Medicaid fee-for-service

AN ACT Relating to the medicaid deprivatization act; and adding a 1
new chapter to Title 74 RCW. 2
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:3
NEW SECTION. Sec. 1. (1) The legislature finds that the 4
administration of medicaid through managed care organizations has 5
resulted in excessive administrative costs, reduced transparency in 6
financial and clinical decision making, and barriers to timely access 7
to medically necessary care. These outcomes have disproportionately 8
impacted Native American communities, rural residents, individuals 9
with complex health needs, and those navigating behavioral health and 10
disability services.11
(2) The legislature further finds that a managed fee-for-service 12
model, in which providers are paid directly by the state and care 13
coordination is funded separately, will promote transparency, 14
accountability, and equity. This model will reduce administrative 15
overhead, restore public ownership of medicaid data, and ensure that 16
care decisions are made in the best interest of patients rather than 17
corporate shareholders. 18
(3) The purpose of this act is to eliminate financial risk-19
bearing intermediaries from the state medicaid program and to 20
S-3684.1
SENATE BILL 5955
State of Washington 69th Legislature 2026 Regular Session
By Senator Hasegawa
Prefiled 12/29/25.
p. 1 SB 5955
establish a publicly accountable, managed fee-for-service system that 1
centers care coordination, community oversight, and health equity.2
NEW SECTION. Sec. 2. The definitions in this section apply 3
throughout this chapter unless the context clearly requires 4
otherwise.5
(1) "Administrative services organization" means an entity 6
contracted by the state to perform administrative functions related 7
to medicaid including, but not limited to, claims processing, prior 8
authorization review, customer service and grievance resolution, and 9
data analytics and utilization monitoring. An administrative services 10
organization shall not assume financial risk for the cost of medicaid 11
services. 12
(2) "Authority" means the Washington health care authority.13
(3) "Care coordination" means a set of services provided by 14
physicians, nurses, community health workers, behavioral health 15
professionals, and other licensed providers to ensure that patients 16
receive appropriate, timely, and culturally responsive care across 17
the continuum of health services. 18
(4) "Department" means the Washington state department of health.19
(5) "Financial risk-bearing entity" means any organization that 20
receives capitated payments or assumes financial liability for the 21
cost of medicaid services, including managed care organizations, 22
health maintenance organizations, and other entities operating under 23
risk-based contracts. 24
(6) "Local health jurisdiction" means a geographically designated 25
body that is a local government agency and carries out a wide variety 26
of programs to promote health, help prevent disease, and build 27
healthy communities. 28
(7) "Managed fee-for-service" means a medicaid delivery model in 29
which providers are paid directly by the state through fee-for-30
service for clinical services, and care coordination is funded 31
through a separate mechanism that does not involve capitation of a 32
risk-bearing fiscal intermediary. Providers of direct care may not be 33
paid with capitation except for a flat monthly care coordination fee 34
paid to practices designated by a beneficiary as the coordinator of 35
their care. 36
(8) "Medicaid" means the joint federal-state program enacted 37
under Title XIX of the social security act that provides health 38
p. 2 SB 5955
insurance coverage for adults and children with limited income and 1
resources. 2
NEW SECTION. Sec. 3. (1) Beginning July 1, 2026, the authority 3
may not initiate, renew, or extend any contract with a financial 4
risk-bearing entity for the administration of medicaid services. This 5
prohibition shall apply to all programs administered under the 6
authority, including medical assistance programs under chapter 74.09 7
RCW.8
(2) All existing contracts with managed care organizations shall 9
terminate no later than December 31, 2026. 10
(3)(a) Beginning January 1, 2027, no fiscal intermediary shall be 11
authorized to receive capitated payments or assume financial risk for 12
medicaid enrollees under any program administered by the state.13
(b) Medicaid payments for health care services shall be made 14
directly from the state to providers of care on a fee-for-service 15
basis, with care coordination funded separately. 16
NEW SECTION. Sec. 4. (1) The authority may create a division to 17
perform necessary administrative functions for the maintenance of the 18
state medicaid plan or may contract with one or more administrative 19
services organizations to perform nonrisk administrative functions 20
necessary for the operation of the medicaid program. These functions 21
shall include, but are not limited to:22
(a) Human review of prior authorization to ensure that medically 23
necessary services are approved in a timely and equitable manner. AI 24
generated denials of care are not allowed; 25
(b) Reviewing prior authorizations to ensure that medically 26
necessary services are approved in a timely and equitable manner. 27
Prior authorization should be used as judiciously as possible and 28
only for services prone to nonmedically necessary use. As a nonrisk 29
contractor, the administrative services organization may not have a 30
financial stake in medical necessity determinations;31
(c) Providing customer service and grievance resolution to assist 32
enrollees in navigating benefits, resolving disputes, and accessing 33
care; 34
(d) Using data analytics to evaluate service patterns, identify 35
gaps in care, and support continuous quality improvement;36
(e) Processing claims to ensure accurate and timely reimbursement 37
for covered services; and 38
p. 3 SB 5955
(f) Providing administrative support for care coordination 1
programs, including scheduling assistance, documentation 2
infrastructure, and technical support for interdisciplinary teams 3
engaged in patient-centered care. 4
(2) Administrative services organizations may not establish or 5
maintain separate provider networks. All medicaid enrollees shall 6
access care through a unified statewide provider network that is 7
publicly managed and inclusive of safety net providers, culturally 8
competent practitioners, and geographically distributed services.9
(3) Administrative services organizations shall comply with all 10
transparency and data-sharing requirements established by the 11
authority, including public reporting of performance metrics, audit 12
results, and stakeholder feedback. 13
(4) The authority may give priority to an administrative services 14
organization that is: (a) Owned and operated in the state of 15
Washington; (b) located in an underserved community; and (c) is a 16
not-for-profit entity. 17
NEW SECTION. Sec. 5. (1) The care coordination fund account is 18
created in the state treasury. Moneys in the account may be spent 19
only after appropriation. Expenditures from the account may be used 20
only to compensate approved providers for documented care 21
coordination services that improve health outcomes, reduce 22
unnecessary utilization, and promote culturally responsive care. 23
These services shall include, but are not limited to, patient 24
navigation, transportation services for health care, 25
interdisciplinary care planning, chronic disease management, 26
specialist consultations to primary care, programs for patients with 27
specialized care needs including for those with serious mental 28
illness and substance use disorders, behavioral health integration, 29
and culturally competent outreach.30
(2) The authority shall provide flat care coordination payments 31
to any primary care practice designated by a medicaid enrollee as 32
their source of coordinated care. Community-based care coordination 33
services shall be funded through the care coordination fund account 34
based on the cost of operations and community need, and not with 35
capitation based on defined members that would shift insurance risk 36
onto care providers, require risk adjustment, or impose undue 37
administrative burden. 38
p. 4 SB 5955
(3) The authority shall develop and publish performance metrics 1
to evaluate the effectiveness of care coordination services. These 2
metrics shall include, but are not limited to: 3
(a) Data analytics and utilization monitoring to evaluate service 4
delivery; 5
(b) Identification of gaps in care; and 6
(c) Support for continuous quality improvement, patient 7
satisfaction, reduction in avoidable hospitalizations, improved 8
chronic disease management, and culturally appropriate service 9
delivery. 10
(4) The authority shall report annually to the legislature on 11
expenditures from the care coordination fund account, provider 12
participation, patient outcomes, and recommendations for improvement.13
NEW SECTION. Sec. 6. (1) Physicians and other independent 14
practitioners shall be paid directly by the authority for clinical 15
services provided to medicaid enrollees. Payments shall be made on a 16
fee-for-service basis and shall be equal to the applicable medicare 17
rates for the same services.18
(2) In addition to standard fee-for-service payments, the 19
authority shall provide a flat care coordination fee to eligible 20
providers for each medicaid enrollee who formally designates that 21
provider or practice as their primary source of coordinated care. 22
This flat care coordination fee shall be paid from the care 23
coordination fund account established under section 5 of this act.24
(3) Hospitals and other providers shall be reimbursed directly by 25
the state through fee-for-service payments. Payment methodologies 26
shall be designed to promote financial stability, access to essential 27
services, and alignment with this chapter. 28
(4) All care coordination services, whether provided by 29
independent practitioners or community-based entities, shall be 30
funded through the care coordination fund account.31
NEW SECTION. Sec. 7. (1) The department shall require local 32
health jurisdictions to serve as localized oversight bodies that 33
monitor community health needs, assess disparities in access and 34
outcomes, and facilitate continuous feedback between providers, 35
patients, and the authority. A local health jurisdiction shall:36
(a) Identify gaps in service delivery; 37
(b) Recommend culturally responsive best practices;38
p. 5 SB 5955
(c) Support the implementation of care coordination strategies 1
aligned with the goals of this chapter; and 2
(d) Report these to the authority and to their respective county 3
councils at least annually. 4
(2) A local health jurisdiction shall convene no less than once 5
per calendar quarter and shall include representation from primary 6
care providers, community health workers, behavioral health 7
specialists, patient advocates, and local public health officials. 8
The department shall ensure that jurisdiction membership reflects the 9
geographic, cultural, and linguistic diversity of the region served.10
(3) The department shall provide operational funding, technical 11
assistance, and administrative support to each local health 12
jurisdiction. Each jurisdiction shall submit an annual report to the 13
department summarizing its findings, recommendations, and stakeholder 14
engagement activities. 15
NEW SECTION. Sec. 8. (1) All contracts entered by the authority 16
with administrative services organizations shall be in compliance 17
with chapters 70.02, 19.373, and 42.56 RCW.18
(2) The state shall retain full and exclusive ownership of all 19
medicaid-related data including, but not limited to, utilization 20
records, cost reports, provider directories, and enrollee 21
demographics. No private entity shall assert proprietary rights over 22
data generated through publicly funded programs. 23
(3) The authority shall develop and maintain a publicly 24
accessible data dashboard that includes deidentified medicaid data 25
for research, oversight, and community engagement. The dashboard 26
shall be updated quarterly and shall include metrics related to 27
access, quality, equity, and cost. The authority shall also publish 28
an annual data report summarizing trends, disparities, and 29
recommendations for improvement. 30
NEW SECTION. Sec. 9. (1) Public health functions, including 31
vaccination programs, disease surveillance, emergency response 32
coordination, and health education initiatives, shall remain under 33
the direct administration of their current oversight departments. 34
These functions shall not be delegated to any administrative services 35
organization, contractor, or third-party entity.36
(2) The authority, in collaboration with the department, shall 37
ensure that public health operations are integrated with medicaid 38
p. 6 SB 5955
services where appropriate, and that coordination between agencies 1
supports continuity of care, emergency preparedness, and population 2
health management. The authority and department shall maintain 3
staffing, infrastructure, and funding necessary to fulfill their 4
public health responsibilities without reliance on privatized 5
intermediaries. 6
NEW SECTION. Sec. 10. (1) The legislature shall appropriate 7
funds necessary to implement the provisions of this chapter 8
including, but not limited to:9
(a) Transitioning infrastructure and administrative systems from 10
risk-bearing managed care organizations to nonrisk-bearing 11
administrative services organizations; 12
(b) Establishing and maintaining the care coordination fund, 13
including provider outreach, enrollment, and performance monitoring;14
(c) Supporting local health jurisdictions including staffing, 15
meeting facilitation, and reporting functions; and16
(d) Expanding provider recruitment, training, and retention 17
programs, with emphasis on culturally competent care and service to 18
underserved populations. 19
(2) The authority shall submit a detailed budget and 20
implementation timeline to the legislature no later than December 1, 21
2026. The budget shall include projected costs, staffing 22
requirements, technology upgrades, stakeholder engagement plans, and 23
contingency strategies to ensure uninterrupted service delivery.24
NEW SECTION. Sec. 11. (1) The authority shall submit an annual 25
report to the legislature no later than December 1st of every year. 26
The report shall include detailed information regarding:27
(a) Income and expenditures related to medicaid administration 28
and service delivery; 29
(b) The quality of care provided to medicaid beneficiaries, 30
including performance metrics and patient outcomes;31
(c) Challenges encountered by providers, including physicians, 32
hospitals, and community-based organizations; and 33
(d) Recommendations for program improvement, policy adjustments, 34
and legislative support. 35
(2) The authority shall consult with local health jurisdictions, 36
providers, and patient advocacy groups in preparing the report. The 37
report shall be made publicly available and serve as a primary tool 38
p. 7 SB 5955
for legislative oversight and continuous improvement of the medicaid 1
program. 2
NEW SECTION. Sec. 12. Full implementation of all provisions 3
shall be completed by January 1, 2027. The authority shall submit 4
quarterly progress reports to the legislature beginning March 1, 5
2027, detailing milestones achieved, challenges encountered, and 6
adjustments to ensure progress toward the goals outlined in this 7
chapter. The authority shall continue to work with the universal 8
health care commission to monitor implementation, provide feedback, 9
and support continuous improvement throughout the transition period.10
NEW SECTION. Sec. 13. Sections 1 through 12 of this act 11
constitute a new chapter in Title 74 RCW.12
--- END ---
p. 8 SB 5955