Weekly StateVitals Update: Volume 70 (May 26, 2026)

Weekly Update: Volume 70

May 26, 2026

National

CMS Proposes Caps to Medicaid Provider Payment Rates. This past Wednesday, the Centers for Medicare & Medicaid Services announced a proposed rule to cap Medicaid State Directed Payments (SDP) provider payment rates and certain targeted fee-for-service (FFS) payments. Specifically, the proposed rule would: 

• Cap SDP provider payment rates at 100% of Medicare payment rates for expansion states and 110% of Medicare payment rates for non-expansion states (or 100% of the Medicaid state plan rate if a comparable Medicare rate is not available),

• Apply similar limits to certain targeted Medicaid FFS payments, and

• Establish consistent national standards to improve transparency and accountability.

The public comment deadline is July 21, 2026. To request further information, interested parties may contact John Giles, Medicaid Managed Care, at (410) 786-5545, or Jocelyn Velez, Medicaid Fee-for-Service Payments, at (410) 786-2367.

California

Vice President Vance Announces Deferral of $1.3 Billion in Medicaid Reimbursements. Recently, Vice President J.D. Vance (R) stated that the Trump administration is set to defer $1.3 billion in Medicaid payments to California amid fraud concerns. Vice President Vance’s statement comes as Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz (R) announced a six-month hospice and home health agency (HHA) Medicare enrollment moratorium. In his announcement, Dr. Oz claimed CMS had suspended payments to 800 Los Angeles hospices and HHAs suspected of fraud that billed $1.4 billion last year. Governor Gavin Newsom (D) and Attorney General Rob Bonta have criticized the administration's actions, claiming they are politically motivated and target programs for seniors and people with disabilities. 

Illinois

House Engrosses Bill to Establish PDAB with UPL Authority. Last Thursday, the Illinois House passed SB 3496 in a vote of 62-39. The bill would create a Prescription Drug Affordability Board (PDAB), with the authority to conduct drug affordability reviews and set upper payment limits (UPLs). In particular, the UPLs are required to be at the Medicare maximum fair price for drugs that have one. Additionally, the PDAB would be able to set up to two UPLs a year  for drugs without a Medicare MFP. Notably, its passage comes shortly after Virginia Governor Abigail Spanberger (D) vetoed PDAB legislation, citing inefficiencies and a lack of cost effectiveness. The bill now awaits consideration in the Senate.

Indiana

CMS Approves Medicaid Overhaul to Incentivize Hospitals to Lower Costs. Recently, the Centers for Medicare & Medicaid Services approved Indiana’s revised Hospital Assessment Fee (HAF) program and State Directed Payment (SDP) Program. The HAF program, which is retroactively effective as of July 1, 2025, links Medicaid reimbursement rate increases to hospitals’ Average Commercial Rate (ACR). Hospitals with lower commercial prices will receive higher pay increases, with the exception of certain rural, safety-net, and county hospitals, which will receive $177 million in financial support without having to cut prices. Effective January 1, 2026, the SDP Program will distribute up to $1.866 billion in supplemental Medicaid payments next year across hospitals participating in the state’s Medicaid programs. Governor Mike Braun (R) stated that the new programs come as a broader effort to lower healthcare costs and address Medicaid spending growth. 

Iowa

Governor Reynolds Signs Bill Restricting Telehealth Abortion Medication Access. Last Tuesday, Governor Kim Reynolds (R) enacted HF 2788, which prohibits telehealth prescriptions and mail-order dispensing of abortion medications. The bill requires physicians to perform in-person examinations, establishes informed consent requirements regarding chemical abortions, and requires patients to submit a written confirmation of the specific risks before having an abortion. Additionally, the bill creates a mandatory reporting system on abortion medication complications to support an annual published report. Notably, this bill comes shortly after the Supreme Court blocked a Fifth Circuit ruling that paused a 2023 Food and Drug Administration (FDA) rule authorizing nationwide telehealth and mail-order dispensing of Mifepristone. The Supreme Court’s decision is not expected to have any impact on Iowa’s new restrictions.

Maryland

Prescription Drug Affordability Board Votes to Set Upper Payment Limit on Ozempic. This past Monday, the Maryland Prescription Drug Affordability Board (PDAB) voted to finalize cost review study reports for Ozempic. The PDAB made a final determination that the drug has led to an affordability challenge and voted to proceed with setting an upper payment limit (UPL) for Ozempic. The PDAB approved proposed regulations to set the UPL for Ozempic at the Medicare maximum fair price for state and local government health plans in 2027. The proposed regulations will now go through the rulemaking process, which includes a 30-day public comment period, before the PDAB takes a final vote.  In addition to the UPL, the PDAB also approved non-UPL policies to address drivers of the affordability challenges for Ozempic, including GLP-1 study and recommendations, bulk purchasing/subscription model, plan design and PBM reform study recommendations, and state participation in CMMI models. 

New Jersey

Assembly Engrosses Comprehensive PBM Reform Bill. Last Monday, the General Assembly voted 59-18 to engross NJ A 1502. This pharmacy benefit manager (PBM) reform bill would prohibit several industry practices and create various pharmacy protections, including provisions that: 

• Require PBM compensation to be tied to a flat PBM fee, prohibiting compensation linked to drug acquisition costs, savings, rebates, charged fees, or cost sharing.

• Prohibit PBMs from recommending a prescription drug’s placement on a formulary on the basis of cost.

• Requires PBMs to have a fiduciary duty to contracted health plans.

• Prohibits PBMs from steering patients to mail-order or specialty pharmacies owned or controlled by them or their affiliates.

• Prohibit PBMs from excluding pharmacists or pharmacies from participating as a contract pharmacy.

• Requires PBMs to submit data on the amount of fees paid to third-party brokers, upon request.

• Requires PBMs to reimburse pharmacies at the National Average Drug Acquisition Cost, if available,  plus the State Medicaid dispensing fee. Otherwise, requires reimbursement to be the Wholesale Average Cost (WAC) or the Suggested Wholesale Price (SWP).

The bill now awaits consideration by the Senate Commerce Committee.

Pennsylvania

Attorney General Sunday Appeals Ruling Authorizing Medicaid Funding for Abortions. Last Tuesday, Attorney General Dave Sunday (R) appealed a Pennsylvania Appellate Court ruling that overturned a state ban on using Medicaid funding for abortions. Last month, in a 4-3 decision, the Appellate Court found that the state’s ban on Medicaid payments for abortions violates the state’s constitution’s Equal Rights Amendment and equal protection provisions. Currently, the state’s Medicaid only covers abortion services in circumstances of rape, incest, or if the mother’s life is at grave risk, which the plaintiffs argued violated enhanced reproductive health protections under the state’s constitution. Notably, in 2024, the state’s Supreme Court already ruled the coverage exclusion was presumptively unconstitutional under the state’s Equal Rights Amendment as sex-based discrimination, but still remanded the issue back to the appellate court. Hence, while AG Sunday filed an appeal to send the case back to the Supreme Court, it is expected that they will likely affirm the Appellate Court’s ruling.

Tennessee

Governor Lee Enacts Law Prohibiting Joint PBM, Pharmacy, and Health Plan Ownership. This past Friday, Governor Bill Lee (R) enacted SB 2040, which prohibits a person or entity from simultaneously owning a pharmacy benefit manager (PBM) and a pharmacy or health plan. The bill has several exemptions for hospitals and health system pharmacies, independent pharmacies, orphan drugs, federally contracted pharmacy services, and employers who solely provide pharmacy benefits for their employees. Notably, the bill significantly impacts CVS Health, the only company in the state that owns both a pharmacy and a PBM. Shortly after the bill’s signature, CVS filed a complaint with the U.S. District Court for the Middle District of Tennessee, seeking a permanent injunction on the law to block it from becoming effective on July 1, 2028. CVS has warned that once effective, the SB 2040 would force the closure of its 134 pharmacies in the state.

Virginia

Governor Spanberger Vetoes Prescription Drug Affordability Advisory Panel Bill. This past Tuesday, Governor Abigail Spanberger (D) vetoed SB 271/HB 483, bills that would have established a new Prescription Drug Affordability Advisory Panel with Medicare Maximum Fair Price (MFP) controls. Gov. Spanberger’s decision comes after the General Assembly voted unanimously last month to reject her amendments to delay the effectiveness of the MFP controls unless the 2027 General Assembly decides to reenact the provisions. Within the last five years, bills to establish a Virginia Prescription Drug Affordability Board (PDAB) have faced three vetoes between her and former Governor Glenn Youngkin (R). On why she vetoed the bills, Spanberger stated that they do not achieve the goal of lowering healthcare costs, claiming PDABs were “expensive undertakings that other states have either repealed or are considering repealing due to costs and ineffectiveness.”

Wyoming

CMS Approves Updated RHTP Application. Last Tuesday, the Centers for Medicare & Medicaid Services approved Wyoming’s Rural Health Transformation Program (RHTP) application, granting $205 million in federal funding for the first year. The Wyoming Department of Health’s original proposal included a perpetuity fund to stretch the state’s share of RHTP funding past five years, a provision that CMS rejected. The amended application was nearly identical to the original, minus the perpetuity fund. The state has until October 31 to obligate the first year of funding, which recipients will have one year to spend.