Medicaid state directed payment overview

In response to the Medicaid managed care final rule, several states have recently received approval from the Centers for Medicare and Medicaid Services (CMS) for state directed payments that support delivery system and provider payment reforms.

These arrangements allow states to require managed care plans to make specified payments to healthcare providers when the payments support overall Medicaid program goals and objectives. These arrangements provide a permissible mechanism for making supplemental payments in managed care programs as an alternative to pass-through programs. While pass-through programs were often opaque and not clearly understood by all affected parties, state directed payments enable states to coordinate value-based purchasing and other delivery system reform initiatives in managed care programs. These arrangements also allow states to coordinate value-based purchasing (VBP) and other delivery system reform initiatives in managed care programs.

As states consider options for state directed payments, it can be helpful to understand the types of programs that have been approved by CMS. In this paper, Milliman’s Jim Pettersson, Ben Mori, Luke Roth, and Jason Clarkson provide background on state directed payment arrangements based on their review of §438.6 (c) “Preprints” and supporting documentation for arrangements approved by CMS as of August 15, 2018.

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