CMS issues proposed rule that would limit the ability of states to create new or increased pass-through payments to providers in their Medicaid managed care programs. In its final Medicaid managed care rule issued last spring, CMS had explicitly allowed states to retain pass-through payments for a transition period (10 years for hospitals, 5 years for physicians and nursing facilities), and had imposed no restrictions on creating new or expanding existing pass-throughs during that period. In an information bulletin issued July 29, CMS indicated an intent to enter into rulemaking to impose such restrictions. The proposed rule issued November 18 fulfills that intent, adopting a narrow definition of pass-through payments that would be allowable. Under the proposed rule, only states with pass-through payments in managed care contracts and rate certifications submitted to CMS by July 5, 2016 would be able to continue pass-through payments during the transition period. And CMS proposed to restrict pass-through payments to no more than the dollar amount paid through such submitted contracts (or, for hospitals, the otherwise applicable limit as described in the final Medicaid managed care rule issued last spring, whichever is less). For more information or to discuss how this proposed rule might affect your funding, contact one of us at Eyman Associates.