Federal officials want to cap state directed payments in Medicaid managed care, and the limit would reach home and community-based services starting in 2029. The Centers for Medicare & Medicaid Services released the proposed rule, CMS-2449-P, on May 20, 2026.
State directed payments let states set the rates that Medicaid managed care plans pay providers.
How the cap would work
Carrying out the 2025 federal budget law, it would cap payments for hospital, nursing facility and certain practitioner services at 100% of Medicare rates in expansion states and 110% elsewhere. It would then extend that limit to all state directed payments for all services starting with rating periods on or after Jan. 1, 2029. When Medicare has no published rate for a service, as with most home and community-based services, the limit would be 100% of the state plan approved rate. Grandfathered payments would phase down by 10 percentage points a year starting in 2028. Comments were due July 21.
Why this matters for providers and DSPs
Some states use directed payments to raise managed care rates for HCBS and DSP wages. If finalized, the cap could limit those add-ons, so providers in managed care states should ask their Medicaid agencies how they would be affected.