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GAO Releases Study on Medicaid Directed Payments

Julie Kozminski
July 5, 2022

The Government Accountability Office (GAO) recently released a study, Medicaid: State Directed Payments in Managed Care, to assist Congress in its oversight of Medicaid.

Beginning in July of 2017, the Centers for Medicare & Medicaid Services (CMS) allowed states to make direct managed care plan payments to providers, referred to as state directed payments. Previously, states were not allowed to make additional payments above capitation payments for services covered under managed care contracts or direct managed care plan payments to providers. CMS must approve state directed payments and provides oversight to ensure payments comply with federal requirements.

CMS has approved 660 state directed payment proposals since 2017. In 2021, 36 states received CMS approval of one or more directed payments, ranging from seven states each making one payment to one state making 17 payments. For the 79 approved proposals for state directed payments beginning on or after July 1, 2021, 28 states had $20 billion in estimated total payments.

The GAO study reviewed CMS’ recent and planned actions to enhance oversight of state directed payments. CMS has updated the form for state directed payment proposals, also known as the preprint, to collect additional information. CMS also plans to consolidate more detailed data on state directed payments, make information on approved payments publicly available, and provide states with technical assistance to perform more robust evaluations.

The GAO says the effectiveness of these planned actions is unknown and information gaps remain. It reiterated past recommendations to collect provider-specific information about Medicaid payments to providers and states’ sources of funding for the nonfederal share. The GAO will further examine whether previous concerns regarding transparency and assurance of use for Medicaid beneficiaries of supplemental payments apply to state directed payments.

Contact Director of Policy Rob Nelb, MPH, at rnelb@essentialhospitals.org or 202.585.0127 with questions.

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