A new Government Accountability Office (GAO) study makes recommendations to the Centers for Medicare & Medicaid Services (CMS) to strengthen policies and procedures for approving state directed payments (SDPs).
CMS has allowed states to make SDPs — direct managed care plan payments to providers — since July 2017. SDPs have increased significantly, reaching at least $38.5 billion in 2022, with further growth expected. Given the reliance on provider taxes to finance the nonfederal share of SDPs, GAO has concerns about states’ limited stake in the cost of these payments.
In the study, Medicaid Managed Care: Rapid Spending Growth in State Directed Payments Needs Enhanced Oversight and Transparency, GAO identifies weaknesses in CMS’ policies and procedures for approving payments that may lead to ineffective payments:
- Weak fiscal guardrails — CMS has not established standards for assessing SDPs as reasonable and appropriate.
- No consideration of payment outcomes when renewing — CMS does not consider evaluation results or any other outcome data when approving SPD renewals.
- Gaps in transparency — While CMS has made SPD applications publicly available, other supporting documentation, including financing information, is absent.
GAO recommends that CMS:
- Enhance SDP fiscal guardrails.
- Consider evaluation results to ensure quality goals are advancing.
- Require states to consider health equity priorities in SDP evaluations.
- Make all SDP approval documents publicly available.
Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.
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