The White House has issued a presidential memorandum on “Eliminating Waste, Fraud, and Abuse in Medicaid” that cites Medicaid “state-directed payments” as a form of waste, fraud, and abuse.
According to the memorandum, states use state directed payments to pay more than Medicare rates for some Medicaid-covered services – something the memorandum suggests is contrary to current practice because “…billable costs for such care were historically capped at the same level that healthcare providers could receive from Medicare.” This assertion comes despite a 2024 regulation that set the payment limit for state directed payments at the average commercial rate and not at Medicare rates.
It is not yet clear what the implications of this presidential memorandum might be.
The memorandum does not by itself reverse already-approved state-directed payment programs nor does it appear to constitute authority for or direct the Centers for Medicare & Medicaid Services to reject existing applications for state directed payment programs that would pay up to the average commercial rate. The House-passed reconciliation bill would cap state-directed payments but it is not clear whether that provision will survive as the Senate continues to consider that legislation. If it does not, the administration could, in theory, pursue future rulemaking to align state-directed payments with the presidential memorandum.
Find the presidential memorandum here.