How to Prepare the Rev Cycle for Ongoing Medicaid Upheaval
Hemant Apte, Chief Executive OfficerJune 26, 2026
The next few years promise significant changes to Medicaid – and significant upset to the healthcare revenue cycle and medical billing services.
From work rules to budget cuts, the program is being reshaped in ways that will directly impact revenue cycle leadership at almost every level [1] [2]. A recent proposed rule continues this trend [3].
Last month, CMS proposed a rule that will restrict certain financial mechanisms that have, in the past, increased provider payments through Medicaid. The rule codifies cuts to state-directed payments that were initially detailed in the One Big Beautiful Bill Act. The rule, though, does more. It additionally adds rate caps to other supplemental payments.
Here’s a summary of what the rule does:
- Caps Medicaid Managed Care State Directed Payment (SDP) rates at 100% of Medicare payment rates for expansion states. The cap is 110% of Medicare payment rates in non-expansion states.
- Applies comparable limits to some Medicaid fee-for-service payments.
- Establishes national standards for transparency and accountability.
The stated intent of the rule is limiting “waste, fraud, and abuse”, and there will be other downstream impacts. Many healthcare leaders already believe it will limit access to care. It also presents material risk to the revenue cycle and the fiscal health of safety-net providers and institutions most dependent on Medicaid funding.
This is a significant amount of upset for any provider – and the exact impact to the healthcare revenue cycle will be difficult to predict. Leaders should anticipate and adapt to reductions in Medicaid payments – they will also need to ensure the efficiency and accuracy of the entire revenue cycle to minimize impact to cash flows and margins.
To adapt to this level of change and restructuring, revenue cycle leaders will need increasingly robust tools and deep relationships with medical billing solutions providers, especially if Medicaid is a significant portion of their patient mix. Now is an excellent time to make these strategic shifts and connect with medical billing companies like 3Gen Consulting that have experience with this level of revenue cycle disruption.
[1] E. Casolo, "Medicaid work rules are coming. Here’s how insurers are stepping up," Becker’s Healthcare, 16 June 2026. Available: https://www.beckershospitalreview.com/finance/medicaid-work-rules-are-coming-heres-how-insurers-are-stepping-up/.
[2] R. Rudowitz, A. Burns, E. Hinton, J. Tolbert and E. Williams, "Medicaid: What to Watch in 2026," KFF, 23 January 2026. Available: https://www.kff.org/medicaid/medicaid-what-to-watch-in-2026/.
[3] CMS, "CMS Moves to Rein In Misused Medicaid Dollars and Reward Quality Care," 20 May 2026. Available: https://www.cms.gov/newsroom/press-releases/cms-moves-rein-misused-medicaid-dollars-reward-quality-care.
Hemant Apte, Chief Executive Officer
Hemant Apte is the Founder and CEO of 3Gen Consulting, a leading healthcare revenue cycle management and technology company serving providers, ACOs, and health plans across the U.S. Since founding 3Gen in 2006, Hemant has guided the company’s evolution from a boutique consulting firm into a data-driven organization at the forefront of AI-powered RCM innovation. With decades of experience in U.S. healthcare operations, Hemant continues to provide thought leadership to clients navigating financial, compliance, and technology challenges in an increasingly value-based care environment.
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The proposed rule caps Medicaid Managed Care State-Directed Payment rates at 100% of Medicare payment rates for Medicaid expansion states and 110% for non-expansion states. It applies comparable limits to certain Medicaid fee-for-service supplemental payments and establishes national transparency and accountability standards for these payment mechanisms.
Providers in Medicaid expansion states face tighter caps – 100% of Medicare rates – compared to non-expansion states at 110%. Safety-net hospitals, community health centers, and rural providers with high Medicaid patient volumes and significant supplemental payment reliance face the greatest direct revenue cycle exposure.
State-Directed Payments are supplemental payment mechanisms states use to direct managed care plans to pay providers above standard rates – often used to bring Medicaid payments closer to Medicare or commercial levels. The proposed rule caps these payments relative to Medicare, directly reducing the supplement above base Medicaid rates that many providers have relied on.
Revenue cycle leaders should model the impact of payment caps on their current Medicaid revenue mix, audit billing accuracy and clean claim rates to reduce preventable leakage, strengthen prior authorization and denial management workflows, and evaluate whether their current medical billing services infrastructure can absorb increased administrative complexity as reimbursement tightens.
When Medicaid reimbursement is compressed, billing errors and inefficiencies that were previously absorbed become material losses. Medical billing services teams will need tighter coding accuracy, faster denial turnaround, and real-time visibility into Medicaid claim performance by payer and facility – capabilities that are difficult to maintain in-house during periods of rapid regulatory change.
3Gen provides medical billing services and revenue cycle management specifically designed for the complexity of Medicaid billing – including state-specific payment rules, supplemental payment tracking, and denial management for Medicaid managed care plans. For providers whose Medicaid volume makes them vulnerable to the proposed payment caps, 3Gen builds the billing infrastructure and workflow accuracy needed to protect cash flow through the transition.