The CMS wants to end billions in supplemental funding that helped safety net and Medicaid providers care for the poorest people.
Pass-through payments are paid to Medicaid managed care plans as "add-ons” to the base capitation rate. The plans are required to pass through these payments to contracted providers who often treat a disproportionate share of Medicaid or uninsured patients with complex or costly cases. The CMS says the additional payments are not actuarially sound since they are not directly related to contracted services.
The agency estimates that at least 16 states have paid out $3.3 billion in pass-through payments on average annually, while eight have doled out approximately $105 million. Another three have distributed about $50 million for nursing facilities annually. The states were not identified.
In the final mega managed Medicaid rule released this past summer, the CMS told states to stop making such payments, but said they could be phased out over 10 years for hospitals and five years for physicians and nursing facilities.
That raised questions about whether new contracts could include pass-through agreements. In response, the CMS Friday issued a proposed rule that said only states with contracts submitted to the agency by July 5, 2016, would be able to continue pass-through payments during the transition period. Comments are due on Dec. 22.
The CMS also banned states from boosting payments before the July 5 deadline.
Health plans and states are worried that fee-for-service payments can fluctuate to incentivize providers, while pass-through payments will no longer be able to increase managed care rates. That could counter the federal goal of moving away from fee-for-service payment models.
"By making it more difficult to use supplemental payments in managed care, it would disincentivize the use of this delivery model,” Felicia Norwood, director of Illinois' Healthcare and Family Services said in a comment.
Kris Haltmeyer, vice president of health policy and analysis for the Blue Cross Blue and Shield Association, said he was worried "there is already an uneven playing field in Medicaid between with fee-for-service and managed care plans.”
Providers are also concerned. “States have utilized these pass-through supplemental payments to assist safety net and other needy providers and to achieve state policy goals,” Dr. Ram Raju, the soon-to-be-former head of New York City's public hospital system, said in a comment.
The Medicaid Health Plans of America wonders if the CMS has the authority to issue the rulemaking before President-elect Donald Trump is inaugurated.
"Given that the House and Senate majority asked the departments not release any new regulation, and it was signed by all the committee chairs, we believe this should be shelved until the new administration is sworn in,” Jeff Myers, president and CEO of MHPA said in a statement.
