Managed Care
CMS Proposes Limits on State Directed Payments Under New Statutory Authority
On May 20, 2026, CMS released a proposed rule implementing statutory limits on state directed payments (SDPs) enacted under H.R.1 (Public Law 119-21). The rule establishes new caps and requirements for SDPs that states use to direct managed care organization payments to providers. The proposed changes would affect how states structure supplemental payments within capitation rates and require new CMS preapproval processes. Public comments are due 60 days from Federal Register publication. The rule directly impacts MCO rate setting, provider payment arrangements, and state contract negotiations for managed care plans participating in SDP arrangements.
Why it mattersThis proposed rule will fundamentally reshape how states use managed care capitation rates to fund supplemental provider payments, requiring MCOs to adjust contracting strategies and potentially affecting network adequacy in states heavily reliant on directed payment models.