Strengthening Medicaid SDP Oversight: A Path Forward for Transparency and Accountability

States must ensure that Medicaid directed payments (SDPs) deliver measurable value and tangible improvements in care for beneficiaries, given federal scrutiny and the substantial sums involved. The Medicaid and CHIP Payment and Access Commission (MACPAC) and the Government Accountability Office have raised concerns about the limited evidence supporting many SDPs and have recommended stronger oversight and evaluation. States can enhance transparency and accountability of SDPs in Medicaid managed care plans by more deliberately using existing tools, such as procurement and contract requirements, performance measure reporting, and external quality reviews (EQRs).

Key Takeaways:

• SDPs have grown dramatically in scope, scale, and complexity, with about $110.2 billion in Medicaid spending in 2024. Federal scrutiny has intensified due to the sheer dollar amounts and limited evidence supporting many SDPs.
• States must demonstrate that public dollars invested through SDPs deliver measurable value and tangible improvements in care for Medicaid beneficiaries.
• Strengthening SDP oversight does not require building new evaluation frameworks or infrastructure; states can use familiar mechanisms, such as procurement and contract requirements, performance measure reporting, and EQRs, more strategically.
• States can enhance transparency and accountability of SDPs in Medicaid managed care plans by requiring managed care organizations to submit complete, timely, and accurate SDP data and demonstrate improvement on SDP-aligned metrics.
• States can also use capitation withholds and performance bonuses to encourage managed care plans to submit SDP data and demonstrate improvement on SDP-aligned metrics.
• States can require managed care plans to stratify Medicaid and CHIP Core Set or other existing performance measures by SDP participation, enabling states to generate provider-level data to support SDP evaluations.
• States can work with provider organizations or associations to furnish provider-level data and help interpret the results, particularly when provider-level context or qualitative insights can help explain underlying trends and variation.

Sources:

• Mathematica Policy Research, Inc., "Driving Improvement Through SDP Oversight"
• Centers for Medicare and Medicaid Services (CMS), External Quality Review Protocol (forthcoming)
• Health Affairs Forefront, "Aligning Managed Care Payment Incentives with SDPs"