On February 2, 2026, the Centers for Medicare & Medicaid Services (CMS) released updated preliminary guidance related to the grandfathering of state directed payments (SDPs) under H.R. 1, known as the One Big Beautiful Bill Act. The new “Dear Colleague” letter rescinds and replaces the SDP grandfathering guidance published by the agency on September 9, 2025.
H.R. 1 provides for certain SDPs to be grandfathered until the phase down begins with rating periods beginning on or after January 1, 2028. Specifically, under the legislation, certain SDPs occurring in rating periods within 180 days of July 4, 2025 are eligible for grandfathering.
The February guidance includes a new interpretation of the criteria for deciding if and which SDPs are grandfathered. In the prior, now rescinded guidance, the agency interpreted the 180-day period to be rating periods within 180 calendar days of July 4, 2025. In the new guidance, CMS instead interpreted the 180-day period to be rating periods within 180 business days of July 4, 2025. CMS’ new interpretation expands the grandfathering period to include rating periods with any days from October 11, 2024 through July 3, 2025 or July 7, 2025 through March 27, 2026.
There were no changes to any other aspects of the preliminary guidance from September 2025 to February 2026. CMS must still promulgate a final rule—which may contain different or new interpretations of H.R. 1’s grandfathering provision—and the policies in such rule will govern.
If you have questions about how this new guidance and the provisions of H.R. 1 may affect your state directed payment programs, please reach out to any Eyman Partners attorney to discuss.