The Keeping Obstetrics Local Act is a package of statutory changes to titles XIX and XXI of the Social Security Act that targets closures of hospital labor-and-delivery services by increasing Medicaid and CHIP financial support for hospitals that serve rural and vulnerable populations. The bill requires States to study costs, sets minimum Medicaid payment obligations for eligible hospitals, creates a new “anchor payment” for low‑volume obstetric hospitals, and raises the federal match on portions of those payments.
Beyond payment reform, the bill expands coverage and care coordination for pregnant and postpartum people—making 12‑month full‑benefit postpartum coverage mandatory in Medicaid/CHIP, creating an optional maternity health‑home model, strengthening presumptive eligibility for pregnant individuals, issuing guidance to incorporate doulas and midwives into coverage, and authorizing workforce and deployment support to stabilize obstetric staffing. It also imposes new data collection and public reporting requirements tied to obstetric unit closures so policymakers can monitor consequences and respond.
At a Glance
What It Does
Requires State cost studies and HHS reporting on maternity service costs; obligates States to pay minimum Medicaid rates for maternity services at identified ‘eligible hospitals’; establishes increased federal match for the portion of payments above a base rate; creates annual anchor payments for low‑volume obstetric hospitals; mandates 12‑month continuous postpartum coverage in Medicaid/CHIP and expands care coordination and workforce supports.
Who It Affects
Rural hospitals, critical access hospitals, safety‑net hospitals and low‑volume obstetric units; State Medicaid and CHIP agencies and managed care plans; pregnant and postpartum Medicaid/CHIP enrollees; maternal health clinicians (midwives, doulas) and federal health workforce programs.
Why It Matters
It changes the federal–state financing calculus for obstetric care by both imposing minimum payment obligations and carving out higher federal matching for increases. That makes continued local labor‑and‑delivery capacity financially easier to sustain for low‑volume and Medicaid‑dependent hospitals while also expanding insurance coverage and care models for birthing people.
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What This Bill Actually Does
The bill begins by forcing a data baseline: States must produce recurring cost studies about the true expense of providing maternity, labor, and delivery services at hospitals that are primarily Medicaid/CHIP‑funded or are rural/low volume. HHS must compile those studies and publish national findings and recommendations.
The intent is to give policymakers a factual footing for setting payments.
On the payment side, the bill requires States to pay a minimum Medicaid rate for maternity, labor, and delivery services at hospitals the statute defines as eligible (rural hospitals, critical access hospitals, Indian Health/tribal hospitals, or hospitals with ≥50% births paid by qualifying sources). For the first year the minimum is anchored at 150% of the Medicare rate for those services; thereafter the Secretary must set rates informed by the State studies.
Importantly, the statute separates the overall payment into a base payment and an “enhanced” portion (the amount by which the Medicaid minimum exceeds the base). The enhanced portion receives a 100% federal medical assistance percentage (FMAP), while the base portion receives the State’s existing enhanced FMAP.For low‑volume obstetric hospitals (various thresholds and certification rules apply), the bill requires an annual “anchor payment” designed to guarantee a labor‑and‑delivery revenue floor.
That floor is the sum of a per‑delivery amount (set at $10,000 in FY2028 and indexed, subject to 5‑year review) times delivery volume plus a standby capacity amount (set at $1.2 million in FY2028 and indexed, also subject to periodic review). States pay the difference between that revenue floor and other payments the hospital received; those anchor payments are eligible for enhanced federal matching.Coverage and care expansions run in parallel.
The bill makes 12 months of continuous, full‑benefit postpartum coverage mandatory for pregnant individuals in Medicaid and CHIP. It creates a new optional “maternity health home” model to coordinate pregnancy and 12‑month postpartum care, with States able to use per‑member per‑month or other payment methodologies and receiving a temporarily elevated FMAP for startup quarters.
The Secretary must issue guidance on integrating doulas and midwives, and the bill increases federal support for perinatal mental‑health screening.Workforce and transparency provisions round out the package: the Public Health Service Commissioned Corps is authorized to respond to urgent maternal health needs (including closures or sudden workforce losses) with new authorities and appropriations; the bill streamlines out‑of‑state provider enrollment for maternity clinicians; it requires 180‑day public notices and impact reports before an obstetric unit closure and mandates that hospitals include specific labor‑and‑delivery data in cost reports so States and HHS can track access and costs over time.
The Five Things You Need to Know
States must conduct statewide cost studies of maternity, labor, and delivery services within 24 months of enactment and every 5 years thereafter; HHS will compile and publish a national analysis using those studies.
For fiscal year 2027 the bill requires Medicaid payment for maternity, labor, and delivery at eligible hospitals be at least 150% of the Medicare payment rate; thereafter the Secretary will set minimums informed by State studies.
The statute creates an anchor payment for low‑volume obstetric hospitals: a per‑delivery marginal amount (set at $10,000 in FY2028, indexed and reviewed every 5 years) plus a standby capacity amount (set at $1.2 million in FY2028, indexed and reviewed every 5 years) to reach a revenue floor.
The enhanced portion of payments attributable to raising Medicaid minimums (the amount above a base rate) receives a 100% FMAP; the remainder of such obstetric payments receives the State’s enhanced FMAP. States may not have those increased payments counted against other federal supplemental payment caps.
The bill makes 12‑month continuous, full‑benefit postpartum coverage mandatory in Medicaid and CHIP, requires mandatory presumptive eligibility for pregnant individuals, and creates an optional Medicaid maternity health‑home model with federal planning grants.
Section-by-Section Breakdown
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State cost studies and HHS national report
Requires every State to run a detailed study of maternity, labor, and delivery costs at ‘applicable hospitals’ (those with high Medicaid/CHIP birth shares or rural/low‑volume hospitals) and submit results to HHS within 24 months, then every 5 years. The study must estimate costs, compare payments across Medicare/Medicaid/CHIP/private payers, analyze geographic and demographic cost drivers, and flag hospitals at risk. The Secretary must compile State submissions into a public national report and recommend improvements to data collection. The provision includes dedicated appropriations for small hospital technical assistance and HHS implementation.
Minimum Medicaid payment requirement for maternity services
Adds a statutory floor to State Medicaid fee‑for‑service and managed‑care rates for defined maternity, labor, and delivery services at ‘eligible hospitals’ (rural, critical access, tribal, or hospitals with at least half their births paid by qualifying sources). It directs HHS to publish an interim coding definition, and sets an initial FY2027 floor equal to 150% of the Medicare rate; for later multi‑year periods the Secretary will set floors using State study results. States must identify eligible hospitals subject to CMS approval.
Enhanced federal matching for the incremental payment
Creates a two‑part federal match design: the incremental amount attributable to moving Medicaid payments up to the minimum (the ‘enhanced payment rate amount’) is matched at 100% FMAP; the remaining ‘base’ portion is matched at the State’s usual enhanced FMAP. The statute specifies how to compute the base rate (using the payment level as of Jan 1, 2025, adjusted by the medical CPI) and constrains the rule so the higher match won’t reduce the FMAP otherwise applicable. It also excludes these federal dollars from territorial cap calculations.
Anchor payments for low‑volume obstetric hospitals (new §1923A)
Adds a new statutory anchor‑payment mechanism requiring States to provide an annual top‑up to low‑volume obstetric hospitals so labor‑and‑delivery revenue reaches a statutory floor. The floor combines a per‑delivery marginal cost (initially $10,000 in FY2028, indexed and revised every 5 years) times delivery volume and a standby capacity amount (initially $1.2 million, also indexed and periodically revised). Receipt conditions include skills‑maintenance activities, contractual commitments to continue offering labor‑and‑delivery services for a defined period, and use of funds for obstetric services; contracts include clawback and preferred creditor provisions on breach or bankruptcy.
Coverage expansions: 12‑month postpartum, presumptive eligibility, screening
Mandates 12 months of continuous full‑benefit Medicaid and CHIP coverage for pregnant individuals (coverage begins per the effective‑date rules and includes a State option for earlier implementation). The bill makes presumptive eligibility for pregnant women mandatory and tightens related statutory references. It increases federal support for perinatal depression and anxiety screening and requires HHS guidance to States on covering doulas and midwives in Medicaid/CHIP across rural and alternative care settings.
Optional Medicaid maternity health homes
Creates an optional State plan authority to operate ‘maternity health homes’ that coordinate pregnancy and 12‑month postpartum care through a designated provider, team, or health team. States must set qualification standards, quality monitoring and reporting, and payment methodologies (per‑member per‑month, prospective payments for FQHCs/RHCs, or other approved models). Start‑up planning grants are authorized; the statute requires data collection and protections for individually identifiable information and alignment with maternal mortality review activities.
Workforce and licensing flexibilities
Expands the Public Health Service Commissioned Corps role to respond to urgent maternal health needs (closures, imminent closures, or sudden workforce loss) and authorizes investment to strengthen Corps operations, recruitment, training and deployments. It adds a mechanism allowing Commissioned Corps detailees to staff affected facilities under reimbursement terms and workplace assessment requirements. Separately, the bill requires States to implement streamlined enrollment for eligible out‑of‑state maternity providers and directs CMS to issue enrollment/screening guidance for neighboring‑state clinicians, with applicability to Medicaid and CHIP.
Transparency: closure notices and hospital reporting
Requires the hospital conditions of participation to include a 180‑day notification and public report for any obstetric unit closure that analyzes community impact, causes, transportation and cost implications, and mitigation steps. It also expands Medicare cost report entries to capture labor‑and‑delivery specific data (birth counts, cesarean vs vaginal, antenatal/postpartum transfers, staffing characteristics, L&D expenses, on‑call costs, and revenue sources) so States and HHS can monitor access and financial flows.
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Explore Healthcare in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Rural and low‑volume hospitals — The anchor payments and minimum Medicaid rates reduce the risk that obstetric service lines operate at a sustained loss, improving financial viability and staffing stability for hospitals serving small birth volumes or high Medicaid shares.
- Pregnant and postpartum Medicaid/CHIP enrollees — Mandatory 12‑month full‑benefit coverage, strengthened presumptive eligibility, expanded perinatal mental‑health screening, and maternity health‑home options increase continuity of care and remove churn during a high‑risk period.
- Safety‑net clinicians and midwives — Guidance to incorporate doulas and licensed midwives into coverage and streamlined out‑of‑state enrollment expand practice opportunities and reimbursement pathways for non‑physician maternal health professionals.
- States and Medicaid program administrators — The 100% federal match on the incremental payment removes much of the state budget disincentive for raising obstetric payments and supports targeted investments to preserve local labor‑and‑delivery capacity.
- Federal response capacity — Commissioned Corps and funded operational upgrades strengthen federal ability to temporarily deploy clinicians to areas facing urgent maternal care shortages.
Who Bears the Cost
- State Medicaid programs — Even with a 100% match on the enhanced portion, States will carry administrative costs, potential increases in base FMAP spending, and the obligation to administer anchor payments and contract terms.
- Hospitals (administrative/contractual obligations) — Low‑volume hospitals must meet training, reporting, and contractual use‑of‑funds requirements and accept clawback provisions and preferred‑creditor recovery in bankruptcy scenarios.
- Managed care organizations and private plans — The statutory floor for public payments and data transparency may shift market negotiations and could raise hospital negotiation leverage; MCOs may face payment or network changes if States adjust capitation to reflect higher provider floors.
- Federal agencies (HHS/CMS) — The law creates new rulemaking, reporting, and oversight responsibilities and requires technical assistance and reviews, which the bill partially funds but will still demand programmatic resources.
- Taxpayers/Federal budget — The 100% FMAP on the incremental portion and appropriations for Corps operations and planning grants increase federal outlays; long‑term fiscal impacts depend on utilization and State implementation choices.
Key Issues
The Core Tension
The central dilemma is preserving local access to obstetric care by underwriting the fixed and standby costs of low‑volume facilities while avoiding perverse incentives or fiscal unsustainability: higher public payments can keep units open, but if payments are not calibrated to real costs or tied to quality and community needs, they can perpetuate inefficient capacity, distort state hospital subsidy programs, or encourage strategic behavior. Implementation choices—how floors are calculated, which hospitals qualify, and what conditions attach to funds—will determine whether the bill preserves essential local services or simply shifts and expands public subsidies without securing reliable high‑quality care.
The bill aligns multiple levers—minimum rates, enhanced FMAP, anchor payments, coverage mandates, and workforce supports—but those levers interact in ways that will matter a great deal at implementation. For example, the “base rate” definition uses a Jan 1, 2025 starting point indexed by the medical CPI; States with historically low Medicaid obstetric rates may see a large enhanced portion (and thus 100% FMAP) in the near term, but longer‑term Secretary rulemaking will replace the single‑year anchor with a periodic, multi‑year rate determination informed by State studies.
How the Secretary balances cost data, geographic adjustments, and quality incentives when setting subsequent floors will determine whether payments match real costs or spur unexpected market responses.
The anchor payment design addresses fixed costs (standby capacity) and marginal birth costs, but it also creates administrative and contractual complexity. Hospitals must demonstrate training and commit to continued service levels to receive funds, and States can claw back payments if obligations aren’t met.
That protects public money but exposes struggling hospitals to clawbacks if circumstances change (for example, workforce departure or bankruptcy) and may complicate hospital borrowing or sale negotiations. The statute also specifically carves these new payments out of other supplemental‑payment calculations and upper‑payment limit rules; while this prevents double counting, it could shift how States structure other hospital subsidies (DSH, supplemental payments) and creates room for gaming unless CMS guidance sets clear boundaries.
Data and reporting provisions improve transparency but raise privacy, burden, and comparability questions. Cost report expansions and mandatory closure notices will yield valuable localized insights, yet smaller hospitals may lack capacity to produce detailed cost analyses without continued federal tech/TA support.
The maternity health‑home option is promising for coordination, but uptake depends on provider capacity, payment adequacy, and the ability to integrate social services. Finally, workforce deployments via the Commissioned Corps can be a bridge for immediate shortages, but they don’t solve longer‑term recruitment and retention in rural areas; the law funds Corps operational upgrades but not the broader pipeline reforms (loan forgiveness, residency slots) many rural hospitals say they need.
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