CMS Publishes Proposed Rule on Medicaid Fiscal Accountability

On November 12, the Centers for Medicare and Medicaid Services (CMS) issued a Notice of Proposed Rulemaking(NPRM) on Medicaid fiscal accountability. The NPRM covers a wide variety of Medicaid financing structures and mechanisms that CMS views as posing risks to the fiscal integrity of the program, including supplemental payment arrangements, provider taxes and donations, and sources of state share of Medicaid funding. The rule proposes a number of new reporting requirements and practices that CMS believes will give it certainty in assessing and approving state financing arrangements, and directly responds to concerns raised by federal oversight entities such as the Government Accountability Office and the U.S. Health and Human Services Office of the Inspector General.

The National Association of Medicaid Directors (NAMD) published the following overview in their November 19, 2019 Bi-Weekly Update. 

A high-level overview of the rule's topics includes: 

  • Definitions: Defines in regulation what constitutes a Medicaid "base" payment and a "supplemental" payment
  • Three-Year Sunset: Requires any supplemental payment or tax waiver to automatically sunset after three years, with state option to renew the arrangement after CMS review and approval;
  • Provider-Level Reporting: Requires states to report each provider's received supplemental payment level, the specific authority the state is using to make the supplemental payment, and the source of the state share of the supplemental payment;
  • Requirements on Provider Sources of Non-Federal Share: Clarifies that states using Intergovernmental Transfers (IGTs) or Certified Public Expenditures (CPEs) must draw the IGT or CPE from a legitimate state or local tax source; requires that providers receiving a supplemental payment retain 100 percent of that supplemental payment to prevent recycling of payments to draw down additional federal share; new requirements on ownership transfers and when such transfers do not constitute a legitimate change of ownership for purposes of additional Medicaid payments;
  • Disproportionate Share Hospital (DSH) Payments: New data elements for DSH audits to quantify individual hospital findings in the audit; new requirements on how states must either repay or redistribute identified DSH overpayments; and
  • Health Care-Related Taxes and Donations: Clarifies rules around masking impermissible tax and donation schemes to prohibit arrangements that pose undue burdens on the Medicaid program, such as taxing a managed care plan's Medicaid line of business at a significantly higher rate than other business. 

This NPRM was formally published in the Federal Register on November 18 with a 60-day comment period closing on January 17, 2020.

As noted, this NPRM covers a broad range of topics. The area that will most likely directly affect School-Based Medicaid billing is within the Requirements on Provider Sources of Non-Federal Share, specifically supplemental payments and state share match sources. 

If you have any concerns or questions, please reach out to:

John Hill, NAME Executive Director                     Amy Edwards, NAME Governmental Affairs

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