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DECEMBER 2025 Medicaid & Medicare Newsletter: Compliance and Policy Updates

Updated: Mar 15

Mental Health • Substance Use • Social Services


Summary


December brought a mix of stabilizing and disruptive shifts across the Medicare and Medicaid landscape, especially for behavioral health and social-service providers. At the federal level, CMS finalized CY 2026 rules that tighten documentation requirements, expand behavioral health integration supports, and sharpen site-neutrality policies affecting hospital-affiliated behavioral health programs (Advisory Board, 2025).


A revised CMS telehealth FAQ clarified that behavioral-health telehealth retains expanded flexibilities through early 2026, while most non-behavioral telehealth services reverted to pre-PHE restrictions on October 1, creating a dual-standards environment that organizations must manage carefully (CMS, 2025a).


Behavioral health also remains in the spotlight following an OIG investigation that revealed persistent “ghost provider” issues undermining network adequacy in Medicare Advantage and Medicaid managed care plans (OIG, 2025).


States continued preparatory work for Medicaid work and community-engagement requirements slated for 2027, with wide variation in readiness. This month’s newsletter includes four state case studies, Georgia, Arkansas, North Carolina, and Utah, along with an analysis of broader Section 1115 waiver activity, state-directed payment reforms under federal budget law, and operational impacts of the recent federal shutdown.


Federal Policy & Regulatory Developments


CY 2026 Physician Fee Schedule — Behavioral Health Implications

CMS’s CY 2026 Physician Fee Schedule continues the agency’s long-term strategy to strengthen behavioral-health integration through expanded Collaborative Care Model (CoCM) billing flexibility, higher valuations for care-management services, and maintained tele-behavioral-health flexibilities. Providers should update documentation standards and review staffing and coding workflows for BHI- and care-management–related services.


CY 2026 OPPS / ASC Final Rule — Behavioral Health Impact

The CY 2026 OPPS/ASC Final Rule includes a net 2.6% payment increase but reinforces site-neutral payment principles.


Site-neutrality has downstream implications for:

  • Hospital-operated PHP and IOP programs

  • Emergency and crisis behavioral-health services billed under OPPS

  • Co-located behavioral-health services within outpatient hospital departments


Behavioral-health organizations partnering with hospitals should review CY 2026 contractual and operational implications (Advisory Board, 2025).


Telehealth — Behavioral vs. Non-Behavioral Split


CMS’s updated Telehealth FAQ (Nov 20) confirms that behavioral-health telehealth services retain the ability to originate from a patient’s home without geographic limitations, while most non-behavioral telehealth services reverted October 1 to pre-pandemic constraints (CMS, 2025a). FQHCs and RHCs retain extended authority to furnish and bill telehealth services through December 31, 2026.


This creates a dual regulatory landscape that requires distinct workflows, coding rules, and compliance safeguards for BH vs. non-BH services.


Medicaid Managed Care Rate-Setting — Rising Data Expectations


CMS’s Medicaid Managed Care Rate Development Guide emphasizes encounter-data quality, actuarial transparency, and validation of cost assumptions (Medicaid.gov, 2025).


Behavioral-health providers should expect:

  • More frequent and granular data requests from MCOs

  • Increased scrutiny of documentation and coding integrity

  • Greater influence of utilization and cost data on contract negotiations


Organizations with strong access metrics, outcomes data, and clean encounter submissions will be better positioned in this environment.


Directed Payment Reform Under Federal Budget Law


CMS released preliminary guidance in November on the redesigns of directed-payment programs required under federal budget law (Holland & Knight, 2025). Reforms include:

  • Stricter requirements for state-directed payment methodologies

  • Greater fiscal transparency

  • Phased reduction of hold-harmless payment arrangements


These changes will affect crisis services, SUD treatment, peer support, and care coordination, particularly for providers operating under Medicaid managed care.


Medicare Advantage & D-SNP Updates


Beyond the OIG’s network adequacy findings, Medicare Advantage and D-SNPs are increasing expectations around behavioral-health integration in care management, updating supplemental benefits for SMI/SUD populations, and tightening alignment requirements with state Medicaid agencies (OIG, 2025).


Behavioral-health providers that demonstrate strong access times and integrated care capacity can leverage these findings in contracting discussions.


Operational Effects of the Federal Shutdown


During the federal funding lapse, CMS confirmed that Medicare and Medicaid payments continued uninterrupted. However, several administrative processes slowed or temporarily paused, including MAC audits, appeals, provider enrollment processing, and hotline response times (CMS, 2025c).


Providers should anticipate residual delays into early 2026.


State-Level Spotlight (Work & Community-Engagement Readiness)


Georgia — Pathways to Coverage Adjustments

Georgia announced modifications to its Pathways to Coverage program, including expanded exemptions and revised reporting timelines relevant to individuals engaged in SUD/MH treatment (AP News, 2025).


Arkansas — Lessons From 2018 Implementation

Arkansas remains the only state with real-world implementation experience, where coverage losses were driven largely by reporting and administrative barriers rather than reduced engagement (KFF, 2025a). This evidence is shaping federal planning for 2027 implementation.


North Carolina — Limited System Readiness

Georgetown CCF concluded in September that North Carolina lacks the systems, staffing, and vendor readiness necessary to implement work requirements on schedule, raising operational and equity concerns (CCF, 2025). Providers should expect to play a larger role in eligibility navigation.


Utah — Engagement Requirements in Waiver Design

Utah’s partial expansion model, which includes engagement-linked requirements, continues to influence current waiver proposals, particularly in how states define allowable engagement activities for individuals in SUD/MH treatment (KFF, 2025b).


1115 Waiver Activity Beyond Work Requirements

States continue to propose and negotiate Section 1115 waivers that affect behavioral-health and social-service providers. Current trends include:

  • Expansion of SDOH services

  • Crisis service redesign

  • Activation of BH-specific value-based payment models

  • Refinement of eligibility pathways for high-acuity populations (KFF, 2025b)

Practical Updates for Providers – Tactical Recommendations




Leadership Action Checklist 


Action

Due Date

Update BH coding/documentation for CY 2026 PFS

Jan 15, 2026

Implement eligibility-navigation workflow

Feb 1, 2026

Deploy dual telehealth compliance matrix

Jan 31, 2026

Prepare MA/MCO contracting packet

Feb 15, 2026

Launch 1115 waiver tracking dashboard

Ongoing


EXECUTIVE CALL TO ACTION


Decisive C-Suite action requires a transition from information consumption to execution, making proactive policy integration a core strategic pillar going forward.


For a custom executive foresight briefing or to benchmark your readiness across interoperability, resilience, and equity metrics, contact us at ask@hiquitysolutions.com



References (selected)



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