If implemented carefully, the memo could help strengthen long term financial sustainability of Medicaid, preserving access for low-income individuals, people with disabilities, older adults, and medically vulnerable communities who rely heavily on Medicaid. However, if payment rate reductions lead providers to withdraw from Medicaid or reduce services, underserved populations may face reduced access, longer wait times, or fewer care options, potentially worsening health disparities.
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Department of Health and Human Services
A written policy statement issued by a government agency or executive official that provides guidance, clarification, or direction on implementing laws or policies. Memos do not have the force of law but can influence policy interpretation and enforcement.
Who It Impacts: Federal agencies, policymakers, and sometimes regulated industries. Memos can shape how agencies enforce laws, impacting businesses, healthcare providers, and other stakeholders.
Who Is Not Impacted: Memos do not create binding legal requirements for the general public, though they can influence enforcement priorities that indirectly affect individuals and organizations.
Date Enacted
June 6, 2025
Last Updated
December 10, 2025
Policy Type
Healthcare Coverage
Healthcare Delivery, Services & Quality
Justice System
Health and Disability
Maternal Health
Summary
This memorandum directs HHS and CMS to eliminate waste, fraud, and abuse in Medicaid by ensuring Medicaid payment rates are not higher than Medicare rates to safeguard program integrity and protect taxpayers while preserving coverage for eligible individuals.
Impact Analysis
Legal Challenges
N/A
Take Institutional Action
- Providers should monitor forthcoming CMS guidance on reimbursement rate changes and assess potential impacts on Medicaid patient volume, service provision, and financial viability. Safety-net hospitals and clinics may need to strengthen efficiency, cost-control, and service-prioritization processes to maintain care for Medicaid-covered patients.
- Advocacy and community based organizations should track changes in provider participation and healthcare access for Medicaid beneficiaries, especially in marginalized or underserved communities, and prepare to document potential equity impacts.
Associated or Derivative Policies
This memo interacts with broader federal efforts on Medicaid reform and oversight, including previous and proposed changes to State-Directed Payments (SDPs) under Medicaid. It may align with reimbursement and rate-setting regulations under CMS rulemaking, as states and providers adjust to new directives.
Policy Prior to 2025
Prior to this memo, many states used “State-Directed Payments” (SDPs) and provider-tax financing to supplement Medicaid reimbursements; in many cases, states paid providers amounts exceeding typical Medicare rates, a practice criticized by the administration as unsustainable.
Additional Resources
- MLN Medicare Fraud & Abuse Booklet: https://www.cms.gov/outreach-and-education/medicare-learning-network-mln/mlnproducts/downloads/fraud-abuse-mln4649244.pdf
- HHS Fraud, Waste and Abuse Trainings: https://oig.hhs.gov/reports/featured/ihs/fraud-waste-abuse-trainings/
