Trump Administration Plans Further Cuts to Medicaid State Directed Payments Beyond Congressional Reductions

The Trump administration disclosed during the week of May 22, 2026 that it plans to cut Medicaid state directed payments beyond reductions already mandated by the One Big Beautiful Bill Act, passed in July 2026. The Republican tax law directs gradual trimming of state directed payments beginning in 2028 until rates approach Medicare levels. A Biden-era change allowed providers to receive commercial rates starting in 2024. Behavioral health providers, dentists, and doctors face steep cuts.

Medicaid State Directed Payments

• ▪Since 2024, some hospitals, doctors, nursing homes, and other types of providers have been reimbursed for Medicaid services at much higher commercial rates.
• ▪The One Big Beautiful Bill Act directs the Centers for Medicare and Medicaid Services to gradually trim state directed payments beginning in 2028 until they're close to or on par with Medicare rates.

Congressional Reductions Under Tax Law

• ▪The One Big Beautiful Bill Act is a sweeping 2025 tax law passed by Republicans.
• ▪The One Big Beautiful Bill Act was passed in July 2026.

Trump Administration Additional Cuts

• ▪President Trump discussed health care affordability on May 18, 2026, accompanied by CMS Director Chris Klomp, HHS Secretary Robert F. Kennedy Jr., CMS administrator Mehmet Oz, and Cost Plus Drugs co-founder Mark Cuban.
• ▪The Trump administration's plan to cut state directed payments beyond Congressional reductions is likely to set up a showdown with provider groups.
• ▪The Trump administration disclosed during the week of May 22, 2026 that it plans to take cuts to state directed payments even further beyond the Congressional reductions.

Provider Groups Impact

• ▪Hospitals and other providers are bracing for an end to the extra money they've gotten for treating Medicaid patients.
• ▪Behavioral health providers, dentists, and doctors could face steep cuts from the Trump administration's Medicaid payment reductions.

Perspective of Healthcare provider groups (hospitals, doctors, nursing homes)

• ▪Healthcare provider groups are likely to enter a showdown with the Trump administration over Medicaid state directed payment cuts that exceed Congressional reductions.

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