On May 22, 2026, the Centers for Medicare and Medicaid Services (CMS) published a proposed rule in the Federal Register that would cap how much states can pay Medicaid providers through a funding mechanism called state-directed payments. The rule number is CMS-2449-P. Families who rely on Medicaid-funded home care, behavioral health services, or nursing facility care have until July 21, 2026 to submit public comments.

This isn't the first time state-directed payments have been targeted this year. The One Big Beautiful Bill Act (OBBBA), which Congress passed in March, already imposed caps on these payments starting in 2027. What CMS is proposing now goes further. The agency is setting the cap at 100% of Medicare rates for states that expanded Medicaid, or 110% for states that didn't expand, and it's extending those caps to virtually all Medicaid services starting in 2029, including home and community-based services (HCBS).

State-directed payments fund the providers who deliver home care, respite, behavioral health, and other services that keep people with disabilities out of institutions. When those payments drop, providers leave the network. Families who are already waiting months for a new therapist or home care aide will wait longer.

What State-Directed Payments Are and Why They Matter

State-directed payments (SDPs) are a Medicaid financing tool that allows states to set minimum payment rates for certain providers. Unlike standard Medicaid fee-for-service rates, which are often low enough that many providers won't accept Medicaid patients, SDPs let states pay more to keep providers in the network.

States use SDPs to fund home and community-based services (HCBS), behavioral health providers, nursing facilities, and hospitals. For disability families, this often translates to the respite worker who gives you a break, the in-home aide who helps your child get dressed and fed, or the behavioral therapist who works on communication and daily living skills.

SDPs were created to address a structural problem: Medicaid pays less than Medicare, and Medicare pays less than commercial insurance. Providers who can fill their schedules with Medicare or commercially insured patients often won't take Medicaid. SDPs close that gap by allowing states to pay competitively.

When SDPs are capped or reduced, the first thing that happens is providers stop taking Medicaid. The second thing is waitlists get longer. The third thing is families provide more unpaid care themselves, because the formal system can't meet demand.

How CMS-2449-P Goes Beyond What Congress Already Passed

The One Big Beautiful Bill Act already capped state-directed payments at 100% of Medicare rates for Medicaid expansion states, or 110% for non-expansion states, for most Medicaid services starting in 2027. CMS-2449-P makes it worse in two ways.

First, the proposed rule extends the caps to home and community-based services (HCBS) starting in 2029. HCBS was not originally included in the OBBBA caps. CMS is now proposing to include it. That means the funding mechanism that pays for in-home aides, respite workers, personal care attendants, and supported living services will be capped at Medicare rates, even though Medicare doesn't cover most of those services to begin with. The comparison is functionally meaningless, and the cap is arbitrary.

Second, the rule defines "100% of Medicare rates" in a way that's stricter than necessary. Medicare rates vary by service and geography. CMS is proposing to use the lowest applicable Medicare rate as the benchmark, not an average or adjusted rate. For providers in high-cost areas or for services where Medicare rates are already low, this is a functional cut.

Which Services and Provider Types Are Most at Risk

The proposed caps will hit hardest in three areas: HCBS, behavioral health, and nursing facilities.

HCBS providers include personal care aides, respite workers, supported employment coaches, and direct support professionals. These workers already earn low wages, and turnover in the field is high. States use SDPs to pay competitive wages that keep workers in the field. Capping those payments at Medicare rates, which don't even account for most HCBS services, will drive more workers out.

Behavioral health providers, including therapists who deliver ABA, speech, OT, and mental health services through Medicaid, are already in short supply. Many behavioral health providers stopped accepting Medicaid years ago because reimbursement rates didn't cover their costs. SDPs brought some of them back. Capping SDPs at Medicare rates will reverse that.

Nursing facilities are also at risk, though the impact will be less visible to families receiving home care. States use SDPs to fund nursing homes that serve Medicaid patients. When those payments are capped, nursing facilities either reduce services, close beds, or stop accepting new Medicaid residents. That increases the pressure on families to provide care at home without adequate support.

Why Lower Provider Payments Accelerate the Provider Dropout Crisis

Providers make business decisions. When Medicaid pays less than it costs to deliver the service, providers either stop accepting Medicaid or close entirely. That's not hypothetical. It's been happening for years.

States implemented SDPs specifically to keep providers in the Medicaid network. The tool worked. In states that used SDPs aggressively, provider participation increased. Families had more options. Waitlists shortened.

Capping SDPs at Medicare rates eliminates the flexibility that made the tool effective. Medicare rates are set nationally and don't account for regional cost variations, workforce shortages, or the complexity of serving Medicaid patients with multiple needs. A 100% Medicare cap in a high-cost metro area is a cut in real terms. Providers will respond by leaving the network.

The families who will feel this first are the ones who are already struggling to find providers. If you've been waiting six months for a home care aide, you'll wait longer. If your child's behavioral therapist just left the network, the next one will be harder to find.

How to Submit a Public Comment Before July 21

CMS is required to accept public comments on proposed rules before finalizing them. The comment period for CMS-2449-P runs until July 21, 2026. You don't need to be an expert to submit a comment. You need to be specific.

Here's how to do it:

Go to regulations.gov. Search for "CMS-2449-P" in the search bar. Click on the rule titled "Medicaid Program; State-Directed Payments."

Click the blue "Comment" button on the right side of the page. You'll be asked to provide your name, contact information, and your comment. You can submit a comment as an individual, a parent, or a caregiver. You don't need to represent an organization.

Your comment should include three things: who you are, which services you or your family member relies on, and how the proposed caps would affect your access to those services.

For example: "I'm the parent of a 12-year-old with autism who receives in-home respite care and behavioral therapy through Medicaid. State-directed payments fund the providers who deliver those services. Capping those payments at Medicare rates will force providers out of the Medicaid network. My family has already waited eight months to replace a respite worker who left. If the provider network shrinks further, we'll lose the support that allows me to work and care for my child."

Be specific. Name the services. Name the county or region you live in. If you've experienced waitlists, provider turnover, or service reductions, describe them. CMS is required to read and respond to substantive comments. Generic statements don't carry the same weight.

If you're part of a disability advocacy organization, coordinate with other families and submit individual comments. A hundred individual comments from families in different states carry more weight than one form letter.

What Happens After the Comment Period Closes

After July 21, CMS will review all submitted comments and publish a final rule. The agency is required to respond to substantive comments, which means they have to address concerns that are specific, fact-based, and tied to the proposed language of the rule.

If enough families submit detailed comments describing how the caps will reduce access to care, CMS may revise the rule. They could narrow the scope, delay the implementation timeline, or exempt certain services like HCBS from the caps entirely.

If CMS finalizes the rule as written, the caps will take effect in phases. The first phase, covering most Medicaid services except HCBS, starts in 2027. The second phase, including HCBS, starts in 2029.

States will then have to adjust their SDP programs to comply with the caps. That will mean reducing payments to providers, eliminating SDPs for certain services, or finding other funding sources. The most likely outcome is reduced payments, which means fewer providers and longer waitlists.

The Families Who Will Be Hit First

Families who rely on Medicaid-funded home care and behavioral health services will feel the impact first. If you're currently receiving services, your provider may notify you that they're leaving the Medicaid network. If you're on a waitlist, the wait will get longer.

Families in states that have used SDPs aggressively to maintain provider networks will see the sharpest drop. States like California, New York, and Washington use SDPs to fund direct care workers, behavioral health providers, and nursing facilities. Those states have higher provider participation rates than states that rely on standard Medicaid fee-for-service rates. Capping SDPs will bring participation rates down.

Families in rural areas, where provider shortages are already severe, will also be hit hard. SDPs have been one of the few tools states can use to recruit and retain providers in underserved areas. Without them, rural families will have even fewer options.