Dear Administrator Oz:

Thank you for the opportunity to submit comments on the proposed rule on Medicaid state directed payments (SDPs) and targeted fee-for-service payments, published in the Federal Register on May 22, 2026 (File Code CMS-2449-P). On behalf of Children’s HealthWatch, we write to express our serious concern that the proposed rule reaches well beyond what Congress enacted and, in doing so, threatens the Medicaid payments that sustain access to care for children, pregnant and postpartum people, and families. We urge CMS to revise the rule to implement the statute as written and no further.

Children’s HealthWatch is a nonpartisan network of pediatricians, public health researchers, and policy experts who, since 1998, have interviewed more than 80,000 caregivers of young children in hospitals and clinics in Boston, MA; Minneapolis, MN; Little Rock, AR; and Philadelphia, PA, to document how household hardships and policy decisions affect children’s health. While SDP financing is a step removed from our direct research, its consequences are not: when Medicaid payments to the hospitals, clinicians, and community providers who care for low-income children are cut, children’s access to health care suffers. From that perspective, we offer these comments.

The proposed rule far exceeds the statute it implements. Section 71116 of Public Law 119-21 (H.R.1) directed CMS to cap the total payment rate for a defined and limited set of SDPs. The proposed rule goes well past that mandate. Independent analysis estimates that the rule would cut federal Medicaid spending by roughly $515 billion over ten years – more than three times the approximately $149 billion cut the Congressional Budget Office attributed to the statutory provision itself.¹ A rule that triples the financial impact Congress actually legislated is not a faithful implementation of the law, and we are concerned it exceeds the agency’s authority.

These cuts will reduce access to care for children. SDPs exist to raise Medicaid payments toward the level needed to keep providers participating in the program. Medicaid already pays many providers less than the cost of care, and low payment is a well-documented driver of provider non-participation, which translates directly into longer waits, fewer available clinicians, and reduced access to health care for the children and families who rely on Medicaid. Sharp, compressed reductions, some effective immediately under the rule’s narrowed grandfathering provisions and accelerated phase-downs, risk destabilizing the hospitals and practices that serve low-income communities, including the safety-net and children’s hospitals on which pediatric care depends. The people who would feel these cuts are not the abstract “providers” of the rule’s framing; they are the patients, including children, who lose access when providers can no longer afford to serve them. Losing access to health care is harmful to children’s short and long-term health, putting them at risk of preventable physical and developmental conditions being missed through routine screening and standard care.² Our research demonstrates that when children have to forgo health care because their families cannot afford it, they are more likely to be in fair or poor health, have a history of hospitalizations, be at risk for developmental delays, and their families are more likely to experience food insecurity, which is itself a known child health risk. All of these conditions have immediate and ongoing implications for greater – not lesser – health care costs for the country as well as harming the United States’ long-term population and overall economic well-being.³

We recognize the importance of program integrity in Medicaid financing, but we also recognize that reducing provider payments affects children’s access to health care and the proposed rule pursues cuts far broader than Congress authorized, with foreseeable harm to children’s access to care. We urge CMS to withdraw the provisions that extend beyond section 71116 and to preserve the terms Congress actually enacted. CMS should implement the law as written, and no further.

Sincerely,

Stephanie Ettinger de Cuba, PhD, MPH

Executive Director

Children’s HealthWatch

References

1. Cuello L. CMS Triples Harmful Impact of HR 1 Medicaid Provider Cuts in State Directed Payment Proposed Georgetown University Center for Children and Families; May 28, 2026. https://ccf.georgetown.edu/2026/05/28/cms-triples-harmful-impact-of-hr-1-medicaid-provider-cuts-in-state-directed-payment-proposed-rule/

2. Ettinger de Cuba S, Sheward R, Poindexter D, Bovell-Ammon A, Ochoa E Affordable Health Care Keeps Children and Families Healthy. Children’s HealthWatch; 2018. https://childrenshealthwatch.org/wp-content/uploads/CHW-Affordable-Care-Brief.pdf
3. Children’s The Cost of Hunger. https://childrenshealthwatch.org/wp-content/uploads/The-Cost-of-Hunger.pdf