Long-Term Rural Health Investment Act of 2026
- Sponsor
- Rep. Davids, Sharice [D-KS-3]
- Committees
- Energy and Commerce Committee (primary)
- Last action
- Oct 5, 2026
Bottom line
This bill aims to provide states with more flexibility in using Medicaid directed payments, particularly benefiting rural health providers, while increasing transparency around these payments and reversing prior restrictions on provider taxes.
What it actually does
This bill amends Public Law 119-21 to revise limitations on State directed payments under the Medicaid program, specifically adjusting the cap on total payment rates to 200% of Medicare rates starting January 1, 2030, with a grandfathering clause for existing payments. It also repeals certain provisions of Public Law 119-21 related to provider taxes and mandates new, detailed reporting requirements for State directed payments to enhance transparency.
Proponents argue
Proponents would argue that the bill is crucial for supporting rural health infrastructure by allowing states greater flexibility in setting Medicaid payment rates, ensuring adequate reimbursement for services, and reversing potentially harmful restrictions on provider taxes that could destabilize state Medicaid funding. The grandfathering clause and gradual reduction provide a necessary transition period for states and providers.
Opponents contend
Opponents might contend that increasing the cap on directed payments could lead to inflated costs for the Medicaid program, potentially shifting financial burdens to the federal government or other payers. They might also argue that repealing provider tax provisions could reduce accountability or create loopholes in state financing mechanisms, undermining efforts to control Medicaid expenditures.
The bill is relatively short and focused, making it accessible for an informed reader to understand its core provisions within a reasonable timeframe.
Section 2(a)(1)
Revised Cap on State Directed Payments
This provision changes the maximum total payment rate for services under Medicaid's State directed payment program. Starting January 1, 2030, the total payment rate will be limited to 200% of the specified total published Medicare payment rate for that service. If no Medicare rate exists, the limit will be 200% of the average commercial rate in the State. This increases the previous limitation, allowing states to direct higher payments to providers.
Supporters argue
Supporters argue this adjustment is crucial for ensuring adequate reimbursement for healthcare services, particularly in rural and underserved areas where Medicare rates may not cover the true cost of care. It allows states to better support their healthcare infrastructure and ensure access to care for Medicaid beneficiaries.
Critics contend
Critics might contend that raising the payment cap could lead to increased Medicaid expenditures, potentially straining federal and state budgets, and could be seen as an overpayment for services that may not be justified by actual costs.
Tradeoffs
This provision balances the need for adequate provider reimbursement and state flexibility in managing healthcare services with concerns about potential cost increases and the efficient use of taxpayer funds within the Medicaid program.
Section 2(a)(2)
Grandfathering and Gradual Reduction for Certain Payments
For State directed payments that received written prior approval or had a completed preprint submitted before the bill's enactment date (July 1, 2028, or the date of enactment of this Act), a grandfathering clause applies. Starting January 1, 2030, these payments will be reduced by 10% annually from the preceding rating period's amount until they reach the new 200% Medicare cap specified in subsection (a). This provides a structured transition period for states and providers.
Section 2(a)(5) (new subsection (c))
Flexibility for Utilization-Based Payments and Separate Capitation Rates
This section directs the Secretary to revise regulations to grant states more flexibility. First, for payments made on or after January 1, 2028, states may condition State directed payments on the utilization and delivery of services outside the current rating period and reconcile them to utilization within that period. Second, states may withhold a portion of the final capitation rate to pay Medicaid managed care organizations, prepaid inpatient health plans, or prepaid ambulatory health plans separately for State directed payments, and may require these organizations to retain a portion of the capitation rate for compliance.
Section 2(b)
Enhanced Transparency for State Directed Payments
Beginning January 1, 2027, states are required to submit detailed data on State directed payments to the Secretary via the Transformed Medicaid Statistical Information System (T-MSIS) annually, within one year after each rating period. This data includes total expenditures, identifiers for enrollees, providers, and managed care entities, amounts paid to individual providers, funding sources (disaggregated by provider type), procedure and diagnosis codes, and detailed payment breakdowns. This reporting is a requirement for states to receive approval for State directed payments.
Section 2(c)
Temporary Reversion of Payment Cap Regulations
For the period beginning on the date of enactment of this section and ending on January 1, 2030, the Secretary is directed to apply the Medicaid payment cap regulation (42 CFR 438.6(c)(2)(iii)) as such section was in effect on the day before the date of enactment of Public Law 119-21. This means a temporary return to an older, presumably more flexible, payment cap regime before the new 200% cap and grandfathering provisions take full effect.
Section 3
Repeal of Provider Tax Restrictions
This section repeals Sections 71115 and 71117 of Public Law 119-21, which were related to provider taxes. It mandates that Section 1903(w) of the Social Security Act (which governs provider taxes) be applied as if these repealed sections had never been enacted. Additionally, any amounts previously appropriated under the repealed Section 71115(c) are rescinded. This effectively removes recent federal restrictions or changes to how states can use provider taxes to fund their Medicaid programs, restoring prior state flexibility.
Rescinds amounts previously appropriated under Section 71115(c) of Public Law 119-21.
Section 3(b)
Why it matters:This is standard legislative practice for cleaning up appropriations that are tied to statutory authorities being repealed, ensuring that funds are not allocated for programs that no longer exist.
Case for: Supporters would argue this is a necessary administrative step to align federal appropriations with the repeal of the underlying statutory authority, preventing the allocation of funds for a defunct program.
Case against: No specific opposition is typically raised against the rescission itself, but opposition to the repeal of Section 71115 might implicitly oppose this administrative cleanup.
Estimated impact: The specific amount is not stated in H.R. 10729, but it refers to a prior appropriation, indicating a direct reduction in previously authorized federal spending.