Health Law Daily CMS proposes removing Medicaid rule allowing states to pay third parties
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Wednesday, July 11, 2018

CMS proposes removing Medicaid rule allowing states to pay third parties

By Susan Smith, J.D., M.A.

CMS is concerned that the text of a Medicaid regulation that allows a state to make payments to third parties is overbroad and insufficiently linked to the exceptions expressly permitted by Social Security Act §1902(a)(32). Therefore, CMS will publish a Proposed rule in the Federal Register on July 12, 2018, that would remove 42 C.F.R. §447.10(g)(4), but leave other provisions of §447.10 in place. The proposed rule will not impact a state’s ability to perform Financial Management Services (FMS) or secure FMS through a vendor arrangement. In addition, to the extent a state increased reimbursement levels to reassessing portions of a provider’s reimbursement to a third party, implementation of the rule may affect the rates set by the state in the future.

The regulation and the law. On January 16, 2014, CMS adopted a new regulation, "Provider Payment Reassignment, and Home and Community-Based Setting Requirements for Community First Choice and Home Community-Based (HCSB) Waivers," that authorized a state to make payments to third parties on behalf of the individual provider for benefits such as health insurance, skills training, and other benefits customary for employees (see Final rule, 79 FR 2947).

Section 1902(a)(32) requires direct payment to providers who render services to Medicaid beneficiaries. No payment for services rendered to a beneficiary may be made to anyone other than the individual or person or institution providing the care under assignment or power of attorney. Although the statute provides several specific exceptions to the direct payment requirement, it does not authorize CMS to create new exceptions.

Potential impact. Many factors could potentially affect the direct financial impact to providers, including the nature and amounts of the types of payments currently being reassigned and decisions made by home care providers after the final policy takes effect. For example, a potential impact of the Proposed rule would be that states stop reassigning home care workers’ dues to unions. Reported dues payments that would potentially be impacted by the proposed rule include $8 million in Pennsylvania and $10 million in Illinois. Other states that have been reported to have relevant third party payment policies include California, Connecticut, Maryland, Massachusetts, Minnesota, Missouri, New Jersey, Oregon, Vermont, and Washington. CMS said that factoring in the $18 million proportionately by the impacted population yields a nationwide total of approximately $71 million in union dues payments affected by the Proposed rule. This amount depends upon the differences in the amount the other states pay home care workers or if participation in Medicaid home care programs is not proportionate to total population.

Comments. CMS is seeking comments on how it could further clarify types of Medicaid payment arrangements that would be permissible assignments. In addition, CMS is requesting comments on whether and how the removal of §447.10(g)(4) would impact self-directed models, when a Medicaid beneficiary takes responsibility for managing his or her own services. Comments must be received no later than 30 days after the date the proposed rule is published in the Federal Register.

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