CMS Proposes Payment Limits on State Directed Payments and Targeted Fee-for-Service Rates

CMS published a proposed rule on May 22, 2026, that would impose payment limits on additional state directed payments in Medicaid managed care and establish new limits for targeted fee-for-service payments. The rule draws authority from section 71116 of H.R. 1 (the "One Big Beautiful Bill Act") and presidential directives. State directed payments allow states to require managed care organizations to adopt specific provider payment arrangements, and new limits could constrain state flexibility in setting enhanced reimbursement rates for hospitals, nursing facilities, and other providers. The proposal would affect how states design rate strategies and could require MCOs to renegotiate provider contracts if existing SDP arrangements exceed new federal limits.

Managed Care · Finance