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.

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.

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.

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.

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.

Manatt Health outlines strategic approaches for states to deploy Rural Health Transformation Program funding—a five-year, $50 billion federal investment distributing roughly $1 billion per state—with emphasis on creating infrastructure that outlasts the program itself. The piece advocates for hub-and-spoke telehealth networks, workforce pipeline investments, and value-based payment models as mechanisms to address rural access gaps while generating sustainable Medicaid reimbursement. For Medicaid MCOs and state directors, this represents both a capital infusion into struggling rural networks and an opportunity to restructure how Medicaid beneficiaries access specialty and hospital care in underserved areas.

A Manatt-supported health technology convening found that while AI reduces individual health plan costs for prior authorization and medical coding, it increases transaction volume system-wide and may drive up overall spending. Provider AI tools are inflating billing intensity, prompting plans to respond with blanket downcoding and reimbursement cuts, though their effectiveness remains unclear. The analysis suggests reimbursement policy changes offer stronger levers for administrative efficiency than technology alone.

Health care investors are showing renewed interest in home- and community-based services as a strategy to reduce costs for high-complexity Medicaid populations, particularly those requiring long-term services and supports. The investor focus reflects both emerging regulatory clarity and a shift toward care models that can demonstrate near-term return on investment rather than long-horizon value-based arrangements. While the piece addresses broader health care investment trends, it identifies Medicaid LTSS as a specific area where institutional capital sees opportunity to bend the cost curve.

The $50 billion Rural Health Transformation Program is moving from federal framework to state-level implementation, with significant state flexibility in designing models across five strategic areas including workforce, access, and digital capabilities. While the program targets rural providers broadly, states' implementation choices will affect Medicaid managed care operations in rural markets, particularly around network adequacy, alternative payment models, and care delivery innovation. Providers are advised to align early with state priorities and begin operational planning as program details crystallize.

A new California Health Care Foundation report co-authored by Manatt reveals that approximately half of county behavioral health, public health, and social services agencies have minimal or no electronic data exchange with healthcare partners, with 71% of behavioral health agencies unable to receive hospital alerts for mental health emergencies. The research identifies four priority areas—technology standards, workforce, financing, and policy guidance—to address fragmentation that particularly affects Medicaid enrollees with complex needs. These findings are directly relevant to California Medicaid managed care plans that contract with counties for behavioral health services and must coordinate care across siloed systems.

Manatt Health and two Telehealth Centers of Excellence examine how artificial intelligence can streamline provider-to-provider electronic consultations in Medicaid and CHIP, which became reimbursable in 2023 but face adoption barriers from workflow burden and billing constraints. The analysis argues AI integration could reduce administrative friction, expand specialty access in underserved areas, and help Medicaid managed care organizations scale asynchronous specialty consultation programs more effectively. This is part of a four-brief series exploring AI applications across telehealth use cases relevant to payer and provider strategy.

Manatt outlines operational and compliance considerations for state Medicaid agencies as they design consumer notices for new federal work reporting requirements under H.R. 1. The piece emphasizes that poorly designed notices have historically contributed to inappropriate coverage loss and increased administrative burden, and urges states to invest in plain-language, user-tested communications before rolling out new outreach and non-compliance notices. For MCOs partnering with states on eligibility operations or member communications, this guidance offers practical design principles to support continuity of coverage.

CMS released detailed guidance outlining over 20 strategies for state Medicaid and CHIP agencies to strengthen child and youth behavioral health systems under EPSDT requirements, which mandate all medically necessary services for children under 21. The toolkit covers delivery system development, provider network adequacy, care coordination, and equity improvements, with concrete state examples of implementing services like coordinated specialty care and wraparound programs. For MCOs, this signals heightened federal expectations around pediatric behavioral health coverage, network capacity, and utilization management practices that comply with EPSDT's broad entitlement standards.

Federal oversight of state Medicaid program integrity is intensifying, with CMS now investigating New York's claiming patterns and spending levels following similar inquiries in Minnesota, California, and Maine. Minnesota has filed suit challenging CMS's decision to defer $260 million in federal payments for already-reimbursed services, marking the first legal challenge to the agency's expanded enforcement efforts. The piece outlines CMS's two enforcement mechanisms—payment deferrals without prior hearings and prospective withholding requiring hearings—giving MCOs and state officials insight into how federal program integrity actions may affect cash flow and compliance expectations.

States implementing new Medicaid work requirements must identify medically frail enrollees exempt from these rules, but traditional claims data in MMIS systems lag behind real-time clinical information—creating coverage continuity risks. This analysis explores how health information exchanges can supplement state data systems with more current diagnostic and utilization information to support timely ex parte exemption determinations. The approach is particularly critical for managed care plans where encounter data reporting delays compound identification challenges.

A federal court approved a class action settlement requiring New York to overhaul how it delivers intensive home- and community-based mental health services to Medicaid-enrolled children and youth, joining at least ten other states subject to similar consent decrees since the 2006 Rosie D. case. The settlement stems from allegations that New York failed to meet its EPSDT obligations, ADA requirements, and Section 504 compliance, resulting in unnecessary institutionalization of youth with behavioral health needs. For Medicaid managed care plans, this settlement will likely require significant operational changes to expand intensive home- and community-based service capacity, strengthen care coordination for high-need youth, and ensure compliance with EPSDT's broader amelioration standard compared to commercial coverage.

All 50 states received federal awards under the new Rural Health Transformation Program, with first-year allocations ranging from $147 million to $281 million to strengthen rural health systems through workforce expansion, health IT modernization, and new delivery models. States now face implementation challenges including reconciling budgets with CMS, building governance structures, finalizing procurement approaches, and balancing rapid spending timelines against thoughtful program design. While the program isn't Medicaid-specific, many states will likely leverage Medicaid managed care delivery systems and payment structures to execute rural health initiatives, creating indirect implications for MCO operations in rural markets.

Health plans receiving substance use disorder (SUD) patient data from specialized treatment programs must comply with updated 42 CFR Part 2 regulations by February 16, 2026, including revisions to privacy notices and operational procedures. The regulations now carry HIPAA-level enforcement penalties after being largely unenforced historically, creating new compliance risk for Medicaid managed care organizations that handle SUD data. Plans must update both Part 2 and HIPAA notices of privacy practices to reflect stricter protections for SUD information compared to other health data.