July 8, 2026
Last year at about this time, Congress and the White House passed a reconciliation bill, known by the name “The One Big Beautiful Bill.” This legislation drastically altered Medicaid services. However, as with most legislation, passage was not the end of the process. A rulemaking period was then required, wherein the Center for Medicare & Medicaid Services (CMS) would explain to the public how they would enact the changes sought by Congress. We are in the midst of the rulemaking process now. It is highly complex and covers several aspects of the legislation. These include work requirements for Medicaid recipients, as well as caps on State Directed Payments, which could have a substantial impact on SUD services. Working with our colleagues at the Legal Action Center, and the rest of the Coalition for Whole Health, we are doing what we can to illustrate the difficulties these changes would present to those in recovery.
Concerning work requirements, there are two exceptions that our community. One is the “Medically Frail” exemption. People whose physical, mental, or other behavioral health conditions significantly impair their ability to comply with work requirements. To qualify, individuals must meet one of the following five categories: are blind or disabled, have a substance use disorder, a disabling mental disorder, a physical, intellectual, or developmental disability, or have a serious or complex medical condition. Yet under the new rule, it is not enough to be in one of these categories. You must also demonstrate impaired capacity to meet work requirements. In addition, there as an exception to work requirements for individuals participating in a qualifying SUD treatment program, defined as SUD programs that meet SNAP-related federal requirements, run by nonprofit organizations or public community mental health centers. The exemption excludes individuals in recovery for five years or more. The rule claims that such individuals are at no higher risk for drug use than the general population, which is not scientifically accurate. Keep in mind, these work requirements only apply to individuals who are in the ACA “expansion population.” (Those who receive Medicaid as a result of the ACA but would not otherwise qualify.)
With regards to State Directed Payments, while states are generally prohibited from directing how managed care organizations (MCOs) pay for care, states can implement SDPs that require MCOs to increase rates or set minimum rates for specified Medicaid services. In authorizing SDPs, the Centers for Medicare and Medicaid Services (CMS) aimed to help states improve access to care and provider participation, making them highly valuable for SUD service providers. This is according to the KFF foundation. States may use SDPs to require MCOs to adopt minimum or maximum payment rates for providers or implement value-based payment arrangements. The 2025 reconciliation law created new payment limits for SDPs for four services, capping them at or near Medicare rates instead of average commercial rates. Under the limits, the total payment amount under the SDP may not exceed 100% of the Medicare payment rate in states that have adopted the Affordable Care Act (ACA) Medicaid expansion (“expansion states”) and 110% of the Medicare payment rate for non-expansion states. The law specified that the new limits would apply to inpatient and outpatient hospital services, nursing facility services, and professional services at academic medical centers. Yet the rule went further. The proposed rule would apply the new payment limits to all Medicaid services. In a space such as recovery support services, where reimbursement is already low- and there are not necessarily corresponding codes in Medicare- we face the distinct possibility of severe rate cuts for our Medicaid providers.
We will be collaborating with the Legal Action Center and other coalition partners to deliver comments to CMS on these rules, in order to ensure people in active recovery or seeking it receive all the benefits possible to advance their care.