Directed Payments in Medicaid Managed Care

In 2016, the Centers for Medicare & Medicaid Services (CMS) updated the regulations for Medicaid managed care and created a new option called directed payments for states, allowing them to direct managed care organizations (MCOs) to pay providers according to specific rates or methods. Since their initial implementation, directed payment arrangements have grown rapidly in both utilization and spending amounts. In our prior work, MACPAC reviewed directed payment arrangements approved up to February 2023 and made recommendations for improving the transparency and oversight of directed payments in Chapter 2 of MACPAC’s June 2022 Report to Congress on Medicaid and CHIP. To build off our prior work, we updated an issue brief that discusses the history of directed payment policy, highlights changes made in the 2024 managed care rule, and examines the use of directed payments based on MACPAC’s review of directed payments approved between February 1, 2023 and August 1, 2024. In this session, staff presented key findings from our updated analysis of directed payments and recent regulatory updates to the directed payment policy framework.