State directed payments (SDPs) are a vital tool many states use to offset low Medicaid payment rates and ensure access to quality care for Medicaid beneficiaries. As of December 2024, 40 states used SDPs to support a wide range of Medicaid services, including hospitals, physicians, nursing homes, mental health providers, and home health workers.
Without SDPs, Medicaid managed care payments to hospitals would be less than half of the rate paid by other payers, which is not enough to sustain access to the essential services that hospitals provide. In 2018, the Trump administration allowed states to use SDPs to close gaps in hospital payments between Medicaid and the average commercial rate paid by other payers. These payments keep rural hospitals open; reduce infant and maternal mortality; and improve care quality, value, and access in other ways.
This brief reviews publicly available data for SDPs approved as of Dec. 31, 2024, to explain how SDPs support essential hospitals and how cuts to SDPs would affect access to essential services.
Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.
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