CMS Proposes Caps on State Medicaid Payments to Align With Medicare

Overview

• The agency issued a proposed rule that would limit certain state-directed Medicaid payments and some fee-for-service practitioner payments by tying them to Medicare rates.
• CMS projects the caps would cut more than $775 billion in total Medicaid spending over 10 years, including about $510 billion in federal savings.
• Under the proposal, specific payments to hospitals, nursing facilities and academic medical center practitioners would be capped at 100% of Medicare in expansion states and 110% in nonexpansion states for rating periods beginning in mid-2025, with a plan to extend limits to all state-directed payments by 2029.
• The rule includes temporary grandfathering for some arrangements and a phase-down that would reduce grandfathered payments by 10 percentage points a year starting with rating periods on or after Jan. 1, 2028.
• Major hospital groups immediately warned the change could shrink supplemental funding that supports safety-net and rural hospitals, potentially reducing services or forcing closures, and CMS will take public comment for 60 days before any final rule is issued.