Summary of Changes to the 2025-2026 Medicaid Managed Care Rate Development as Compared to Previous Year

Source link: https://www.medicaid.gov/medicaid/managed-care/downloads/2025-2026-medicaid-rate-guide-082025.pdf

- Guide for Rating Periods Starting between July 1, 2025, and June 30, 2026

- Produced by Colby Schaeffer of Incline Actuarial Group this is meant to be used for information and reference purposes and does not replace guidance from CMS. Please email me (colby@inclineag.com) if you see any noticeable exclusions or

errors.

Rate Certification and Review Process

• CMS requests that states incorporate responses to questions CMS has previously raised in

earlier rate certification reviews if similar circumstances apply in the current rating period.

• CMS encourages early engagement with CMS for technical assistance in procuring

managed care contracts or implementing new managed care programs.

Capitation Rates and Amendments

• To ensure rate setting accurately reflects program costs over the full effective period of any

change, CMS clarifies that for rate amendments, when program changes take effect partway

through a rating period, states must reflect the financial impact of those changes in capitation

rates for the entire time the change is effective, not just for a shorter subset of that period.

• CMS adds that states must submit a revised rate certification whenever there are changes to

capitation rates, payment arrangements (e.g., incentives, withholds, state-directed payments,

pass-through payments), or ILOSs not already described in the certification, regardless of

how small the change is.

• Retroactive capitation rate adjustments are only allowed if tied to new or amended state-directed

payments under § 438.6(c), or if correcting a material error in the original data, assumptions, or methodologies used to set rates.

• CMS adds that states must utilize a separate and distinct contract with their managed care

plans for state-only funded capitation rates.

• CMS notes that final capitation rates must be based only upon services covered under the

state plan, ILOS(s), and additional services deemed by the state to be necessary to comply

with the requirements in 42 CFR Part 438, subpart K.

Risk-Sharing and Non-Risk Services

• CMS notes that risk-sharing mechanisms may not be added or modified after the start of the

rating period.

• CMS specifies that arrangements that remove 100% of the risk are not considered risk sharing

mechanisms.

• CMS explicitly defines non-risk services as those for which the managed care plan does not

bear financial responsibility, as the state reimburses the plan based on actual incurred costs.

State Directed Payments

• CMS removes the requirement that state directed payments must meet the requirements in

42 CFR § 438.6(c) and receive prior approval before implementation.

• CMS adds that states may utilize state directed payments to direct the managed care plan’s

expenditures, which is consistent with not only 42 CFR § 438.6(c), but also § 438.2.

Additionally, such payments in Medicaid managed care contracts must also meet the

standards outlined in 42 CFR § 438.6(c)(2).

• CMS adds that states can require managed care plans to pay providers at least the full

(100%) Medicare total published payment rate for certain services. The Medicare rate used

must be one that was published within the past three years of the rating period.

• For alternative minimum fee schedules, instead of Medicaid state plan rates, states may

direct plans to use other types of rates, which can include one or more Medicare payment

rates.

• In the table of information states must provide for each state directed payment, CMS notes

that writing “TBD” is not sufficient.

Pass-Through Payments

• The allowable cap on aggregate pass-through payments to hospitals was reduced from 30

percent to 20 percent of the base amount, tightening the limit on such payments.

In Lieu of Services (ILOS)

• CMS removes all references to the State Medicaid Director Letter (SMDL) published

on January 4, 2023 (SMD 23-001) and any guidelines this letter specifies and instead

references 42 CFR § 438.16(c).