CMS Revises State Directed Payment Grandfathering Rules, Tightens Oversight Under Congressional Mandate

CMS has updated its guidance on State Directed Payments in Medicaid managed care, revising how states can grandfather existing arrangements under new statutory payment caps enacted by Congress. The February 2026 guidance modifies CMS's interpretation of the grandfathering window and affects SDPs for hospital, nursing facility, and academic medical center practitioner services—critical payment mechanisms MCOs use to distribute supplemental payments to providers. This represents a significant shift in federal oversight that will require MCOs and state Medicaid agencies to reassess their SDP arrangements and compliance strategies.

Managed Care · Finance

This is outside commentary from Sellers Dorsey, not part of Medicaid Monitor's independently scored news coverage.

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