CMS on Thursday officially killed its controversial Medicaid fiscal accountability regulation after putting it on ice in September.
The Trump administration proposed the rule in November 2019 because it worried that states were gaming the state-federal Medicaid financing system to collect additional federal dollars. But a wide range of stakeholders opposed the rule, including providers, state regulators and governors, patient advocacy groups and some members of Congress. That's because it would have ramped up federal oversight of how states fund their Medicaid programs and possibly led to significant funding cuts.
According to an analysis conducted for the American Hospital Association by Manatt Health, the changes could have cut total Medicaid funding by up to $49 billion annually or roughly 8% each year.
Once the COVID-19 pandemic struck, states and providers hit the panic button on MFAR. States are footing the bill for many costs associated with treating the virus, while unemployment and Medicaid enrollment remain high, and tax revenue collapses. It's putting tremendous strain on state and Medicaid budgets, both of which could hurt providers reliant on Medicaid to pay for care costs.
During an exclusive interview with Modern Healthcare, CMS Administrator Seema Verma defended the policy, saying that the rule was a well-intentioned attempt to address abuses in Medicaid that undermine beneficiary care.
"The goals were laudable, but at the end of the day, I've been very clear that we're always going to listen to our stakeholders," Verma said. "I evaluated the comments personally and recognize that the rule may have had some unintended consequences."
Insiders agree that states often use muddy financing strategies to get more federal funding for their Medicaid programs and boost providers' supplemental payments. But even supporters criticized the administration for not engaging states and providers or collecting necessary information before it proposed the rule, calling it rushed.
Verma said she was "very pleased" that Congress required states to report the supplemental Medicaid payments they make to providers as part of its end-of-year COVID-19 relief package.