameworks, which could directly affect how Medicaid MCOs deploy predictive analytics, utilization management tools, and member-facing technologies. While the analysis covers the broader health sector, Medicaid payers are explicitly mentioned as stakeholders who should prepare for compliance with emerging AI disclosure and safety requirements.

Sellers Dorsey explores how schools can function as coordination hubs connecting Medicaid-funded behavioral health services with child welfare agencies and community providers. The brief addresses fragmentation across systems serving children and proposes schools as an access point for integrating care delivery. This model has direct implications for MCO network adequacy, care coordination strategies, and how managed care plans structure pediatric behavioral health benefits and community partnerships.

CMS has proposed replacing the current 6% indirect hold harmless threshold for health care-related taxes with state-specific thresholds, implementing provisions from federal budget reconciliation legislation. The rule would phase down thresholds for expansion states starting in 2028, add health insurers as a new permissible tax class, eliminate the 75/75 test, and create new reporting requirements. With an estimated $246 billion reduction in federal Medicaid spending over ten years, this proposal has significant implications for how states finance their Medicaid programs and could affect MCO premium rates and overall program funding.

The $50 billion Rural Health Transformation Program is enabling states to scale school-based health care in rural areas, with particular emphasis on behavioral health access. While school-based health isn't new, RHTP's flexibility allows states to fund workforce, telehealth infrastructure, and sustainable care delivery models that could create new partnership and network adequacy opportunities for Medicaid managed care organizations serving rural populations. The analysis suggests successful models will require partnerships between schools and health care organizations with clinical and administrative capacity—roles MCOs may be positioned to fill.

With H.R. 1's work requirements expected to cause 5.3 million people to lose Medicaid expansion coverage by 2034, state family planning programs will become a critical safety net as federal rules require eligibility screening for all other coverage pathways before termination. States should strengthen their family planning programs now by investing in provider networks, benefits, systems, and outreach to handle the influx while preserving access to contraceptive care in a post-Dobbs environment. These efforts align with broader maternal health initiatives like 12-month postpartum coverage extensions.

A Manatt-supported convening examined how payment structures need to evolve as clinical AI moves from assistive to autonomous roles in care delivery, with participants concluding that existing fee-for-service models will inflate costs while value-based arrangements remain insufficient without redesign. The discussion highlighted that AI's ability to substitute technology for clinical labor requires fundamentally new, outcome-based payment approaches rather than incremental modifications. For Medicaid MCOs navigating capitated arrangements and quality incentives, these emerging payment frameworks could significantly affect how AI-enabled services are contracted and how savings from automation are captured or shared.

This piece examines seven operational challenges facing Medicaid MCOs—including frequent eligibility redeterminations, care continuity during coverage gaps, network adequacy pressures, and evolving state quality expectations—and outlines how technology platforms can help address them. The analysis focuses on practical tech-enabled solutions like real-time eligibility tracking, care coordination tools that preserve member history across enrollment gaps, and interoperability platforms that unify clinical and claims data. It's directly relevant to MCO compliance teams and executives managing operational strategy in a high-churn, high-accountability environment.

Federal rules implementing January 2027 Medicaid work requirements delegate critical operational decisions to states, including how to define medical frailty exemptions and verify compliance. Early implementation in Nebraska and Montana shows dramatic state variation—from 6,800 qualifying diagnosis codes in one state to fewer than 100 conditions in another—creating complex compliance environments for health plans operating across multiple jurisdictions. MCOs will face differential enrollment impacts, varying administrative burdens, and state-specific verification protocols as they prepare systems for the rollout.

CMS's interim final rule on Medicaid work requirements takes effect January 2027, requiring 80 hours monthly of qualifying activities from most non-pregnant working-age adults. The medical frailty exemption is narrower than expected—requiring both a serious condition and impairment in at least one activity of daily living—meaning many chronically ill enrollees may lose coverage. Avalere estimates 7.8 million could become uninsured by 2034, creating urgent operational and care continuity challenges for MCOs serving affected populations.

State Medicaid agencies are shifting from voluntary encouragement to mandatory requirements for MCO value-based purchasing arrangements, with many now setting specific targets, timelines, and accountability measures tied to the LAN framework. The analysis finds states are using VBP mandates as the primary tool to drive maternal health, behavioral health, and health equity outcomes, requiring MCOs to demonstrate provider readiness, data infrastructure, and financial risk management capabilities. This evolution makes VBP competency a competitive differentiator in procurement and places new performance pressure on both plans and their provider networks.

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.