CMS vows to curb costs of state Medicaid demonstrations

The CMS is tightening its financial oversight of state Medicaid waiver demonstrations, the agency announced Wednesday in formal guidance emphasizing that the changes must be budget-neutral.

Federal law requires Medicaid demonstrations to be budget-neutral, and the CMS can't disburse additional funds for the proposals. The CMS said in its guidance that it will run tighter analysis on demonstration costs to make sure states are meeting budget-neutrality.

The agency will not approve waivers that predict the federal government will incur additional costs. In a statement, CMS Administrator Seema Verma reiterated that federal Medicaid spending jumped by $100 billion from 2013 to 2016. That span includes the first years of Medicaid expansion, and the CMS mainly shoulders those costs.

"Today's guidance is a comprehensive explanation of how CMS and our state partners can ensure that new demonstration projects can simultaneously promote Medicaid's objectives and keep federal spending under control," Verma said.

Along with the guidance, the CMS unveiled a new monitoring tool it will require states to use for all their demonstrations. States will need to upload all the financial data of a given Medicaid demonstration into the tool, which will consolidate the numbers in one report to the agency.

On Tuesday, Verma and U.S. Comptroller General Gene Dodaro voiced concerns to a Senate panel that states sometimes use demonstrations to draw down additional funds. Dodaro also said states fall short when it comes to evaluating the demonstrations that are supposed to serve as test runs to inform new policy and noted that the CMS "continues to need written guidance on the methodologies for demonstrating budget neutrality."

Dodaro told Senate lawmakers that a 2016 CMS policy that curbed states' ability to keep left-over funds from their demonstration or carry them forward to new demonstrations had saved the federal government nearly $63 billion in two years. But the policy did not affect all the "questionable methods" the Government Accountability Office had identified in how the CMS determines demonstration spending limits, he said.