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States Begin to Engage with the Rural Health Transformation Program

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The Rural Health Transformation Program (RHTP) established in H.R. 1 represents one of the most significant federal investments in rural healthcare in decades. With $50 billion allocated between fiscal years 2026 and 2030, the program is designed to stabilize and transform rural health systems nationwide by supporting infrastructure, workforce development, and innovative care delivery models.

Administered by the Centers for Medicare & Medicaid Services (CMS), the RHTP requires each state to submit a one-time application detailing a comprehensive rural health transformation plan. These plans must address eight core priorities, including improving access and outcomes, leveraging technology, fostering regional partnerships, and ensuring long-term financial solvency for rural entities. The Centers for Medicare & Medicaid Services (CMS) has posted the , with application materials expected to become available in mid-September and state submissions due in late fall 2025.

The experts at 红领巾瓜报, including our Information Services team (红领巾瓜报IS), are tracking several state-level indicators and actions, including lead state agency points of contact, regulatory and public comment deadlines, and links to official notices. Following are the key takeaways from 红领巾瓜报IS State Action Tracker鈥攁 living resource for 红领巾瓜报IS subscribers, which will be updated with federal and state-level details such as state-selected RHTP categories and award amounts.

Initiative Alignment and Partner Engagement: Common Themes Across States

As of early September 2025, at least 15 states have begun structured intake to inform initiatives and uses of the RHTP funding鈥攔equests for information (RFIs), surveys, town halls, webinars鈥攚ith others maintaining a planning posture pending release of CMS鈥檚 application template.

Common themes and approaches emerging from these activities include:

  • Category-aligned input.听States are encouraging stakeholders to align proposals with the statute鈥檚 eligible activities (e.g., access, outcomes, technology/prevention, partnerships, workforce, data/IT, solvency). Examples include:
    • 听requires submissions to identify which of the nine categories are addressed and to discuss outcomes and sustainability.
    • Delaware and听听use structured prompts to sort feedback by activity type.
  • Pre-guidance tools.听States like听听听and听听are using RFIs and statewide surveys to gather ideas and identify viable projects before CMS guidance is finalized.
  • Tech-enabled care.听New and expanded uses of technology are topics of interest to states that are seeking ideas on how to maximize investments in remote monitoring, artificial intelligence (AI)/robotics, data/analytics, and IT/cybersecurity as eligible investments for improving access to services, healthcare delivery, and workforce support. For example:
    • 听explicitly references technology-enabled care models.
    • 听and听听highlight health IT/cybersecurity and value-based purchasing.
  • Local coordination.听States are encouraging regional partnerships/community hubs and rebalancing or right sizing service lines to match local demand.听听and听听emphasize right sizing service lines and coordinated care across the continuum of pre-hospital, emergency, acute inpatient, outpatient, and post-acute services.听听solicitation prioritizes regionally coordinated partnerships and explicitly calls out right sizing the care continuum as a focus area.听听highlights strengthening partnerships between rural hospitals and other providers as a required component of the state plan.
  • Sustainability and value-based readiness.听States are asking how projects will be sustained after federal funding ends and how these can support and sustain alternative payment models.听听and听听request implementation details and financial durability plans.听听prompts discussion of how proposals enable care coordination and payment reform.

Looking Ahead

The emerging national landscape for RHTP initiatives is mixed. Early state movers and their engaged partners are building momentum and reducing execution risk, while others are preserving flexibility until additional federal guidance arrives. States waiting on CMS鈥檚 template may face challenges in coordinating stakeholders and finalizing priorities before the application deadline.

For providers and community-based organizations (CBOs), now is a critical time to engage. These organizations are uniquely positioned to shape state applications by sharing on-the-ground insights, identifying unmet needs, and proposing scalable, sustainable solutions. Participating in state RFIs, surveys, and town halls allow providers and CBOs to inform how funding is prioritized and deployed.

To prepare for the RHTP resources and support, healthcare organizations should:

  • Monitor state-level engagement opportunities and respond to RFIs or surveys with clear, category-aligned proposals
  • Build or strengthen partnerships with other local organizations to demonstrate regional coordination
  • Assess internal capacity to implement and sustain projects beyond the federal funding window
  • Document outcomes and financial models that support long-term viability and alignment with value-based care

Connect with Us

To support transparency during this fast-moving period, 红领巾瓜报IS has launched the RHTP State Action Tracker, a centralized resource for curating each state鈥檚 actions, agency leads, deadlines, and links to official notices. The tracker will be updated as CMS guidance is released and as states fill in details, such as selected categories and award amounts. For details about the RHTP, including the 红领巾瓜报IS State Action Tracker, contact 红领巾瓜报 experts听below.

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Federal Shifts and the Potential Impacts on Healthcare Quality Oversight

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This week, our听In Focus听section explores how recent federal shifts鈥攑articularly under the Trump Administration鈥攁re reshaping healthcare quality oversight. 红领巾瓜报 (红领巾瓜报) has published several analyses on the 2025 Budget Reconciliation Act (H.R. 1, formerly known as the One Big Beautiful Bill), Title IV of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), and the 2025 Centers for Medicare & Medicaid Services (CMS) Quality Conference. Together, these federal changes and the policy priority shifts described at the Quality Conference, have implications for monitoring and oversight of healthcare quality for publicly insured, commercially insured, and uninsured individuals.

In this article, 红领巾瓜报 experts highlight potential areas for state Medicaid programs, healthcare organizations, and other industry partners to watch for as the rollout of new policies and programs begins to affect programs that monitor quality and creates the imperative to develop new oversight mechanisms.

Overview of Key Federal Policy Shifts

2025 Budget Reconciliation Act/H.R. 1

In July 2025, President Trump signed H.R. 1, the sweeping budget reconciliation legislation that directly affects publicly financed health coverage. Notable policy changes with quality implications include:

  • Mandatory six-month redetermination and community engagement for select populations
  • Stricter rules on healthcare-related provider taxes and state-directed payment policies
  • Elimination of Affordable Care Act (ACA) subsidy eligibility for certain lawfully present immigrants
  • An end to conditional eligibility for ACA subsidies, as well as passive re-enrollment
  • Required compliance with community engagement and work policies

Personal Responsibility and Work Opportunity Reconciliation Act of 1996

On July 10, 2025, the US Department of Health and Human Services () and other agencies, redefined 鈥渇ederal public benefits鈥� to exclude individuals with 鈥渦nsatisfactory immigration status鈥� from certain healthcare programs. Examples include Certified Community Behavioral Health Clinics (CCBHCs), Community Health Centers/Federally Qualified Health Centers (FQHCs), grant-funded programs administered by the Substance Abuse and Mental Health Services Administration (SAMHSA), and Title X Family Planning.

2025 CMS Quality Conference

During the 2025 , Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz and senior CMS officials, emphasized CMS鈥檚 and HHS鈥檚 evolving priorities under the Trump Administration. Notable priorities include empowering patients with data, reducing waste and tackling fraud, focusing on prevention, and transitioning to digital quality measures.

Quality Oversight Impacts

Key impacts on quality monitoring programs resulting from these federal changes and evolving priorities include:

Budget constraints elevate monitoring and value-based care metrics. Reduced Medicaid funding and tighter payment rules heighten the need for real-time monitoring of value-based care metrics to ensure financial sustainability in the changing market, optimize reimbursement.

Enrollment changes challenge quality tracking. Tighter eligibility and enrollment policies are expected to decrease enrollment in Medicaid (particularly among the adult expansion population) and the Affordable Care Act Marketplace program. Frequent redeterminations may cause coverage gaps and churn, distorting quality measure denominators and complicating performance tracking 鈥� especially for preventive and chronic care metrics.

Specifically, as the population mix in publicly funded programs changes or as gaps in enrollment exceed the 30鈥�45-day continuous enrollment criteria for many quality measures, the eligible population/denominators of quality measures will likewise fluctuate. Populations that lose coverage or churn on and off eligibility rolls can result in differential impacts for various quality measures (e.g., healthier individuals losing coverage affects prevention measures more than measures of chronic disease care).

Although performance on value-based care quality measures will have increased importance, the ability to track and trend performance will be increasingly challenging. Healthcare organizations will benefit from forecasting potential changes to patient mix and volume and real-time monitoring and improvement opportunities.

Rise in uncompensated care requires new quality monitoring. H.R. 1 changes that reduce eligibility, paired with PRWORA changes that limit treatment for certain individuals who receive public benefits, are likely to lead to increases in the uninsured population and inhibit access to preventive care. These populations tend to use emergency departments more often for health issues that could have been treated earlier or more effectively in outpatient settings, yet quality oversight is limited for populations that receive care outside of publicly or commercially funded programs. New mechanisms for quality oversight鈥攁nd funding of those mechanisms鈥攚ill be needed to monitor the health of these populations.

New programs and priorities warrant updated monitoring. H.R. 1鈥檚 Rural Health Transformation Program and CMS鈥檚 dual-track quality measurement approach (鈥渢reating illness鈥� versus 鈥渕aintaining health鈥�) necessitate a reevaluation of current metrics and monitoring systems.

Implementation of digital quality measures will support these efforts when fully implemented. The accelerated movement toward digital quality measurement and interoperability may create an imperative for healthcare organizations to make the shift. For example, the transition to digital quality measures will be necessary to ensure real-time oversight and improvement of quality measures, population health analytics, maximizing value-based care payments and efficiencies needed to effectively respond to federal changes. At the same time, healthcare organizations will need strategies to effectively deploy digital quality and interoperability within and across their organizations to not just comply, but to maximize their capabilities.

Connect with Us

红领巾瓜报 works with state agencies, payers, health systems, and providers to assess and implement quality systems, value-based care programs, performance improvement and digital health. To discuss how federal changes will affect your organization鈥檚 quality programs, contact our featured experts below.

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Building Rural Health Together: Reflections from the Ohio Rural Health Association Conference

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Earlier this month colleagues from 红领巾瓜报 (红领巾瓜报) attended the 2025 Ohio Rural Health Association Conference. The gathering brought together providers, policymakers, and advocates from across the state to discuss one of the most pressing issues of our time: the future of rural health care in an uncertain policy and financial environment.

At a moment when federal funding and regulatory debates dominate the headlines, what stood out most was the energy and commitment among local leaders to work together on practical solutions. The challenges facing rural communities are profound鈥攈ospitals and clinics strained by reimbursement shortfalls, workforce shortages threatening access, and shifting payer dynamics creating new administrative burdens. Yet the conversations throughout the conference were grounded in resilience and collaboration, demonstrating that sustainable solutions begin at the community level.

Spotlight on Collaboration

红领巾瓜报 was honored to contribute to this dialogue through three sessions focused on core issues shaping rural care.

  • Kenneth Cochran, DSc, RN, FACHE, drew on his deep leadership experience as a former Ohio hospital CEO to highlight the urgency of workforce development. With projections of a 187,000-physician shortfall by 2037, Ken outlined integrated workforce strategies鈥攁pprenticeships, housing partnerships, and a culture of continuous learning鈥攖hat can help stabilize rural hospitals and strengthen community health infrastructure.
  • Courtney Smith, RHIT, CCS, shared two critical perspectives. First, she unpacked the growing strain of Medicare Advantage in rural communities, where reimbursement often falls short and administrative requirements delay patient care. Second, she explored the complexities of Medicaid revenue cycle management, offering actionable steps rural providers can take鈥攆rom leveraging technology and analytics to streamlining wrap-around payment reconciliation鈥攖o maintain stability in an unpredictable environment.
  • Jennifer Shaw, Senior Consultant, co-presented on best practices for navigating payer relationships with Courtney. She underscored how rural providers can use data to strengthen negotiations and how collaboration across hospitals, clinics, and associations creates the leverage necessary to ensure fair treatment in contracting and payment.

These discussions demonstrated the value of having clinical, operational, and policy perspectives at the table. Each 红领巾瓜报 colleague brought not only technical expertise but also a deep appreciation for the lived realities of rural providers, ensuring our sessions were rooted in practicality.

A Landscape in Flux

The national policy context reinforces the importance of this work. Recent debates in Washington over rural health funding underscore just how fragile the financial footing of many hospitals and clinics can be. While the outcome of federal policy is uncertain, what is clear is that communities cannot afford to wait.

As 红领巾瓜报 has noted in our broader work on rural health, effective solutions hinge on collaboration across sectors and levels of government. Whether it鈥檚 building workforce pipelines, ensuring fair payment, or streamlining operations, progress requires alignment among providers, payers, policymakers, and communities themselves.

Moving Forward

The Ohio Rural Health Association conference was a reminder that even in uncertain times, there is a powerful foundation for innovation and problem-solving when rural providers work together. 红领巾瓜报 is proud to support these efforts, bringing decades of experience in Medicaid policy, health system transformation, and rural health strategy to bear for our partners.

As we look ahead, one lesson stands out: the path forward for rural health will not be written in Washington alone. It will be forged in places like Ohio, where providers, leaders, and communities are building practical, collaborative solutions every day.

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Executive Order Addressing Homelessness: The Federal Shift Toward Institutionalization

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President Trump signed an executive order (EO), , on July 24, 2025, signaling a significant shift in federal homelessness policy and the requirements for organizations that use federal dollars to address homelessness in their communities. The order emphasizes public safety and prioritizes institutionalization and mandatory treatment over housing first approaches.

The administration asserts that 鈥渢he overwhelming majority of these individuals are addicted to drugs, have a mental health condition, or both鈥� and calls for transitioning homeless individuals into long-term institutional settings through civil commitment for 鈥渉umane treatment.鈥� Below, 红领巾瓜报 (红领巾瓜报) outlines key elements of the EO, including provisions, key stakeholder considerations, and potential strategies to maintain care continuity amid federal changes.

Key Elements of the Executive Order

End of Housing First: The EO discontinues support for the Housing First model, directing federal agencies to prioritize mandatory treatment. The Department of Housing and Urban Development (HUD) Secretary is directed to take steps requiring treatment participation as a condition of HUD program participation.

Support for Civil Commitment Infrastructure: The federal government will assist state and local governments with technical guidance, grants, and other resources to implement civil commitment, institutional treatment, and step-down treatment standards. The Attorney General and US Department of Health and Human Services (HHS) Secretary are instructed to pursue reversal of legal precedents that restrict civil commitments for individuals with mental illness who pose risks or are unable to care for themselves.

Restructuring Federal Programs: The EO directs HHS, HUD, and the Departments of Justice (DOJ) and Transportation (DOT) to review discretionary grants and restructure programs to ensure compliance with the new guidelines, as outlined below.

  • HHS Substance Abuse and Mental Health Services Administration (SAMHSA) grants will no longer support harm reduction or safe consumption efforts and has听听a 鈥淒ear Colleague鈥� letter clarifying which services will be funded; for example, naloxone distribution can be funded, but clean syringe distribution cannot.
  • HUD will exclusively, where permissible, fund programs for women and children and revise regulations to exclude registered sex offenders.
  • Some emergency law enforcement funds may be allocated for encampment removals.

Expanded Roles: The EO directs HHS to leverage the use of federally qualified health centers (FQHCs) and Certified Community Behavioral Health Clinics (CCBHCs) to reduce homelessness and ensure federal funds support crisis intervention and comprehensive behavioral health services. In addition, the Attorney General is directed to prioritize funding for the expansion of drug and mental health courts.

Notably, federal grants will prioritize jurisdictions and states that enforce laws against open drug use, urban camping, urban loitering, and urban squatting. Grant recipients must also share certain health-related data with law enforcement, as permitted by law.

Considerations for Stakeholders

States, local governments, and county jurisdictions must assess housing and homeless programs that use federal funding streams. They must consider the implications of their current program activities and, where possible, realign programs with new requirements. They may gain access to new funding for treatment beds, drug and mental health courts, crisis response, and law enforcement support but risk losing funding for those programs that use harm reduction or housing first models. Local governments could face increased jail overcrowding and legal challenges related to civil commitments and data sharing. Early examination of current programs, particularly HUD and crisis programs, as well as early planning, will be essential.

Providers may need to restructure services to comply with the new mandates, including collaboration with crisis/removal entities and law enforcement and expanded reporting. Emergency department and inpatient facilities may see increased demand, especially from uninsured individuals.

State behavioral health authorities and other stakeholders can benefit from forming advisory councils to develop ethical frameworks for civil commitments, as well as consider providing training for providers and law enforcement and propose revisions to state statutes and regulations

Homeless individuals are likely to experience increased policing, institutionalization, and loss of access to non-mandated services and housing.

What Happens Next

Federal agencies are now responsible for implementing the EO, revising grant programs, issuing guidance, and shifting funding priorities toward enforcement and institutional treatment. These changes will redefine compliance for local governments and service providers.鈥�

Health and housing organizations must quickly assess the implications of this policy shift. Strategic collaboration across sectors, including behavioral health, housing, law enforcement and judicial systems, will be essential to maintain care continuity and protect individual rights.

Connect with Us

红领巾瓜报鈥檚 housing and homelessness and behavioral health experts are closely monitoring the evolving federal policy landscape and legal developments. We are tracking federal funding shifts, priorities, and opportunities across HHS, HUD, DOJ, and DOT, helping stakeholders align their programs with new priorities to enhance eligibility and impact.

For details about federal agency implementation of the EO and downstream effects, contact our featured experts below.

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Addressing the Growing Crisis in Older Adult Behavioral Health

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Imagine a 77-year-old man named Don who lives alone in his small apartment after his wife, Marcia, suddenly died a year ago. She had been his constant companion and long-time caregiver, making sure he took his medications for diabetes and bipolar disorder. Now he is socially isolated, lonely, and depressed. When he neglects to eat, his blood sugar levels tend to drop, and he becomes light-headed. He won鈥檛 call his doctors then; he doesn鈥檛 want to bother them. Besides, it was his wife who used to communicate with his doctors and psychiatric team about any concerns. Without her, he doesn鈥檛 have much motivation to do anything.

Don illustrates several U.S. demographic and epidemiologic trends:

He is a 鈥淏aby Boomer鈥� driving the ongoing aging of this country. Within the next 20 years, the number of Americans aged 65 and over will exceed the number of those under 18. The population of working age, including those available to care for older adults, will decline by 5 percent. As a result, the emerging care gap between the numbers of Americans who need care and those who can provide it will greatly increase.

Like greater numbers of older Americans, he has at least two chronic illnesses, adversely affecting his overall functioning and quality of life. According to a 2025 Centers for Disease Control research summary, chronic conditions put him at risk for higher healthcare costs[1]. The combination of chronic physical and mental health conditions will likely mean very high health care costs.

Like increasing numbers of older Americans, he has a behavioral health disorder. About 25% of older adults have a diagnosable mental, substance use, and/or cognitive disorder. These conditions are often exacerbated by social isolation and loneliness, which is associated with increased rates of both mental and physical health problems.

Unfortunately, about half of older adults with mental or substance use disorders do not get treatment or are treated by primary health care providers who have limited training in addressing geriatric psychiatric concerns. As a result, only about a third of people who get treatment receive what is “minimally鈥� adequate treatment. Only about half of those who get treatment from mental health professionals receive adequate care.

The low utilization by older Americans of behavioral health services reflects several access challenges including: 

  • Access to providers who are clinically, culturally, linguistically, and generationally competent are in short supply. The shortages are most acute for rural residents. There is also a shortage of geriatric mental health professionals participating in the Medicare program.
  • Service access is also problematic. Many treatment programs are in hard-to-reach locations. There is also a tremendous shortage of services in home and community settings, due to workforce shortages.
  • Discrimination including stigma and ageism, plus the lack of awareness about mental illness and the effectiveness of treatment result in reluctance to seek or accept behavioral health services.

Unlike many of his contemporaries suffering from a behavioral health condition, Don does have long-standing behavioral health treatment which has been effective for most of his lifetime for managing his bipolar disorder. But without his wife鈥檚 support, his attendance and adherence have faltered. He now needs other sources of support and guidance, as well as more intensive treatment, or he faces several major risks:

  • He may wind up being taken by ambulance to hospital emergency rooms for falls. *
  • He may be admitted to the hospital for broken bones, diabetic complications, or even a stroke or heart attack.
  • He may deteriorate further and become unable to care for himself, eventually transferring from a hospital to a long-term care facility.
  • He may suffer premature death.

Older Americans, like Don, need not suffer injury and decline in addition to grievous loss. With the right systems of behavioral health, supported by care coordination and person-centered care plans, they can recover, adapt, and remain in their homes, as most Americans prefer.

红领巾瓜报 has the expertise to create and strengthen those systems of care. To learn more about How 红领巾瓜报 Can Help.

[1] Watson KB, Wiltz JL, Nhim K, Kaufmann RB, Thomas CW, Greenlund KJ. Trends in Multiple Chronic Conditions Among US Adults, By Life Stage, Behavioral Risk Factor Surveillance System, 2013鈥�2023. Prev Chronic Dis 2025;22:240539. DOI:

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Medicaid Managed Care Profitability: Navigating Margin Pressures and Regulatory Shifts in 2024

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This week, our In Focus section highlights findings from 红领巾瓜报 Information Services鈥� (红领巾瓜报IS鈥檚) review of 2024 statutory filings submitted to the National Association of Insurance Commissioners (NAIC). These filings provide a nationwide view of Medicaid managed care plan profitability and medical loss ratios (MLRs) across 221 plans operating in 39 states, the District of Columbia, and Puerto Rico.

These data build upon and offer additional context to a previous  conducted by 红领巾瓜报 and Wakely, an 红领巾瓜报 Company, of increasing post-pandemic financial pressures driven by acuity increases resulting from the continuous eligibility unwinding and increases in behavioral health and home and community-based services access and utilization.

Medicaid Managed Care Underwriting Gains and Losses

As state Medicaid programs have increasingly moved from fee-for-service to managed care, a foundational assumption has been that efficient managed care organizations (MCOs) reduce waste and deliver high quality, cost-effective healthcare services. This transition has made Medicaid plan performance and sustainability a central focus for policymakers and actuaries alike.

Medicaid capitation rates must be actuarially sound, which means they must be projected to cover all 鈥渞easonable, appropriate, and attainable costs,鈥� including medical administrative costs, plus a margin for insurance risk, even for nonprofit plans. According to the Society of Actuaries 2024 , average underwriting margins in Medicaid rates ranged from 0.35 percent to 3.15 percent, with a consistent average between 1.2 percent and 1.3 percent.

However, actual results often deviate from projections for reasons that may be challenging to predict. Rate setting is an inherently forward-looking process, and even with conservative assumptions, unexpected shifts in enrollment, acuity, or service utilization can lead to significant deviations from projected results. Retrospective reviews show variability in margins over time (see Figure 1).

Figure 1. Historical Medicaid MCO Net Gains/Losses, 2012鈥�2024 (39 States, DC)

Based on 红领巾瓜报IS鈥檚 analysis, Medicaid MCOs sustained modest but steady gains from 2012 through 2017. After a decline between 2016 and 2019, margins rebounded to approximately 3 percent until 2022, narrowed in 2023 to 1.9 percent, and turned negative in 2024 at -0.9 percent.

For the first time in over a decade, more plans experienced losses than gains in 2024 (see Figure 2), with only 42 percent reporting positive margins, down from the decade high of 84 percent in 2022. This shift raises critical questions about sustainability and participation in Medicaid managed care.

Figure 2. Medicaid Managed Plans Likelihood of Gain, 2012鈥�2024 (39 States, DC)

The 鈥淟ikelihood of Gain鈥� chart tracks the percentage of Medicaid managed care plans reporting an underwriting gain each year from 2012 to 2024. For most years, the likelihood that a plan posted a gain was relatively high, typically between 60 percent and 80 percent. The probability reached a recent peak in 2022, with 84 percent of plans reporting gains, and remained elevated in 2023 (74 percent). In 2024, however, the likelihood of gain dropped sharply to just 42 percent, the lowest level in the 12-year period.

Risk Corridors, Medical Loss Ratios, and Structural Policy Shifts

MLRs show the portion of plan revenue spent on medical care as compared with the costs to operate the plan and the underwriting gain or loss described previously. When MLRs rise or fall, it can be an indication that medical cost trends experienced by health plans differ from the assumptions used by state rate setting actuaries. High MLRs are the key driver of underwriting gains, and low MLRs are associated with higher profitability. All states report MLRs to the Centers for Medicare & Medicaid Services (CMS), and some enforce minimum MLRs with a remittance provision, requiring plans to return funds if their MLR goes below a certain level.

Risk corridors are another tool that states use to manage financial volatility. These mechanisms share gains or losses between plans and states when results deviate significantly from pricing assumptions, offering protection to MCOs and the state alike, in contrast to minimum MLR provisions with a remittance provision, which only protects the state. During the COVID-19 pandemic, many states implemented or expanded risk corridors to recoup overpayments because of lower utilization. Some risk corridors were set retroactively鈥攁 practice CMS now prohibits.

In 2024, MLRs reached a decade high of 90.8 percent, as indicated by 红领巾瓜报IS鈥檚 analysis. Driving this increase were heightened utilization rates, increased enrollee acuity, and the end of continuous Medicaid coverage protections in 2023. As healthier, lower-cost members left Medicaid, plans were left serving a more complex population with higher per-member costs. Inflation in medical costs鈥攅specially for behavioral health and home and community-based services鈥攁dded more pressure. Delayed or avoided care during the COVID-19 pandemic may also have played a role, as members sought more services in 2022鈥�2024, resulting in a surge in utilization greater than what was priced into rates.

Many states put risk corridors in place to stabilize margins from 2020 to 2022, which may have contributed to the tight band of outcomes around the high underwriting gains in that period. However, many states have been  them for 2024, 2025, and 2026. Without these protections, plans may face greater exposure to underpayment in 2025 and 2026 if cost trends continue to outpace rate assumptions.

What to Watch

Rate setting conversations between states and plans for 2026 are happening now, and in many cases they are quite challenging. In addition to meeting actuarial soundness requirements, states also must balance their budgets, and some may be facing limitations on their traditionally used tools.

Looking ahead, it will be increasingly important that states and plans partner to find cost savings that can ensure the program鈥檚 long-term sustainability.

A subscription to 红领巾瓜报IS provides access to comprehensive financial intelligence on Medicaid managed care. Far beyond surface-level snapshots, 红领巾瓜报IS delivers health plan-level financial performance metrics, enrollment trends, and state policy developments that directly shape rate setting and operational strategy. Whether you鈥檙e a state official, health plan executive, or policy strategist, 红领巾瓜报IS provides the financial clarity and policy context needed to anticipate regulatory shifts, benchmark performance, and make confident, data-driven decisions.

For questions about the analysis discussed in this article, contact our experts below.

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Health Tech Ecosystem Leaders to Speak at 红领巾瓜报鈥檚 National Conference

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The Trump Administration鈥檚 new Health Tech Ecosystem initiative is reshaping how patients and providers access health data, with the bold Kill the Clipboard road map offering a federal blueprint for modernization. At its  being held October 14鈥�16 in New Orleans, 红领巾瓜报 (红领巾瓜报) is bringing together healthcare leaders to explore how federal policy and industry innovation are driving smarter, more connected care. 

About the Sessions  

  • Driving Digital Health Forward: Federal and Industry Enablers of Smarter, Connected Care听
  • The Digital Health 鈥淪tate of the Art鈥�: Success Stories, Trends and Opportunities听
  • Seizing Disruption to Make a Lasting Impact in Healthcare听

These and other  reflect the federal government鈥檚 evolving priorities around digital transformation, interoperability, and patient empowerment. The Health Tech Ecosystem initiative and CMS鈥檚 Interoperability Framework are setting new expectations for how healthcare organizations manage data, engage patients, and collaborate across sectors 

Featured Digital Healthcare and Innovation Leaders Speaking at the 红领巾瓜报 Conference  

Our  will unpack the far-reaching impact of these advancements, spotlighting opportunities for smarter data exchange and care coordination in a connected ecosystem. In addition, experts from across the healthcare industry will share practical strategies for advancing digital maturity and overcoming operational challenges, with a focus on improving patient care and organizational efficiency. 

  • , Louisiana Department of Health听听
  • , DNP, RN, Chief Executive Officer, CyncHealth听
  • , Principal, Leavitt Partners (an 红领巾瓜报 Company) and co-author of Kill the Clipboard听
  • , MD, MBA, Assistant Secretary for Technology Policy and National Coordinator for Health IT, US Department of Health and Human Services听听
  • , President & Chief Executive Officer, HealthShare Exchange听
  • Juan Montanez, MBA, Managing Director, IT Advisory Services, 红领巾瓜报听
  • , Vice President, Enterprise Clinical Enablement, Optum听
  • , Associate Vice President of Enterprise Transformation-Interoperability, Humana听

Healthcare organizations need to prepare for a future regulatory environment that is significantly more digital, interoperable, and chronic disease鈥揻ocused. From health plan executives and state Medicaid directors and policy teams, to provider organizations and health IT and digital health innovators, our speakers will discuss what changes are coming  in the digital health space and how you can get your organization ready.  for the conference today with the code HOTTOPIC25 to receive 20% off the standard conference rate through August. 

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What鈥檚 Next in Quality: CMS Conference Highlights and Stakeholder Imperatives

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This week, our In Focus section covers the 2025 . The event convened healthcare leaders, clinicians, researchers, and patient advocates to explore strategies for improving outcomes and modernizing service delivery. Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz and senior CMS officials emphasized the agency鈥檚 evolving priorities under the Trump Administration, with a strong focus on digital transformation, patient empowerment, and fraud prevention.  

In this article, 红领巾瓜报 (红领巾瓜报) experts highlight key themes from the conference. We note where these themes align with the agency鈥檚 recent proposed rules and requests for information (RFIs), including several RFIs included in the 2026 Medicare Physician Fee Schedule (PFS) , with comments due September 12, 2025. Finally, they advise healthcare organizations of the immediate need to evaluate their risks and opportunities in this digital health ecosystem.  

Key Themes of the Conference  

Empower Patients with Data 

CMS leaders shared a vision for enabling Medicare beneficiaries to experience healthcare technology in the same way that they use in banking and streaming services. Within a year, CMS committed to enabling real-time digital communication with beneficiaries, becoming the nation鈥檚 鈥渂est payer.鈥� Notably, a patient safety advocate challenged CMS to think about bi-directional data exchange where patients should be able to share data with CMS.  

Subsequent to the conference, Administration officials announced elements of the  infrastructure, including conversational AI tools, diabetes and obesity management platforms, and efforts to 鈥溾�� by simplifying data access for patients and providers.   

Reducing Waste and Tackling Fraud  

The conference coincided with the federal government鈥檚 multi-billion dollar , underscoring CMS鈥�  to curbing waste. CMS officials highlighted several aspects of CMS鈥� work, including application of predictive algorithms dubbed 鈥渢he Netflix model鈥� to identify suspicious billing patterns. They also talked about the new CMS Innovation Center model鈥攖he Wasteful and Inappropriate Service Reduction () Model鈥攖o engage technology companies to improve prior authorization processes in traditional Medicare, particularly for high-risk items like skin and tissue substitutes.  

Focusing on Prevention  

CMS tied the Make American Healthy Again (MAHA) agenda to quality measurement reform. CMS officials encouraged moving to two distinct sets of quality measures: one for treating illness and another for maintaining health. These measures could focus on preventing or delaying onset of disease and on measuring outcomes.   

Moving to Digital Quality  

CMS also emphasized its commitments to digital quality measurement and interoperability through the adoption of Fast Healthcare Interoperability Resources (FHIR庐) application programming interface (API) technology. For example, CMS鈥� Center for Clinical Quality and Standards is testing a FHIR-based assessment tool for inpatient psychiatric hospitals. Separately, the Centers for Disease Control and Prevention (CDC) is transitioning National Healthcare Safety Network鈥檚 measures to FHIR.  

Policy Connections: From Conference Themes to Federal Action 

The conference themes reflect and preview broader federal policy changes including:  

  • The 2026 Medicare Physician Fee Schedule (PFS)听听includes multiple requests for input on streamlining quality measures, enhancing chronic disease management, and expanding digital infrastructure.听听
  • On July 30, CMS announced an updated voluntary blueprint for modern health data exchange,听which encourages healthcare organizations to become CMS-aligned听networks. The agency鈥檚听听describes the voluntary criteria for CMS-aligned in areas of听Patient Access & Empowerment,听Provider Access & Delegation, Data Availability & Standards Compliance, Network Connectivity & Transparency, and Identity, Security & Trust.听听

The Road Ahead for Healthcare Organizations 

Healthcare organizations need to prepare for a future regulatory environment that is significantly more digital, interoperable, and chronic disease鈥揻ocused. CMS is building the highway that will enable healthcare organizations to build and maintain the technology necessary for these new initiatives.  

This will require state and local government, healthcare organizations, and other partners to retool their infrastructure and workflows to optimize needed operational transformations. All entities should have a strategic roadmap for obtaining and using interoperable clinical data for care management, population health and quality, among other use cases. 

Payers will benefit from initiatives such as: 

  • Exploring strategic partnerships to help accelerate technology advancement, such as digital identity providers and specialists in digital quality measurement听听
  • Exploring ways to increase focus on prevention, such as increasing uptake of the Medicare Annual Wellness Visit or considering new payment approaches for services like medically tailored meals听
  • Staying current on AI tools and predictive analytics that identify individuals at risk for preventable conditions and working with their provider networks to intervene early听

States can take steps to prepare, including:  

  • Exploring strategic partnerships to help accelerate technology advancement, such as digital identity providers and specialists in digital quality measurement听听
  • Assessing the reach and impact of existing primary prevention programs to understand how they can use their levers to incentivize healthy lifestyles, encourage culturally responsive health education, and address root causes of preventable illness and disease听听
  • Identifying opportunities for aligned efforts and referral pathways, including with community organizations, to address upstream health factors听

Health systems and providers will need to reimagine the care experience by:  

  • Exploring early adoption of AI tools for medical documentation to improve both patient experience of care interactions and coding accuracy to support digital quality measurement听
  • Developing age-tailored checklists to ensure face-to-face time with patients to identify and support top primary prevention goals听
  • Evaluating and working with their patients to use digital tools that support chronic disease prevention, such as diabetes and obesity management platforms听

Connect with Us 

The CMS Quality Conference signaled a substantial shift toward streamlined regulatory approaches and expanded standard data exchange, digital quality reporting and measurement, and AI deployment in care settings and by payers. Stakeholders should anticipate additional federal guidance updates, including in the Medicare Physician Fee Schedule final rule in the fall.  

红领巾瓜报 works with state agencies, payers, health systems, and providers to assess and implement digital health, quality systems, and information technology. We can help stakeholders develop cross-sector alliances, and organizations plan for and implement changes needed to react to these new initiatives. To discuss the implications of the Administration鈥檚 efforts in prevention, healthcare quality, and interoperability, contact our featured experts below.

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Reference-based pricing 鈥� a tool to improve consumer behavioral health access and affordability

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Reference-based pricing is a tool that can help to address growing healthcare costs and ultimately improve healthcare affordability, especially for consumers with private health coverage.  Two states 鈥擮regon and Montana鈥攈ave already implemented reference-based pricing (RBP), and several others have considered it or are in the process of implementation. RBP can be implemented in two ways- either through setting limitations on what insurers can reimburse for health services or by setting limitations on what providers can charge for services. The 鈥渞eference price,鈥� usually a percentage of what Medicare pays, can also function as a floor for provider payments. This is especially important to combat issues of access to behavioral health services, where payments are notoriously low, and workforce shortages and limited network participation issues are a significant barrier to patients seeking care.

since implementing caps in 2019 on what insurers can pay providers- $107.5 million over 27 months- and recently demonstrated reductions in out-of-pocket spending without unintended consequences such as hospital network disruptions or price hikes. `

In Washington, reference-based pricing was evaluated as a possible policy intervention in two reports prepared by 红领巾瓜报 (红领巾瓜报). The reports were produced for the Office of the Insurance Commissioner (OIC) to address healthcare affordability in 2023 and 2024. The included a landscape of the healthcare system in Washington as well as an overview of several policies for consideration, while the involved actuarial and economic analyses of selected policies to understand their potential impacts they might have in lowering healthcare costs and improving healthcare affordability for consumers.

红领巾瓜报 and Wakely, an 红领巾瓜报 Company, worked closely with the OIC and other partners to select and model the impact of various policies. The process for developing a model to evaluate reference-based pricing involved Wakely accessing the state鈥檚 , and included a review of claims from the state鈥檚 commercial and Medicaid health plans. To establish a baseline, Wakely compared different sets of healthcare services to what Medicare reimburses for that category of services, on average. This data showed vast differences in how much was being reimbursed by private plans relative to Medicare depending on service category- ranging from .

Recognizing the value of access to primary care services, that 12% of healthcare dollars should be spent on primary care. Ever since, the state鈥檚 has been focused on tracking progress towards this goal. There had not been a similar focus on establishing targets for behavioral health services until this analysis. The low reimbursement rate for outpatient behavioral health services was not surprising and confirmed what had long been suspected as a contributor to challenges accessing outpatient behavioral health services for those with private insurance. Poor access to behavioral health services also contributes to healthcare affordability issues for consumers with private insurance, who end up going without, or paying for care out-of-pocket when they can鈥檛 find behavioral health providers that take private insurance. An analysis by the found that privately insured adults who had a diagnosed mental health condition had twice as much out-of-pocket expense compared with those who did not have an identified mental health condition and that employers reported narrower networks for mental healthcare than their overall provider networks.

These findings, combined with the data from the APCD about low reimbursement rates, were catalysts for how Washington approached legislation to apply reference-based pricing for its public and school employee health plans in the 2025 legislative session. Recognizing that reference-based pricing could be used not only as a tool to improve affordability, but also to potentially increase access to important services, , signed into law in May 2025, sets caps on how much insurers can pay providers for specific sets of services, but establishes floors for how much insurers must reimburse for primary care and outpatient behavioral health services to 150% of Medicare. Notably, Colorado was considering , but it did not pass.   

Healthcare affordability and access to behavioral health services are two persistent problems that contribute to poor health outcomes for many Americans and the relationship between the two is complex.  It will be important to track how Washington鈥檚 new law impacts both of these issues to better understand and explore other questions, such as how expanded access to outpatient behavioral health services could improve overall healthcare affordability by addressing behavioral health issues before they become critical and/or emergent? Will it avoid or reduce traumatic and expensive trips to emergency room and crisis services? Washington鈥檚 new law offers an opportunity to closely evaluate and understand these types of questions and offers a potential model to address these intertwined and persistent problems.   

红领巾瓜报鈥檚 work on reference-based pricing was supported in part by Arnold Ventures.

As states struggles to address healthcare costs and invest in behavioral health, reference-based pricing and supporting analytics are one tool that 红领巾瓜报 can offer to organizations.  Contact us to learn more.

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60 Years of Medicaid and Medicare Impact: From Milestones to Momentum

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This week, the nation celebrates two major milestones: the 60th anniversary of the Medicaid and Medicare programs and 40 years of 红领巾瓜报鈥� (红领巾瓜报鈥檚) commitment to advancing healthcare and improving lives. As we look ahead, 红领巾瓜报 is investing in human-centered strategies, digital tools, and analytics to help our clients and partners build a healthier future鈥攁ll topics that will be discussed at the , October 14鈥�16 in New Orleans, LA.

October 14鈥�16 | New Orleans

The 红领巾瓜报 National Conference is a three-day immersive experience designed to equip healthcare leaders with the insights and tools to adapt and lead in a changing landscape.

As new federal priorities unfold, this year鈥檚 conference, , will feature insights from healthcare leaders on how organizations can respond to change, align with new expectations, and strengthen their impact. With early鈥慴ird registration ending Thursday, July 31, 2025, here鈥檚 our 鈥淲eekly Roundup鈥� of what we鈥檝e shared so far鈥攁nd why you won鈥檛 want to miss the 红领巾瓜报 National Conference in New鈥疧rleans.

红领巾瓜报鈥檚 National Conference offers an immersive, three鈥慸ay experience that combines strategic insight, peer collaboration, and interactive learning.

Networking & Community

  • Welcome Reception at a landmark New Orleans venue
  • Facilitated breakfast discussions, coffee conversations, and evening receptions
  • Networking lunch and dedicated breaks to keep ideas flowing

Big Picture Plenary Sessions

  • Opening keynote Asa Hutchinson, Arkansas鈥� 46th Governor, on policy, politics, and a vision for healthier communities
  • Expert panels unpacking transformative shifts in Medicaid and Medicare, value鈥慴ased care, behavioral health innovation, and cross鈥憇ector population health strategies
  • A closing conversation on government鈥檚 evolving role in healthcare innovation with nationally recognized leaders , Executive Vice President and Chief Community Health Officer, Kaiser Permanente, and , Secretary, Louisiana Department of Health

Workshops

  1. Policy & Trends: Medicare Advantage reforms, Medicaid work requirements, digital health guardrails, and 988 crisis care expansion
  2. Use Cases & Responses: Operational strategies for payment reform, community resilience investments, digital health success stories, and coordinated care solutions for complex behavioral health needs

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Streamlining Healthcare with AI: The Administration鈥檚 Plan and What Comes Next

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On July 23, 2025, the Trump Administration  , a comprehensive federal strategy designed to position the United States as the global leader in artificial intelligence (AI). The plan, developed in accordance with  14179, outlines over 90 policy initiatives across three strategic pillars: Accelerating Innovation, Building AI Infrastructure, and Leading International AI Diplomacy.

Healthcare and Medicaid Impacts

CMS AI-Enabled Prior Authorization Pilot
The AI Action Plan explains the Centers for Medicare & Medicaid Services (CMS) plan to launch a six-year pilot to improve, streamline, and where possible, automate prior authorizations using AI. Consistent with the AI Action Plan, CMS on June 27, 2025, announced a new Innovation Center model, the Wasteful and Inappropriate Service Reduction (WISeR) Model. WISeR will test ways to improve the prior authorization process relative to Original Medicare鈥檚 existing processes. This initiative is expected to dramatically reduce approval times鈥攆rom days to, potentially, minutes in some cases 鈥� while easing administrative burdens for providers and improving access to timely care for beneficiaries. CMS will evaluate the pilot using metrics such as efficiency gains, cost savings, satisfaction levels, and decision accuracy.

Enhanced Fraud Detection and Program Integrity
CMS will also expand its use of AI to detect and prevent fraud, waste, and abuse (FWA) in Medicaid and Medicare. By leveraging predictive analytics and real-time data, the agency aims to identify anomalies and improper payments before they occur鈥攅nhancing program integrity and public trust.  CMS is also encouraging state Medicaid agencies to bolster its investments in FWA systems, and enhanced federal funding continues to be available for such investments.

Regulatory Streamlining and Innovation Incentives
The plan calls for removing outdated regulatory barriers to AI adoption in healthcare. Proposed measures include revising compliance requirements and offering financial incentives or preferential funding access to states that foster innovation-friendly environments. While specifics are pending, states are encouraged to modernize regulations to support AI adoption.

Key Differences from Prior Administration鈥檚 AI Policy

The following table outlines key differences between the Biden and Trump administrations鈥� approaches to AI policy:

Considerations for Healthcare Organizations and Partners

Medicaid agencies, healthcare providers, and industry stakeholders should track the next wave of federal actions to implement the AI Action Plan and the healthcare sector鈥檚 response. Data from pilot initiatives will inform future federal policy decisions on broader AI deployments within Medicaid administration. In addition, healthcare organizations will need to remain nimble as variability may emerge in how states pursue regulatory changes to align with federal incentives under the Action Plan.

Sector specific considerations include:

Health Plans:  Plans should proactively pursue initiatives such as AI-driven prior authorization, claims adjudication, fraud detection, and member engagement to improve their operations, their position in the markets in which they operate, and ideally, their performance. This effort will require significant investments in information technology, new workflows, and continuous quality improvement initiatives, staff training, enhanced compliance protocols, and a culture that embraces AI. In addition, plans must implement robust AI oversight mechanisms that incorporate the necessary level of transparency, avoid bias, and are appropriate across all functions that use AI, including population health analytics, member engagement, care management, prior authorization management, claims processing, and fraud detection.

State Government: States will face pressure to modernize health and human services regulatory frameworks to align with federal requirements and access federal incentives. Moreover, states should proactively pursue initiatives that improve the operations of health and human services agencies with a particular focus on improving program design, oversight, and evaluation functions. In addition, agencies should assess current rules regarding AI and consider how to support AI adoption while safeguarding desired outcomes and accountability.

Health Systems and Providers: Providers can benefit from reduced administrative overhead, improved care delivery, and the use of AI to augment the ability of providers to diagnose and treat patients. Providers will have to adapt to new workflows that incorporate use of AI, ensure data quality, and monitor data for unintended consequences such as unintended bias. In addition, providers must incorporate AI literacy training to align with federal expectations and remain competitive in a deregulated, innovation-driven landscape. Providers will also have to implement robust compliance protocols.

Looking Ahead

The  signals a substantial shift toward streamlined regulatory approaches and expanded AI deployment in Medicaid and broader healthcare administration. Stakeholders should anticipate federal guidance updates, pilot program evaluations, and further clarifications regarding state incentives in the months ahead.

To discuss the implications of the AI Action Plan or for further policy analysis, contact 红领巾瓜报 experts below.

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CMS and Tech Leaders Unite to Build a Patient-Centric Digital Health Ecosystem

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The White House and Centers for Medicare & Medicaid Services (CMS), on July 30, 2025,  new commitments from leading technology 鈥攊ncluding Amazon, Apple, Google, OpenAI, and Anthropic鈥攖o create a smarter, more secure, and patient-centered digital health ecosystem. At the Make Health Tech Great Again event, CMS unveiled voluntary criteria for trusted data exchange across networks, electronic health records (EHR), and tech platforms, emphasizing interoperability, personalized tools, and reduced provider burden.

This announcement echoes many of the priorities laid out in Leavitt Partners鈥�  road map鈥攁 federal policy and industry blueprint for modernizing patient and provider access to health data. The priorities outlined at today鈥檚 White House event and the administration鈥檚 recent regulatory announcements closely reflect the multisector road map鈥檚 recommendations. A recent webinar hosted by Leavitt Partners, an 红领巾瓜报 Company, explored how the recommendations are shaping federal policy and creating strategic opportunities for early adopters.

What鈥檚 Next

红领巾瓜报 (红领巾瓜报) experts, including those with Leavitt Partners, will delve further into the new initiative and considerations for the healthcare industry in an upcoming Weekly Roundup.

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