Medicaid Policy

The Trump administration is moving Medicaid policy on two fronts: President Trump said all 50 states, DC, and Puerto Rico will participate in the GENEROUS most-favored-nation drug pricing model, while CMS is also pressing affordability through state-directed payment (SDP) cuts—raising near-term margin and network-stability questions for Medicaid managed care plans, hospitals, and VBC contracts tied to supplemental funding. At the same time, the $50 billion Rural Health Transformation Program created in 2025 budget reconciliation is emerging as a partial offset to Medicaid cuts, but KFF notes the grants are time-limited and unevenly distributed, forcing states and rural providers to decide whether to use funds for delivery-system transformation, workforce, and access stabilization rather than backfilling recurring Medicaid shortfalls. The immediate tension for ACOs, rural systems, and Medicaid risk-bearing entities is whether drug-rebate savings and transformation grants can be operationalized fast enough to offset SDP reductions, frozen/unfrozen supplemental payments, and state FY2027 budget pressure.