The Centers for Medicare & Medicaid Services (CMS) plays a crucial role in overseeing how states manage their Medicaid programs, particularly concerning managed care. A key aspect of this oversight is State Directed Payments (SDPs), which allow states to guide how Medicaid managed care plans spend money to improve healthcare delivery and provider payments. Understanding the regulatory framework and available tools is essential for states and providers operating within this system.
Understanding State Directed Payment Preprints
To ensure transparency, CMS publishes all approved SDP preprints submitted on or after February 1, 2023. These preprints are accessible on the [Approved State Directed Payment Preprints webpage](Approved State Directed Payment Preprints webpage). This resource acts as a vital tool for stakeholders to see concrete examples of how states are utilizing SDPs and the initiatives being implemented across the country. Regularly updated by CMS, this webpage offers ongoing insights into the evolving landscape of state-directed healthcare funding.
Key Guidance on State Directed Payments
CMS has provided extensive guidance to clarify the rules and expectations surrounding SDPs. Initially, a State Medicaid Directed Letter (SMDL) was published to address questions arising from the implementation of SDP regulations, which took effect for contract rating periods beginning on or after July 1, 2017. This letter, available at [SMDL]([/Federal-Policy-Guidance/Downloads/smd21001.pdf “smd21001.pdf”]), serves as a foundational tool for states, offering clarifications on:
- Defining State Directed Payments: Establishing clear boundaries for what qualifies as a state-directed payment within Medicaid managed care.
- Reducing State Burden: Proactively addressing common queries to streamline the preprint review process and alleviate administrative challenges for states.
- Enhancing Program Integrity: Ensuring responsible and compliant utilization of state-directed payments to safeguard program resources.
- Quality Requirements: Reminding states of the essential quality-related criteria that must be fulfilled to secure CMS approval for SDPs, emphasizing the link between funding and improved healthcare outcomes.
Furthermore, CMS updated the [preprint form]([/medicaid/managed-care/downloads/sdp-4386c-preprint-template.pdf “sdp-4386c-preprint-template”]) in December 2022 to simplify and clarify the submission process. The revised form utilizes tables and checkboxes to make completion easier and aims to reduce processing times by gathering more comprehensive information upfront. An accompanying [preprint addendum]([/medicaid/managed-care/downloads/sdp-4386c-preprint-addendum.xlsx “sdp-4386c-preprint-addendum”]) allows states to provide additional detail when necessary, ensuring all relevant information can be captured within the submission. The updated preprint form is mandatory for all SDP requests for contract rating periods starting on or after July 1, 2021.
To facilitate efficient review, CMS recommends states submit SDP preprints at least 90 days before the start of the relevant rating period and directs submissions to a dedicated mailbox: [email protected]. These procedural tools and guidelines are designed to ensure timely processing and effective implementation of state-directed payment initiatives.
Addressing Health-Care Related Tax Programs
CMS has also issued specific guidance regarding health care-related tax programs with hold harmless arrangements. A [guidance document]([/federal-policy-guidance/downloads/cib042224.pdf “cib042224”]) clarifies that CMS will temporarily not enforce certain sections of the Social Security Act and related regulations concerning these tax programs that existed as of April 22, 2024. This provides states with a degree of flexibility in managing these existing programs while navigating the complex regulatory landscape.
COVID-19 Impact and Delivery System Adaptations
The COVID-19 pandemic brought significant disruptions to the healthcare system, necessitating rapid adaptations in Medicaid managed care. CMS recognized the financial strains and utilization shifts caused by the public health emergency and provided states with options to modify provider payment methodologies and capitation rates. Guidance issued by CMS [COVID-19 Guidance]([/sites/default/files/Federal-Policy-Guidance/Downloads/cib051420.pdf “cib051420.pdf”]) outlined several strategies for states, including:
- Adjusting Capitation Rates: Allowing temporary adjustments to managed care capitation rates to reflect changes in fee-for-service payment rates in state directed payment models.
- Retainer Payments: Enabling retainer payments to habilitation and personal care providers to maintain service capacity during periods of fluctuating demand.
- Enhanced Provider Payments: Utilizing state directed payments to temporarily increase provider payments under managed care contracts, ensuring stability within the provider network.
CMS further published examples of 438.6(c) preprints to illustrate the practical application of these COVID-19 related SDP strategies. These examples serve as valuable tools for states in developing and implementing their own responses to public health emergencies within the Medicaid managed care framework.
Implementing Delivery System and Provider Payment Initiatives
A comprehensive [Informational Bulletin (CIB)]([/sites/default/files/federal-policy-guidance/downloads/cib11022017.pdf “cib11022017.pdf”]) details the broader capabilities of states to implement delivery system and provider payment initiatives through Medicaid managed care contracts. These arrangements, authorized under 42 CFR 438.6(c), empower states to direct specific payments from managed care plans to healthcare providers. This mechanism is a powerful tool for states to advance their Medicaid program goals, incentivize value-based care, and improve the overall effectiveness of their healthcare systems. By strategically utilizing SDPs, states can drive innovation and positive change within their Medicaid programs.
