Page 16

Page 16 – State Health Official Letter Considerations for Medicaid Managed Care Programs States must ensure their Medicaid managed care programs comply with section 1903(v)(5) of the Act, as added by section 71109 of the WFTC legislation. States and their actuaries should evaluate whether implementation of section 1903(v)(5) of the Act necessitates adjustments to Medicaid capitation rate development or constitutes a material adjustment requiring an amended rate certification.57 States must also ensure that all Medicaid managed care contracts comply with all applicable federal and state laws, including section 1903(v)(5) of the Act.58 To ensure clarity, states should assess their Medicaid managed care contracts and consider revisions to make explicit that payment for medical assistance under the contract is limited to expenditures for which FFP is available under section 1903(v) of the Act and that the limitations on FFP in section 1903(v)(5) of the Act apply to Medicaid capitation rates.59 CMS reminds states that CMS published the State Medicaid Director (SMD) letter #25-003 entitled “Medicaid Managed Care Payments and Emergency Medical Condition Coverage for Aliens Ineligible for Full Medicaid Benefits” on September 30, 2025.60 This guidance announced a change in the agency’s interpretation of section 1903(v) of the Act and how it applies to Medicaid managed care payments to improve program and fiscal integrity in the Medicaid program. As outlined in SMD letter #25-003, for rating periods beginning on or after September 30, 2026, states can either provide coverage and claim FFP for emergency Medicaid in the FFS delivery system or by contracting with PIHPs and PAHPs on a non-risk basis. Additionally, if a state uses state-only funding to provide health coverage for noncitizens for whom FFP is not available for full Medicaid benefits under section 1903(v)(5) of the Act, the state must utilize a separate and distinct contract and payment with any managed care plan it contracts with to provide state-funded services. State-only funded services for noncitizens who are not FFP-eligible noncitizens may not be included in the state’s contracts and payments to Medicaid managed care plans. Medicaid and CHIP Information Technology (IT) Systems Costs and Upgrades To support the implementation of sections 1903(v)(5) and 2107(e)(1)(R) of the Act, as described above, states may need to modify their eligibility and enrollment system and/or their Medicaid Management Information System (MMIS) to accurately determine Medicaid and CHIP eligibility and provide the appropriate scope of coverage (i.e., full Medicaid or CHIP benefits or emergency Medicaid coverage), including to ingest the new Hub indicators or apply new eligibility logic to immigration codes and other responses from SAVE.

457.1180 (2023) for CHIP (which require a timely and adequate written notice of the proposed termination and an opportunity for review). 57 42 C.F.R. §§ 438.5(b)(4), 438.5(f), 438.7(b)(4), and 438.7(c)(2). 58 42 C.F.R. § 438.3(f). 59 42 C.F.R. § 438.812(a). 60 CMCS SMD letter # 25-003, “Medicaid Managed Care Payments and Emergency Medical Condition Coverage for Aliens Ineligible for Full Medicaid Benefits” (Sept. 30, 2025), available at: https://www.medicaid.gov/federal-policy- guidance/downloads/smd25003.pdf.