The One Big Beautiful Bill Act (OBBBA) is more than just sweeping federal legislation—it marks a decisive shift in how dual-eligible care will be financed and delivered. While headlines have focused on tax reforms and political infighting, two foundational provisions embedded in the bill carry far-reaching consequences for health plans and states alike:
- A hard cap on Medicaid State-Directed Payments (SDPs)
- A 4% annual across-the-board Medicare spending cut starting in 2027
Individually, these are big. Together, they signal the end of patchwork workarounds—and the start of a full-force shift toward deeply integrated care delivery models, such as FIDE SNPs, HIDE SNPs, and value-driven LTSS networks.
For plans serving high-need, high-cost populations, the message is clear: integrate now or fall behind.
Medicaid’s Structural Shakeup: The End of SDP Leverage
Over the past decade, State-Directed Payments (SDPs) became a cornerstone of Medicaid managed care. States used them to:
- Deliver enhanced payments to hospitals, behavioral health, and LTSS providers,
- Offset low base rates,
- Leverage provider taxes to draw down federal funds.
OBBBA puts a hard stop to this flexibility. Key provisions include:
- A hard cap on SDPs at 2% of total managed care expenditures by 2027,
- Strict new federal budget neutrality and value-tied approval requirements,
- A phase-out of pass-through-style payments that lack performance metrics.
The result? States lose a key financing lever, and providers face shrinking supplemental revenue. Going forward, value must be embedded directly into base rates and delivery structures—particularly for duals.
The Medicare Squeeze: Why 4% Matters
At the same time, OBBBA mandates a 4% annual reduction in Medicare spending starting in 2027— the implications are far-reaching, impacting:
- Fee-for-service reimbursement,
- Medicare Advantage benchmarks and rebates,
- Part D subsidies and drug margins.
For SNPs managing dual-eligible populations, the convergence of Medicaid constraint and Medicare contraction is a fiscal double bind. Legacy fee-for-service models will no longer suffice. Instead, plans must shift to accountable, aligned, value-based care with clear attribution and outcome management.
The States That Will Feel It First
While all states must comply, some are far more exposed. Here are the states where OBBBA’s changes will hit hardest—and fastest:
| State | Why It’s Vulnerable |
| Texas | Deep reliance on DPPs (CHIRP, QIPP, BH-DPP), large provider tax base, minimal SNP integration |
| California | Heavy use of SDPs through CalAIM, deep ECM investment, moving rapidly toward full integration |
| New York | High Medicaid spend, large safety-net systems, still fragmented integration of duals |
| Florida | Extensive Medicaid managed care infrastructure, SDPs tied to MMA program, expanding SNP alignment |
| Illinois | Uses SDPs to fund safety-net support, but has a base of integrated models through MMAI |
For these states, the path forward is clear: either restructure their provider networks or embrace more formal, aligned integration of Medicaid products with Medicare.
Why This Pushes SNPs Into the Spotlight
Recognizing the populations impacted are different, the Medicaid SDP cap and the Medicare payment reduction are two sides of the same coin. In both cases, traditional funding flows are being curtailed—and integration offers the clearest path forward.
Here’s why:
- FIDE and HIDE SNPs align Medicare and Medicaid financing and care delivery into a single, accountable structure.
- They create more predictable capitation revenue—essential in a world of shrinking margins.
- They offer better tools to manage utilization, reduce cost, and track performance across both programs.
- CMS continues to prioritize integrated models, offering technical support and greater authority to states that pursue alignment.
As both funding streams get squeezed, only integrated plans will have the levers to manage care, contain cost, and maintain provider networks.
The Next Frontier: Value-Based LTSS Networks
Structural integration is foundational—but not sufficient. SNPs must now evolve into value-based Long-Term Services and Support (LTSS) operators.
Why now?
- LTSS is where cost, complexity, and care gaps converge.
- These services have historically been propped up by SDPs, disconnected from Medicare models
- Under the new rules, value—not volume—must finance LTSS
Plans must pivot to performance-based contracts that track outcomes, incentivize home-based providers, and reduce avoidable institutionalization.
Getting Ahead: Why Plans Should Invest Now
The message is clear: health plans can no longer treat LTSS as a sidecar to core Medicare benefits. Plans must invest in the systems, networks, and technology to manage this care holistically. That’s where Dina comes in
Dina helps health plans design and manage value-based in-home and personal care service networks that scale with SNPs including
- Network design and performance-based contracting
- Automated onboarding and credentialing
- Real-time coordination workflows
- Analytics-driven network management
As federal policy cuts through old funding models, the winners will be those who build resilient, tech-enabled, data-informed networks that can deliver better outcomes at lower cost.
Final Thought
The One Big Beautiful Bill Act is reshaping the financing foundations of Medicaid and Medicare. By capping SDPs and slashing Medicare payments, it’s forcing states and plans to abandon old crutches—and embrace new models.
FIDE and HIDE SNPs aren’t optional—they’re inevitable.
Value-based LTSS isn’t innovative—it’s essential.
