SB 5955

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