Medicaid state directed payments get capped at Medicare rates, stepping down 10 points a year from January 2028. The states whose hospitals lean hardest on Medicaid are the ones held to the lower cap.
A state directed payment lets a state pay Medicaid providers above the base managed-care rate. The ceiling used to be the average commercial rate — the highest benchmark in American healthcare. Section 71116 of H.R. 1 replaced it with Medicare, and CMS's May 20, 2026 proposed rule codifies it:
100% of Medicare in Medicaid expansion states. 110% of Medicare in non-expansion states. (Or 100% of the Medicaid state plan rate where no comparable Medicare rate exists.) Grandfathered programs hold at their dollar amount until the first rating period on or after January 1, 2028, then fall 10 percentage points every year until they hit the cap. CMS scores the rule at $775B in total savings over ten years, of which $510B is federal.
Each row is a state. The bar runs from the median hospital's Medicaid share of patient days to the 90th-percentile hospital — the safety-net tail. Colour is the cap that state's SDPs will be held to.
The higher cap was written as relief for states that never expanded Medicaid. But not expanding is exactly what keeps a state's Medicaid patient-day share low. The result is that the 110% concession lands mostly on hospitals with less Medicaid volume to protect, while the hospitals carrying the heaviest Medicaid load — in California, New York, Louisiana, DC, New Mexico — get held to 100%.
Do not model this at the state median. An SDP can be 20% of total Medicaid revenue for one safety-net hospital and a rounding error for the community hospital ten miles away. The bar's right end — the 90th percentile — is where the exposure actually sits, and inside California that is 175 hospitals above a 30% Medicaid patient-day share. The state average tells a CFO nothing.
Drag min hospitals per state. Wyoming rests on a single record. Alaska and Vermont on two. Watch the headline gap between the two cap tiers move as the thin states drop out — if a pattern only survives at n = 1, it was never a pattern.
medicaid_ratio is Medicaid days over total patient days — a good indicator of who leans on Medicaid, but it is not the SDP dollar and not every state runs a hospital SDP the same way. CMS counts 41 states with at least one directed payment.