Hethcoat Featured in Q&A on OBBBA’s Impact on Directed Payments in Medicaid Managed Care

Law360: What impact will the One Big Beautiful Bill Act provision have on state-directed payments?

Gayland: The reforms are expected to substantially decrease payments that the Centers for Medicare & Medicaid Services (CMS) will be making to state Medicaid programs and, by extension, decrease payments that at least certain types of healthcare provider organizations receive for providing care.

The estimate that’s been put out there is that state-directed payment reforms are supposed to save the federal government something in the neighborhood of $140 billion over the next 10 years.

The net effect of that is that there’s going to be a financial squeeze, particularly for hospitals, academic medical centers and nursing facilities.

What changes can providers, Medicaid patients and the public expect?

The changes that are going to take place, they’re not going to take effect overnight.

We’ll have to see, but particularly hospitals will likely face some tough operational questions and have to take a really close, shrewd look at whether services they’re offering are financially viable. We’ll see if some facilities have to scale back certain services or programs.

Certainly, there will be an impact that patients will feel if providers have to scale back services or programs.

There’s also going to be pressure on the state Medicaid programs.

States have a tough decision in that they’re increasingly going to face the question of how to make up these shortfalls and whether they’re going to have to draw further from general state revenues to maintain these payment levels. And of course, that’s going to come with a trade-off with other legislative spending priorities.

The net bottom-line impact is that payment reductions for at least for these defined subsets of providers are forthcoming. How are they going to plan and prepare for that?

Read the full Q&A here. (Subscription required)