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CMS Shakes Up the Innovation Center Model Landscape: What Comes Next?

This week, our In Focus section focuses on a March 12, 2025, from the Centers for Medicare & Medicaid Services (CMS) regarding CMS Innovation Center programs under the new Administration. After reviewing the Innovation Center鈥檚 model portfolio, CMS has elected to discontinue four models ahead of their original end dates: (TCOC), (PCF), (ETC), and (MCP). The agency also intends to downsize the Integrated Care for Kids Model (InCK) and forgo the launch of two drug pricing initiatives. According to the announcement, CMS appears to be moving forward with other Innovation Center models, but signaled upcoming modifications to models to align with Administration priorities as well as new model announcements.

The following is a discussion of CMS鈥檚 announcement and what it may signal about the agency鈥檚 commitment to value-based care, key takeaways regarding the four terminated models, and how stakeholders should be preparing to engage with the Innovation Center on current or future models while we await additional details.

颁惭厂鈥檚&苍产蝉辫;Strategic Decision

As part of CMS鈥檚 recent announcement about the model terminations, the agency reaffirmed its support for testing models that reduce program spending while maintaining or improving quality of care. Furthermore, the Innovation Center 鈥減lans to announce a new strategy based on guiding principles to make Americans healthier by preventing disease through evidence-based practices, empowering people with information to make better decisions, and driving choice and competition.鈥� These statements should be seen as a commitment to using the Innovation Center to test new approaches to delivering care but with an expectation that the models will need to demonstrate significant cost and quality improvements as outlined in its statutory authority. According to CMS, the cancellation of these models is projected to save an estimated $750 million.

Because CMS said it may modify additional models in the future, it is reasonable to expect those changes will focus on achieving a higher level of savings or to see savings earlier in the demonstration, as well as aligning model design with the priorities of this Administration. The potential modifications could have an impact on the number of model participants, length of model testing, and financial arrangements, especially with regard to risk and quality improvement approaches.

Models Ending

CMS Innovation Center models are time-limited pilots meant to help the agency test which types of interventions lead to cost savings and improved quality and, if successful, can be scaled on a nationwide basis. These models are evaluated regularly, and CMS has the authority to modify or terminate models if they fall short of the statutory criteria.

The four models the agency plans to terminate are ending for various reasons (e.g., underwhelming performance, forthcoming replacement by successor model, etc.) and, as stated above, the decision should not be seen as a retreat from value-based care, but rather as a signal regarding Administration priorities for Innovation Center models. For example, despite terminating PCF and MCP prior to their original end dates, CMS reaffirmed its support for primary care as a 鈥渇oundational component of the Center鈥檚 strategy鈥� and that future primary care payment reforms will focus on approaches that produce savings. CMS also noted that ending these models early offers an opportunity to move beneficiaries into more permanent programs, such as the 鈥擟MS鈥� flagship accountable care initiative鈥攅ven going so far as to direct readers to the MSSP鈥檚 calendar year 2026 .

CMS plans to advise current model participants of other options for advanced primary care payment before the models conclude by December 31, 2025. Table 1 presents information on the models scheduled for early termination.

Table 1: Models Ending by December 31, 2025

In addition, the agency is considering options to reduce the size of the model and will no longer pursue the and Accelerating Clinical Evidence models. The latter two initiatives were included in a Biden Executive Order on drug pricing and were not implemented. Notably, CMS did not end another drug pricing Innovation Center model, ) Model.

Innovation Center鈥檚 New Strategic Plan

CMS also announced that it will soon release its new vision for the Innovation Center, based on principles designed to improve Americans鈥� health through evidence-based practices, empower individuals with decision-making information, and drive competition.

This vision will set the direction for future value-based care initiatives and reflect the leadership changes within CMS, including the anticipated confirmation of Mehmet Oz, MD, as CMS Administrator and the appointment of , as the new Director of the Innovation Center. Mr. Sutton鈥檚 experience with value-based care鈥攅specially during his time as an advisor to then Department of Health and Services Secretary Alex Azar under the first Trump Administration and his subsequent private sector leadership of value-based companies鈥攑ositions him to play a key role in shaping CMS鈥檚 future efforts.

Stakeholder Considerations

Stakeholders have several critical operational decisions and strategic considerations to address, including:

Transition Support. Participants in the models scheduled to end must assess their options for sustaining certain components of the payment models without Innovation Center support. This effort will require strategic, operational, and financial analyses to make informed decisions.
Evaluation of Other Programs. While the Innovation Center has signaled its intentions of announcing new models, participants should not wait to evaluate options. The Administration plans to prioritize permanent payment programs and will continue to support the MSSP as CMS鈥檚 permanent model for accountable care organizations (ACOs). Stakeholders interested in participating in the MSSP in 2026 must act quickly to assess their organizational readiness, conduct financial modeling of their potential benchmark and performance, evaluate potential partners, and prepare for the application process. Both existing and new ACOs should be exploring their strategies and infrastructures to optimize performance.
Adapting to Changes in Existing Models.聽While CMS discontinued select models, it is likely the agency will make additional changes to the Center鈥檚 continuing models. These revisions likely will reflect President Trump鈥檚 executive actions and policy priorities. With the increased focus on cost savings, CMS may choose to spend fewer resources on model implementation, including participant support and model engagement.
Policy and Market Intelligence.聽Monitoring the dynamic federal policy landscape and seeking strategic advisory support can help stakeholders navigate and inform potential future federal and state alternative payment model opportunities. Stakeholders should expect that existing and potential new models may have stricter requirements and higher expectations for financial risk. Providers, states, insurers, and other interested stakeholders should monitor public and private sector developments to understand the landscape and evolving opportunities.

Connect with Us

黑料网, Inc. (HMA), is home to alternative payment model experts that can assist stakeholders in responding to changes in Innovation Center models and the agency鈥檚 approaches and to help prepare for participation in future model opportunities. Additionally, HMA produces a weekly briefing focused on public and private sector VBP-related news. To learn more about how HMA can support your organization鈥檚 federal engagement and innovation strategy, contact聽our experts below.

Navigating CMS鈥檚 2025 Marketplace Rule: What It Means for ACA Marketplaces, Insurers, and Consumers

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This week, our In Focus section also reviews the , released by the Centers for Medicare & Medicaid Services (CMS) on March 10, 2025. The proposed rule calls for enhancing program integrity protections in the Affordable Care Act (ACA) marketplaces through targeted changes to eligibility and enrollment policies and procedures.

This proposed rule aligns with the overarching policy priorities President Trump has identified, including reducing federal costs and reforming policies related to immigrants. It also takes aim at fraud, waste, and abuse practices in the ACA Marketplaces, which is the cornerstone from which the US Department of Health and Human Services explains and justifies its proposed initiatives.

Notably, the proposed changes will occur alongside other potential federal policy revisions, including the December 31, 2025, expiration of the ACA enhanced subsides for consumers, which led to historically high coverage levels鈥� as of January 2025. The combined changes will have a varied but significant effect on all state health insurance markets, creating a need for scenario planning and preparation to start immediately.

CMS is providing the public 30 days to submit comments on the proposed rule. An overview of the proposed changes and key considerations follow.

Rule Components

Enrollment Timeline: CMS proposes shortening the open enrollment period for all individual market coverage, including for state-based marketplaces (SBMs), which traditionally have had flexibility to set later enrollment deadlines. If finalized, open enrollment will begin November 1 and end December 15, a month earlier than the current deadline of the following January 15.

Income Verification: The rule would require marketplaces to bolster their income verification processes to protect against manipulation of the authorization and calculation of advance premium tax credit (APTC) values. CMS policymakers believe these changes will be useful in addressing broker and consumer fraud and abuse of the APTC eligibility process. Proposed income verification changes include requirements that people provide the documentation of their income if they meet the following criteria:

The income on their application is between 100 percent and 400 percent of the federal poverty level (FPL), but the income returned from external data sources show they make less than 100 percent of the FPL
No tax data are available from external data sources to confirm the applicant鈥檚 self-attested income

Applicants who do not verify their income will have it adjusted to align with the income returned from external data sources, and their APTC eligibility will be updated accordingly. In some cases, such as when no returned income data are available, these individuals will become ineligible for the APTC.

CMS also plans to reinstate a 2015 policy that requires marketplaces to designate applicants or enrollees as ineligible for APTCs if they fail to file and reconcile their APTC on their federal income taxes. This requirement is known as the failure to file and reconcile (FTR). The Biden Administration changed the FTR requirements to find enrollees ineligible for APTCs if they fail to file and reconcile for two consecutive tax years.

Lastly, CMS proposes eliminating the additional 60 days consumers are granted to resolve income inconsistencies. Today, most marketplace consumers have up to 150 days to resolve income inconsistences. This proposal would return to the 90-day verification period that was in place prior to the Biden Administration.

CMS also requests input on alternative redetermination and re-enrollment policies for fully subsidized consumers, including whether $5 is the appropriate premium amount or should be higher or if fully subsidized consumers should be required to actively confirm their eligibility and reenroll every year.

Another proposal would remove the ability for marketplaces to automatically reenroll Bronze members who are eligible for a cost-sharing reduction (CSR) in a Silver plan if the Silver plan has the same provider network, is in the same product, and has a lower or equivalent net premium as the consumer鈥檚 Bronze plan.

Special Enrollment Period Changes: CMS is proposing multiple changes to special enrollment periods (SEPs), including the removal of monthly SEPs for individuals with household incomes that are projected to be at or below 150 percent of the FPL and a requirement that marketplaces verify eligibility for at least 75 percent of new enrollments during SEPs. CMS also proposes adopting a pre-enrollment income verification model for SEPs.

Bar Deferred Action for Childhood Arrivals (DACA) recipients from QHPs in the Marketplace and basic health programs, making them ineligible for APTCs and CSRs and returning to pre-Biden era DACA eligibility rules
Remove gender-affirming care as an essential health benefit
Allow insurers to require payment of past due premiums before effectuating new coverage, if state law permits
Increase cost sharing/lower premiums by increasing the maximum out-of-pocket limit and widening de minimis ranges

Implications

CMS is reverting to several policies that were put in place during President Trump鈥檚 first term, increasing the likelihood that CMS will finalize many of the changes as proposed or with minimal modification.

Insurers, SBMs, insurance departments and other stakeholders should engage in the federal policymaking process and begin planning immediately for the financial and operational changes that will be required to comply, as several of the requirements will take effect as soon as the rule is finalized. Stakeholders will also want to consider the direct impact on consumers.

黑料网 (HMA) Marketplace experts identified the six key considerations for stakeholders:

Market share and risk.聽The proposed changes are projected to decrease Marketplace enrollment and聽Insurers and states need to plan for shifts in their market and consider approaches to manage these changes.
Administrative operations.聽A shorter enrollment period and additional eligibility and enrollment requirements may increase administrative actions for enrollees, insurers, and marketplaces. Examples include:
- Marketplaces will need to make system and operational changes to comply with the new income verification, SEP, and open enrollment period requirements.
- Departments of Insurance may need to adjust their rate and form filing instructions and timelines to give insurers the clarity and time they need to comply with new requirements.
Consumer education.聽Insurers and marketplaces will need to consider the effectiveness of their marketing and outreach and education strategies, given the shorter open enrollment period.
Interactions with the expiration of the enhanced subsidies in 2026.聽The Congressional Budget Office聽聽that the uninsured population will increase by 2.2 million in 2026 and up to 3.8 million by 2028 if the enhanced ACA subsidies expire. While it is too early to project or measure the impact of this proposed rule and the expiring subsidies, together they undoubtedly will have direct impacts on eligibility, enrollment levels, market dynamics including pricing and risk mix, and the overall stability of the Marketplaces in the long term. Congress may also take action on other policies related to Marketplace stability for which stakeholders should prepare.
State-level mitigation. States interested in mitigating the impacts of this proposed rule, as well as the expiring subsidies, will need to consider legislation to address the resulting affordability gaps and coverage losses. For example, states may look to state-funded subsidy wraps or reinsurance programs to minimize the net premium rate increases that most Marketplace plan members will experience when the enhanced subsidies expire in 2026.
Federal engagement. CMS is providing the public 30 days to comment on the proposed rule. This provides stakeholders the opportunity to voice their positions on the impact of this and future Marketplace policies. Comments on the proposed rule may also be shared with congressional policymakers and staff to help shape future legislative proposals.

HMA experts have considerable experience working with marketplaces, Departments of Insurance, insurers, and federal policymakers with jurisdiction over the Marketplace. They work with these entities to inform, analyze, and influence federal policies and conduct impact analyses on pricing, enrollment, administration, and operations. HMA also provides strategic and project management support for the implementation of finalized policies.

To learn more about how the proposed rule and the scheduled sunsetting of enhanced subsidies may affect your organization contact HMA Marketplace experts聽below.

New Insights on Medicaid Spending: HMA Analysis of Disaggregated Medicaid Managed Care Spending

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This week, our In Focus section highlights insights from a new 黑料网 (HMA), issue brief, 鈥�New Insights on Medicaid Spending: An Analysis of Disaggregated Managed Care Spending.鈥�&苍产蝉辫;Until now, most Medicaid cost data have focused on enrollees in fee-for-service (FFS) programs. HMA used the Centers for Medicare & Medicaid Services (CMS) Transformed Medicaid Statistical Information System (T-MSIS) database to analyze Medicaid managed care organization (MCO) spending in major categories of healthcare, including inpatient and outpatient hospital care, physician and other professional services, skilled nursing facilities (SNFs) and home and community-based services (HCBS), clinics, pharmaceuticals, and other services. HMA鈥檚 methodology can be applied to all 50 states and allows us to determine prices for these services, which, combined with data on the number of encounters, yields reliable cost figures.

Findings

Medicaid managed care accounted for $420 billion of the total $717 billion in Medicaid spending for federal fiscal year 2021. Professional claims accounted for the largest portion of Medicaid spending, totaling 25.1 percent, followed by SNFs at 19.7 percent, and inpatient claims at 15.4 percent.

Figure 1. T-MSIS Medicaid Spending by Service Category 2021 (MCO Disaggregated plus FFS)

What鈥檚 Next

This analysis can be replicated for subsequent years and will provide important information on Medicaid spending trends. This work also sets the stage for analyses and comparisons of cost categories by variables such as eligibility category (e.g., dual eligibles, children, parents, adults without children, the Medicaid expansion population, and designated as aged/frail/disabled); race and ethnicity; frequent users of hospital services; and people with multiple chronic illnesses. This type of analysis allows us to answer fundamental questions about the Medicaid program and can pinpoint areas of high need within the Medicaid population, such as:

How much do we spend on services for people with diabetes?
How much do we spend during childbirth/first year of life and in the last year of life?
How much do we spend for Medicare-Medicaid dual eligibles?

Data-informed discussions on these and other topics can help identify opportunities for efficiencies and timely care management to slow the growth in total healthcare spending. This information will provide important context for the policy debate, offering a full view of the relative magnitude of the major categories of Medicaid spending.

Connect with Us

Medicaid providers, MCOs, states, and policymakers all have an interest in identifying high-cost drivers of Medicaid managed care. The methodology applied in the analysis for the HMA issue brief can be applied and adapted for future analysis.

For details about this analysis, its implications for state and local policies, and additional research using T-MSIS, contact聽our experts below.

Join the Call to Action to Address the Behavioral Health Workforce Crisis

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The behavioral health workforce crisis, a long-standing issue worsened by the COVID-19 pandemic, threatens the ability of provider organizations to meet growing demands for behavioral health treatment services. Despite decades of efforts, challenges such as inadequate compensation, workforce shortages, lack of diversity, and high burnout persist. In fact, a 2023 survey of state Medicaid officials on behavioral health revealed that nearly every state was engaged in at least one strategy to address the workforce shortage.^[1]

Since 2021, The Workforce Solutions Partnership, a collaboration of , , and 黑料网 has worked to create both short and long-term solutions. Efforts have included:

Policy papers aimed at short term solutions
- Immediate Policy Actions for States
- Immediate Policy Actions to Address the National Workforce Shortage and Improve Care
- Addressing Representation in the Workforce and Emerging Opportunities for the Behavioral Health Workforce
Review and crosswalk of over 400 recommendations from organizations across the country
Creation of the , begun in May 2024, a monthly webinar spreading innovation and discussing all elements of the behavioral health workforce
Multiple convenings of technical experts and partners to discuss how to support action on the workforce
And now a call to action.

The next step for the Workforce Solutions Partnership is to expand engagement with partners to address the workforce shortage. The Partnership believes that using the framework, will provide the structure to build a national strategy and cross-sector approach to shared implementation of workforce initiatives, resulting in effective and scalable solutions. We understand there are countless workforce initiatives underway across the country, many of which are demonstrating progress and innovations that can be scaled. Rather than duplicate or distract from existing efforts, the Partnership will build connections between these efforts, elevate their impact and empower emerging innovative ideas.

Initial areas of focus will include:

Community alignment: Enhancing recruitment and retention of a workforce that reflects the communities accessing behavioral health services.

Creation of efficiencies: Building a new operational and administrative model that improves access.

Technology integration: Exploring tech-enabled supports to enhance skill development and service delivery.

Career pathways and compensation: Improving access to career opportunities and using evolving payment models to increase salaries for behavioral health professionals.

The Call to Action outlines the Partnership common agenda, levers of change, and the process for developing a national platform for change. It outlines how partners can engage and is the launch of what we hope will be national action to build a sustainable workforce.

[1] Saunders, H., Guth, M., & Eckart, G. (2023). A look at strategies to address behavioral health workforce shortages: Findings from a survey of state Medicaid programs. Kaiser Family Foundation.

The Medicaid Pivot: New Developments in Section 1115 Demonstration Policy

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This week, our In Focus section examines new federal policy developments affecting Medicaid Section 1115 demonstrations. The Centers for Medicare & Medicaid Services (CMS), on March 4, 2025, two guidance letters issued by the prior Presidential Administration that defined and provided the framework for state Medicaid programs to cover health-related social needs (HRSNs) using Section 1115 authority.

Though specific Medicaid priorities under the Trump Administration are nascent, 黑料网鈥� federal and state experts are monitoring these developments. This article describes the withdrawn policy, known implications for states with approved and pending proposals, and the imperative to plan for a variety of scenarios and future opportunities.

Background on HRSN Initiative in Section 1115 Demonstrations

CMS-approved Section 1115 demonstrations allow states to pilot alternative methods to improve the accessibility, coverage, financing, and delivery of healthcare services under joint federal-state funded programs, specifically Medicaid and the Children鈥檚 Health Insurance Program (CHIP).

Addressing health disparities and promoting integrated care in Medicaid became a key focus of the Biden Administration. In November 2023, CMS introduced a , giving state Medicaid agencies the opportunity to address the broader social determinants of health (SDOH) that affect their enrollees, leading to better health outcomes. The agency published an to the guidance in December 2024. The new initiatives were not intended to replace other federal, state, and local social service programs, but rather to coordinate with those efforts.

Key Takeaways for States

The following critical components of the March 2025 announcement and the present policy landscape should inform state Medicaid agency and stakeholder response and future planning work.

First, this guidance does not affect states with a current, active Section 1115 demonstration, state plan, or 1915 waiver programs that include HRSN. States with HRSN demonstrations will maintain their approved programs; however, states and their partners should prepare for shifts in federal reporting, oversight, and evaluation expectations. Separately, states may wish to re-evaluate their resource allocation and consider adjustments that may be needed to better align with a new federal policy environment.

States seeking any amendment or extension of their demonstration program鈥攅ven if unrelated to HRSN鈥攕hould expect this activity to trigger a CMS review of the HRSN component of the 1115. States will need to consider the strategic advantages and necessity of such requests relative to the implications to their HRSN initiative. They also should consider planning for nonrenewal of their HRSN programs in advance of the demonstration鈥檚 current expiration date.

Pending state HRSN Section 1115 demonstration proposals are not expected to be approved. The Section 1115 option for federal matching funds to provide up to six months of housing supports, nutrition supports, and associated infrastructure capacity funding no longer aligns with the Trump Administration鈥檚 objectives for Medicaid and CHIP. Stakeholders interested in these concepts should consider alternative strategies and investment options.

What to Watch

Notably, CMS did not rescind the 2021 State Health Official Letter RE: (SDOH) (SHO# 21-001) published during the first Trump Administration. States and their partners should monitor CMS鈥檚 actions and signals for the agency鈥檚 posture toward SDOH proposals.

A new group of states proposing alternative and revised demonstration concepts and innovations is likely to emerge. These states may provide early signals of the nature and breadth of the Section 1115 demonstrations CMS is willing to consider. With regard to SDOH, states and their partners should consider aligning proposals with the approaches outlined in the 2021 guidance for regular federal program authorities (e.g., 1915(i) state plan options, 1915(c) waiver options) as well as certain managed care authorities.

In addition, states and Medicaid stakeholders should watch for other Medicaid and CHIP policy priorities advanced through demonstration and other authorities, including efforts to address substance use disorders (SUD) and reentry initiatives that focus on supporting individuals who are transitioning from incarceration back into society. SUD and reentry initiatives can intersect with Section 1115 demonstrations and other authorities, such as managed care, in a variety of ways. The intersection of these issues can provide another area of common ground and opportunity to continue work on state reentry initiatives, though likely with new and modified federal parameters.

Connect With Us

HMA is monitoring other developments in Congress and from the White House and agencies affecting federal Medicaid and CHIP policy changes. The complexity and nuances associated with potential future statutory and regulatory changes necessitate thoughtful and immediate impact analysis, scenario planning, and preparations that will allow organizations to pivot if and when policy changes occur. HMA colleagues have expertise in all of the components critical to staying informed, engaged, and prepared for changes to Section 1115 programs鈥攆rom the policy knowledge to actuarial/budgeting talent, to communications and project management skills, as well as the necessary IT infrastructure.

For questions about these developments and your organization鈥檚 plan to adapt to new federal Medicaid policy priorities, contact our featured experts below.聽

HMA partners with Healthcare Association of New York State (HANYS) on webinar series to help organizations with Survey Readiness

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In today鈥檚 complex healthcare environment, navigating the scrutiny of regulatory and accreditation bodies like The Centers for Medicare & Medicaid Services (CMS), Department of Health (DOH), The Joint Commission, and Det Norske Veritas (DNV) Healthcare is critical for the success of every hospital and health system. Unexpected surveys, triggered by recertification, validations or even complaints, can occur at any time.

HMA has partnered with the Healthcare Association of New York State (HANYS) to develop the content for Survey Readiness: Prepare, Respond, Succeed, a 5-part virtual series on Wednesdays in April from 1- 2:30pm ET. HMA鈥檚 expert faculty will also co-teach the sessions. Attendees will dive deep into organizational strategies and tactics to prepare, manage and respond to surveyors effectively 鈥� and get the essential skills to excel in survey readiness.

While some examples in the program will address issues from the New York state perspective, attendees from organizations nationwide should attend. Hospital and long-term care executive team and leaders in quality and compliance, survey coordinators, and risk management will benefit from attending.

Survey Readiness: Prepare, Respond, Succeed

Virtual Series | April 2 鈥� 30

April 2:聽 Survey readiness 101: Overview and getting started
April 9:聽 Preparation: How to mitigate risk and prepare for upcoming surveys
April 16: They鈥檙e here: Establishing a survey response and management protocol
April 23: Responding to survey findings: How to develop a strong correction plan and knowing your options
April 30: What鈥檚 next: Leveraging survey findings and strengthening organizational quality and compliance

The cost to attend this series is $475.

State hospital associations and their members can enjoy $50 off when using this code when registering: SHADISCOUNT25

To learn more and to register, visit .

PACE Plans and The Changing Risk Environment

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Programs for All-Inclusive Care for the Elderly (PACE) plans are programs aimed at keeping low-income older adults living in the community and out of nursing homes, providing home care, prescriptions, meals, and transportation to participants. The Centers for Medicare & Medicaid Services (CMS) recently proposed changes to the risk score model used for PACE (which determines the calculation for how many Medicare dollars PACE gets) that will create funding vulnerabilities in the Medicare rate. If approved, this would likely mean PACE programs get significantly lower funding amounts from Medicare than under the current model. The final notice is expected to be released in April 2025. If approved, this change would be fully phased in by 2029.

PACE enrollees, as compared to enrollees in Medicare Advantage plans, disproportionally have conditions that will no longer be risk-adjustable, such as depression, leading to an across-the-board drop in risk scores. Along with the reduced funding for PACE programs, this risk model change will create data submission issues for PACE organizations and their vendors. When health plans, who are much more risk-score focused in general than PACE plans, underwent this same change, risk scores dropped by between 5%-20%. If PACE programs don鈥檛 fix their data submissions in 2025, they鈥檒l lose money in 2026 and beyond.

To sustain and grow, PACE leaders must understand and plan for the change to v28 risk scores. HMA鈥檚 team of consultants and our actuaries from Wakely, an HMA Company, have put together an analysis to help PACE plans understand and prepare for the transition:

HMA will create reports showing the current (v22) risk score, the proposed (v28) risk score, and the impact by diagnosis category to help with potential recapture efforts.

Identify data submission problems and suggest strategies for fixing them.
Outline potential financial and operational adjustments uncovered during the analysis.

HMA has found that this the change in the process of diagnosis submission is a blind spot for many PACE plans and may be more critical to mitigate than the impacts from the risk adjustment model change.

HMA & Wakely will be hosting a booth at the National PACE Association Spring Policy Forum in Washington, DC on March 17 and 18. If you are attending, we hope you will visit us there. If you would like help understanding the potential impact to your PACE organization, contact us about developing an analysis to help you respond to these changes.

2025 State of the State Addresses, Part 2: Evolving Healthcare Priorities Across the Nation

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This week, our In Focus section reviews priorities outlined in recent State of the State addresses, building on an earlier article: We examine specific proposals from the governors of Illinois, Indiana, New Mexico, and South Carolina, as detailed in the 黑料网 Information Services (HMAIS) report, 2025 State of the States Overview. These states offer examples of the trending policy changes and investments governors intend to make, providing valuable insights into the evolving healthcare landscape.

Key Trends in Governors鈥� Budgets

State of the State addresses provide insights into governors鈥� priorities, reflecting state budgets, multiyear initiatives, and changes in federal policies and funding. These priorities signal strategic shifts healthcare stakeholders must navigate to remain aligned with the evolving state and federal policy landscapes. Common themes that 黑料网 (HMA) is tracking this year include healthcare affordability, Medicaid work requirements, workforce shortages, and enhanced oversight of healthcare entities.

Highlights by State

Illinois Gov. J.B. Pritzker a 2025 State of the State Address on February 19, 2025, during which he presented his executive for fiscal year (FY) 2026 and discussed strengthening oversight of healthcare entities like pharmacy benefit managers (PBMs) and health insurers. Governor Pritzker introduced the Prescription Drug Affordability Act, which seeks to further regulate PBMs, reduce drug costs, and protect independent pharmacists. More specifically, it would give the state Department of Insurance full statutory authority to examine PBM records and require these organizations to comply with annual auditing and reporting requirements. The governor also called for a ban on prior authorization for behavioral healthcare and proposed requiring insurance companies to reimburse patients for reasonable travel costs for medical appointments when the distance they must travel exceeds network adequacy requirements.

Pritzker鈥檚 budget allocations include:

$191.8 million to support the Certified Community Behavioral Health Clinic (CCBHC) Medicaid Demonstration Program
$27.9 million to maintain the state鈥檚 maternal and child home health programs
$27.7 million to support nonhospital facilities that provide psychiatric care to people younger than 21 years old
$132 million for Medicaid-like coverage for undocumented adults ages 65 and older
A shift in funding from the state鈥檚 Exchange to a State-Based Marketplace, which would end use of the federal platform

In addition, the budget plan eliminates funding for Medicaid-like coverage for undocumented adults ages 42鈭�64, which cost approximately $420 million in one year.

Indiana Gov. Mike Braun his address on January 29, 2025, during which he discussed his support for state legislation that would address healthcare costs. Governor Braun urged the legislature to pass multiple bills, including:

House Bill (HB) 1003: Specifies that the state鈥檚 Medicaid Fraud Control Unit (MCFU) may investigate provider fraud, insurer fraud, and duplicate billing and would require more healthcare price transparency, stop anticompetitive practices that drive up prices, and put an end to surprise billing
Senate Bill (SB) 3: Would mandate that third party administrators, PBMs, employee benefit consultants, and insurance providers acting on behalf of plan sponsors have a fiduciary duty to the plan sponsors
HB 1004: Would bolster oversight of nonprofit hospital financials

The governor also encouraged the legislature to support efforts focused on PBM reforms.

Governor Braun鈥檚 proposed for the 2025鈭�27 biennium recommends a general fund appropriation of more than $5 billion in FY 2025鈭�26 and $5.3 billion in FY 2026鈭�27 for the state Office of Medicaid Policy and Planning. Moreover, the state is still managing the effects of a nearly $1 billion shortfall it identified in the Medicaid budget in FY 2024. The Indiana Family and Social Services Administration predicts total Medicaid expenditures will reach nearly $21 billion in FY 2025, up 6.4 percent from $19 billion in 2024 and will likely increase by at least another $1 billion in both 2026 and 2027.

New Mexico Gov. Michelle Lujan Grisham her 2025 State of the State Address on January 21, 2025, wherein she discussed the new state Health Care Authority (HCA), which launched in July 2024. According to Governor Grisham, the HCA has helped the state to increase Medicaid provider rates, create a Health Care Affordability Fund, and expand the Health Care Professional Loan Repayment Program. To continue with HCA鈥檚 work, the governor announced that in March 2025, the state will be sending more than $1 billion to New Mexico hospitals through the Medicaid provider tax. She also recommended that the state legislature approve $50 million in additional funding for the Rural Health Care Delivery Fund, which supports getting new and expanded primary, behavioral, maternal and child, and specialty healthcare services into rural areas.

In her proposed FY 2026 , the governor recommends:

$13 million in recurring funds to increase reimbursement rates up to 150 percent of Medicare rates
$5.3 million for the Program of All-Inclusive Care for the Elderly (PACE)
$2.5 million for increased assisted living facility rates
$2.9 million to increase behavioral health rates for non-Medicare equivalents
$30 million annually over three years to expand Medicaid services, including medical respite for people who are homeless, food support for certain individuals who pregnant, infrastructure to provide medical services to people who are justice-involved, and infrastructure to provide housing and food supports.

In addition, the budget recommends a $100 million special appropriation to address behavioral health needs, which will fund the 988 program, an investment to secure a federal match for the CCBHC Initiative, more drug and alcohol treatment services at the New Mexico Behavioral Health Institute, and medical and behavioral health providers at the Corrections Department.

South Carolina Gov. Henry McMaster his 2025 State of the State Address on January 29, 2025, in which he discussed the state鈥檚 siloed health and human services delivery system, which he said creates a difficult landscape to navigate for people with physical disabilities, special needs, and mental health issues. Governor McMaster said the state must make immediate changes to the Department of Mental Health and Department of Disabilities and Special Needs and proposed making the boards of commissioners that run the departments directly accountable to the governor.

The governor鈥檚 proposed FY 2025鈭�26 highlighted his priority of reimplementing Medicaid work requirements through a Section 1115 demonstration waiver, which the state previously had in place during President Donald Trump鈥檚 first administration. Governor McMaster has already requested an expedited approval of the demonstration, which would expand Medicaid eligibility to 100 percent of the federal poverty level (FPL) for parents who are working or going to school. Under South Carolina鈥檚 existing eligibility rules, parents no longer qualify for Medicaid if they earn more than 67 percent of the FPL. The work and school requirements would only apply to parents with incomes of between 67 percent and 100 percent of the FPL.

The budget also recommends approximately $79 million in recurring funds to support the state鈥檚 Medicaid program. Those funds would be allocated as follows:

$5.7 million toward increasing behavioral health provider payment rates
$5.4 million toward increasing opioid use disorder provider reimbursement rates
$10 million toward reducing waiting lists for home and community-based services
$2.4 million toward intensive partial hospitalization and outpatient behavioral health programs

In addition, the budget recommends funding for the Department of Public Health and $1.6 million in nonrecurring funds and $625,000 in recurring funds for the Healthy Moms, Healthy Babies program and its mobile maternity care vehicle.

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has prepared a comprehensive report summarizing each State of the State address and governors鈥� proposed budgets, which is available to HMAIS subscribers. It also comprises a section highlighting trends in the issues covered in each speech, including maternal health, substance use disorder, Medicaid work requirements, prescription drug prices, and provider rates.

HMA supports healthcare stakeholders in responding to these developments, offering strategic guidance and expertise to help navigate the evolving policy landscape and align with the shifting priorities outlined in these addresses. Contact聽one of our experts below for more information about the report or to connect with one of HMA鈥檚 state policy and market experts.

Child and Teen Mental Health and the Lifting Voices initiative

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Each year on March 2 we observe World Teen Mental Wellness Day, which aims to raise awareness and destigmatize mental health issues experienced by teenagers, and to expand the conversation around available resources. There is an ongoing mental health and substance use crisis in our country. Families everywhere experience difficult and challenging experiences as their loved ones are cycled in and out of a system dealing with workforce shortages and resource issues. HMA works extensively to address the opportunities and challenges inherent in our struggling behavioral health system, including substance use disorder and on child welfare and family resilience programs throughout the country. #WorldTeenMentalWellnessDay

One such program is , an independent initiative developed by Heidi Arthur and Ellen Breslin, both HMA Principals, who co-founded the initiative, informed by their own family members鈥� experience and by their expertise in behavioral health policy and practice. As parents of children who nearly died on multiple occasions from severe behavioral health conditions, the co-founders are driven to inform the transformation of the youth behavioral healthcare system. As behavioral health professionals who found themselves struggling to navigate the many challenges facing their own children, they realized that their knowledge, desperation, and resources afforded their children access to interventions that should be available to every child and youth in need of services. Their experience of the care delivery system has also inspired their commitment to highlight the urgent improvements necessary to support struggling children and parents affected by the nation鈥檚 youth behavioral health crisis.

The co-founders published the initial Lifting Voices report in October 2023. Since then, the team has engaged multiple youth and family collaborators and state and national partners. They presented the report and their ongoing efforts at national and state conferences.

They developed a second iteration of the surveys and a website to scale the dissemination effort, with collaborators, who developed the website and who helped to develop the survey.

鈥淲e felt an imperative to lift the voices of youth and families experiencing mental health and substance use conditions,鈥� says co-founder, Ellen Breslin.
Heidi Arthur added, 鈥淪o far we鈥檝e received just over 100 survey responses. As we reach each 100-response milestone we plan to collaborate with our network of youth and family advisors to distill key findings that we can share in order to inform improvements to the system.鈥� They plan to release the first report in May 2025.

In February 2025, the team was invited by the Substance Abuse and Mental Health Services Administration (SAMHSA) Office of Recovery to participate in workgroups providing input into a toolkit for family and caregivers and to further define and describe SAMHSA鈥檚 framework of community-based recovery supports.

You can join national organizations and state agencies in disseminating the secure, anonymous Lifting Voices surveys by simply sharing the link and inviting families and youth to participate.

Findings will be disseminated with the goal of sharing the experience that youth/young adults and parents/caregivers are having as they seek services for child and youth mental health and/or substance use.

To learn more about this project, or inquire about ways that HMA can help with other behavioral health, child welfare, or substance use disorder issues, contact a member of our behavioral health team.

Spotlight on Development of President Trump鈥檚 Children鈥檚 Health Strategy

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This week, our In Focus section highlights President Trump鈥檚 Make America Healthy Again (MAHA) , which is designed to address the challenges driving chronic diseases in the United States. Our article delves into the key components of the order, presents a data snapshot about the state of children鈥檚 health, and discusses implications for stakeholders seeking to prepare for and inform the transitions impacting the future of children鈥檚 health.

Presidents can use executive orders to communicate their priorities and set a framework and timelines for federal agency actions. Historically, these orders have provided strong signals for the initiatives and policy direction that federal departments and agencies will pursue. 黑料网 (HMA), experts are monitoring the MAHA directive and several other executive orders, alongside other Trump Administration actions.

Executive Order: Making Children Healthy

On February 13, 2025, President Trump signed an executive order establishing the Make America Healthy Again Commission, chaired by US Department of Health & Human Services (HHS) Secretary Robert F. Kennedy, Jr. The commission, which builds on the Secretary鈥檚 prior work, is charged with combating 鈥渃ritical health challenges facing citizens, including the rising rates of mental health disorders, obesity, diabetes, and other chronic diseases.鈥�&苍产蝉辫;

Initially, the commission will focus on studying and addressing childhood chronic diseases. The order directs the commission to release within 30 days an assessment that summarizes what is known about the childhood chronic disease crisis, identifies gaps in knowledge, and includes international comparisons. This report will serve as the foundation for developing a strategy to improve the health of children, which is due within 180 days of the order.

Data Snapshot: Childhood Chronic Conditions

Evaluating existing data and identifying gaps in data for children are critical initial steps toward developing a comprehensive and evidence-driven federal policy agenda. At present, 90 percent of the $4.5 trillion in annual US healthcare expenditures are used to provide services to people with chronic and mental health conditions. Many of the risk factors for developing these conditions begin in childhood and some are preventable. For example:

鈥痑蹿蹿别肠迟蝉听, putting them at risk of chronic diseases such as type 2 diabetes, heart disease, and some cancers. More than one in three young adults ages 17鈭�24 are too heavy to join the US military.鈥疶he youth obesity rate from 2017鈭�2020 was聽, a 42 percent increase from the rate in 1999鈭�2000.聽Lifestyle choices, combined with social and environmental factors like access to healthy foods and neighborhood walkability and safety can significantly reduce the risk of developing obesity.聽
In 2022, diabetes and the complications associated with it accounted for $413 billion in total medical costs and lost wages in the United States. While few children have type 2 diabetes, nearly one in five adolescents (12鈭�18 years old) have prediabetes and may develop diabetes in adulthood. Like obesity, both personal choices and adverse social and environmental factors can increase the lifetime risk of developing diabetes.聽
础辫辫谤辞虫颈尘补迟别濒测听聽in the United States have asthma, which is incurable but can be managed. Asthma is one of the main causes for missed school days among children. Many US schools have poor indoor air quality, which can expose children to allergens, irritants, and triggers such as mold, dust, and pests. Conditions in children鈥檚 homes also can exacerbate asthma.

How Federal Programs Impact Children鈥檚 Health

Numerous federal programs directly and indirectly affect children鈥檚 health. Examples include:

Nationally, more than 38 percent of children have Medicaid coverage, with rates exceeding 50 percent in some states and territories (e.g., Louisiana, New Mexico, Puerto Rico). Medicaid鈥檚 requirement to cover Early Periodic Screening, Diagnostic and Treatment (EPSDT) has long been the vehicle for addressing the chronic healthcare needs of children on Medicaid. For example, for children with asthma, in addition to covering medications to prevent and treat exacerbations, some states will reimburse providers for conducting home health assessments to identify and remediate triggers in the home. In addition, federal funding through both Medicaid and US Department of Education supports school nurses and school-based health centers, which can be critical resources in addressing the chronic healthcare needs of students, such as the administration of Insulin or providing inhalers to children experiencing asthma.聽
To receive funding through the National School Lunch and School Breakfast programs, schools must provide meals aligned with the 鈥溾€� established by US Department of Agriculture, which specifies the amount of food among various groups and an age-based maximum for calories, saturated fat, and sodium. Under current guidelines, by 2027, school meals also will be expected to comply with limits on added sugars.聽
Participants in the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children (WIC), which provides participants with certain foods to meet their nutritional needs, have a聽聽for preterm birth, low birthweight infants, and infant mortality.聽

Federal programs affect children鈥檚 home and school environment in other ways, and the health implications of those funding choices may not be explicitly recognized or prioritized. For example:

Housing assistance programs in some cases prevent families from experiencing homelessness but may place them in living situations where exposure to environmental hazards such as mold, pests, or pollution and neighborhood factors like crime and lack of walkability may adversely affect their health.聽
Some federal agriculture programs are specifically designed to make nutritious foods available (e.g., Gus Schumacher Nutrition Incentive Program, or聽), while others聽聽without specifically bringing a health lens to those programs.

Implications for Stakeholders

The President has directed that the strategy address 鈥渁ppropriately restructuring the Federal Government鈥檚 response to the childhood chronic disease crisis, including by ending Federal practices that exacerbate the health crisis or unsuccessfully attempt to address it, and by adding powerful new solutions that will end childhood chronic disease.鈥� Though we do not know what the Make our Children Healthy Again Assessment and Strategy will recommend, we anticipate it will present both opportunities and risks for organizations focused on children鈥檚 health. As the commission begins its work, organizations can take the following actions:

Consider policy opportunities: Review your organization鈥檚 strategic plan as well as your operational and policy priorities and consider how they may fit into this framework. This could be the time to suggest changes to federal grants you receive or federal regulations or requirements that negatively affect your ability to keep children healthy.聽
Prepare for potential funding disruptions: It is possible that programs you rely on will have changes in scope or funding levels. Review your offerings for children with chronic conditions and identify substitutes or complements to your main priorities. Consider partners you might work with to keep work going that may not have the same level of federal support in the future.聽
Be prepared to share the real-world impacts of policy changes: Begin gathering data, stories, and compelling information to share about chronic conditions affecting children that can be used in future public comment opportunities, shared with the media, and discussed with your federal, state, and local representatives. Think about how to talk about these issues in a clear and compelling way that will resonate with each of those audiences.聽
Find partners and allies: As you consider the policy opportunities and risks, think about other organizations that share your interests and how you can work with them in complementary ways. It can be compelling to policymakers when stakeholders who might not naturally be aligned on other issues can unite around a specific policy area.聽

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Healthcare stakeholders with a commitment to healthy children and healthy adults have an opportunity to support the specific policies and funding opportunities that may emerge from the MAHA order. To learn more about these policy changes, the impact on your organization,鈥痑nd actions your organization can take, contact our one of our featured experts below.聽

Why housing insecurity is a critical public health issue

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More than ever, facing the challenges of housing insecurity is becoming a top priority for communities nationwide. Here鈥檚 why.

Direct impact on health: The quality of housing directly affects physical and behavioral health. People experiencing homelessness are at higher risk for illness, mental health issues, and death. Substandard housing leads not only to higher incidence of illness, but also greater exposure to toxins like lead and asbestos that exacerbate health problems.
Cost burdens of housing issues: Overcrowding, substandard housing, eviction, and homelessness all lead to poor economic outcomes, lower infant birthweights, mental health challenges, chronic disease, and higher mortality.
Effects on healthcare access: Due to high housing costs,half of renters delay medical care because they can’t afford it. And people experiencing homelessness or housing insecurity have a much harder time accessing healthcare.
Rise in homelessness: After homelessness hit a record high in 2023, it increased another 18% from 2023 to 2024. More than 771,800 people in the U.S. lived without housing in 2024.聽聽聽聽

To address these issues, we are announcing the launch of the HMA Housing and Health Solutions team. HMA has brought together a team of experts who understand the challenges that homelessness and housing insecurity present to community health. Bringing together partners across all sectors, we help craft effective solutions for populations that lack access to stable housing and healthcare. 鈥�

Our team includes former directors of national, state, and municipal government housing departments, nonprofit affordable housing organizations, and housing financing and investment.

We鈥檙e pleased to announce the addition of two well-renowned housing experts to the team. Andy McMahon joins HMA after spending over seven years at UnitedHealthcare and UnitedHealth Group. Andy has over two decades of executive experience spanning healthcare, housing, human services and community development, and worked with UHC Medicaid plans nationwide on various policy issues to improve care for the most complex populations. Doug Shoemaker joins HMA after leading Mercy Housing California for 13 years.聽 Prior to Mercy Housing, Doug directed the Mayor鈥檚 Office of Housing and Community Development in San Francisco.聽 Doug focuses on the intersection of housing, community development and healthcare to advance projects and policy that improve outcomes for lower-income individuals and communities.聽

Come meet some of our team members at the NAEH conference Feb 26 and 27 in Los Angeles, CA and visit us at the HMA booth in the exhibit hall. HMA鈥檚 Dena Hasan will be presenting, 鈥淒oes Secret Domestic Violence Housing Lead to Unsheltered Homelessness?鈥� on 2/26 at 2:30 in San Gabriel ABC, and 鈥淒oes Medicaid Hold the Key to Housing?鈥� at 3:45pm in Santa Anita AB.

Housing and Health Solutions

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Managing Director, Housing and Health Solutions

Senior Consultant

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Principal

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Associate Principal

Madeleine (Maddy) Shea

Principal

Doug Shoemaker

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Nicholas Williams

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Healthcare Quality Goes Digital: Navigating Challenges and Opportunities

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This week, our聽In Focus聽section highlights insights from a new 黑料网 (HMA) issue brief,聽Digital Quality Transformation.聽The brief, released in January 2025, explores the transition from traditional manual data extraction for use in quality measurement to fully automated digital quality measurement (dQM). It examines the challenges, benefits, and policy changes that are driving this transformation with a focus on how payers and providers can leverage digital tools and open data standards to improve efficiency, reduce costs, and enhance patient care and value-based payment models.

Following is a summary of key points from the brief about the evolution of traditional quality reporting in healthcare, which has depended on structured claims, administrative data, and manual chart abstraction. This process tends to be expensive, inefficient, and unable to capture data from a population perspective. We highlight the challenges and strategic steps that organizations should be taking now to prepare for the federally required dQM transition.

Current State

Traditional manual quality measurement methods are costly and inefficient. Generally, providers are expected to submit a sample of medical records (usually about 400 charts per measure). Once received, trained staff extract key data fields from those charts and enter them into another database, where the data are then used to augment claims data. This process results in significant gaps in and delays in information regarding quality of care, is prone to manual entry errors, and represents only a small portion of the patient population. Accreditation bodies like the National Committee for Quality Assurance (NCQA) are moving away from these outdated methods, signaling a shift toward more comprehensive and automated collection of clinical data. Facilitating this movement is the increasing availability of digital tools, APIs, and interoperability standards designed to streamline data exchange.

Federal Policy Landscape

The , the and the collectively are contributing to improve the ability of providers, payers, and applications to access health information using HL7 FHIR APIs. Although it is unclear whether the Trump Administration will revise aspects of certain existing regulatory policies, the commitment to interoperable, standardized, reusable data has been a bipartisan issue and was supported by the previous Trump Administration. This transition to digital health measures could even accelerate to meet changing expectations for efficiency and improved quality.

Key federal and state efforts include:

Roadmap for Digital Quality Measurement

The outlines necessary actions for a transition to fully digital measures by 2030. Organizations like the NCQA already are converting healthcare quality measures (e.g., HEDIS^庐) into digital formats using non-claims-based data sources in preparation for a full transition to digital measures in 2030. Key stakeholders, including the Digital Quality Implementation Community (DQIC) led by , an HMA company, are driving industry alignment with these new federal mandates. Organizations that proactively invest in digital quality measurement will be well-positioned for future compliance and improved healthcare outcomes.

(1) https://ecqi.healthit.gov/sites/default/files/CMSdQMStrategicRoadmap_032822.pdf Source: https://ecqi.healthit.gov/sites/default/files/dQMStrategicRoadmapExecSummarySlides_032022.pdf

Digital Health Advances in the States

States are also starting to plan for the implementation of these digital requirements. The , led in partnership with Gov. Spencer Cox and is one example of state-level leadership to support and maximize the use of digital health measures. The pilot is designed to enable providers, payers, and individuals to aggregate and share clinical and claims information from anywhere in Utah鈥檚 healthcare ecosystem. The statewide Fast Healthcare Interoperability Resources (FHIR)-based ecosystem leverages modern application programming interface (API) standards as required at the federal level. This pilot will aid Utah in its fully digital quality measurement transition by ensuring that health data are standardized and easily accessible, which is crucial for accurate and efficient quality measurement.

Challenges and Opportunities in Digital Quality Transformation

As the industry moves toward full adoption of dQM by 2030, healthcare organizations should be focusing on how to strategically leverage this transformation. Though the transition to digital quality measurement presents significant opportunities, key challenges include:

Workforce adaptation: Healthcare professionals accustomed to traditional reporting methods may need significant training to effectively use real-time data for decision making.
Shifts in payer-provider dynamics: With greater data transparency, reimbursement models may evolve rapidly, demanding more agile contract negotiations.
Data governance: Ensuring that the influx of newly accessible clinical data are properly validated and interpreted.
Vendor management: Organizations will need to rethink their relationship with vendors, specifically as plans reduce their reliance on manual processes.
- New vendor requirements may pivot toward data validation and analytic tools to ensure compliance with NCQA鈥檚 standards.
- Compliance with FHIR-based data exchange and CMS鈥檚 Interoperability & Patient Access Rule, which mandates standardized data sharing across different systems.
Data standardization: Different healthcare systems will need to use common data formats and terminologies to ensure interoperability.

What鈥檚 Next

As federal policies and regulations accelerate the transition to dQM, healthcare stakeholders must prepare by investing in interoperable technologies and adapting their quality reporting business processes accordingly. They should track developments and new opportunities at the federal and state levels and direct organizational attention and resources to the multiyear transition through the following approaches:

Evaluating of the current landscape, envisioning future pathways for dQM, and establishing achievable objectives for their organization
Developing strategic plans with the achievable objectives and enumerating tactical and implementation plans that address identified risks
Focusing on implementation, identifying and dashboarding your key performance indicators and metrics, making adaptations based on your evaluation

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Providers, payers, patients, and states all have a vested interest in ensuring fully digital quality measurement, as it will be essential to staying ahead in this rapidly evolving landscape. For details about this analysis, its implications for states and other organizations, and additional information, contact our experts below.

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