CMS is withdrawing its much-maligned Medicaid fiscal accountability regulation, CMS Administrator Seema Verma said in a tweet Monday.
The proposed rule was opposed by a wide range of stakeholders, including providers, state regulators and governors, patient advocacy groups and members of Congress because it would have ramped up federal oversight of how states fund their Medicaid programs and possibly led to significant funding cuts.
"We've listened closely to concerns that have been raised by our state and provider partners about potential unintended consequences of the proposed rule, which require further study. Therefore, CMS is withdrawing the rule from the regulatory agenda," Verma tweeted.
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.
"Hospitals and health systems will be greatly relieved when the proposed rule is formally withdrawn," AHA Executive Vice President Tom Nickels said in a statement.
The Trump administration proposed the rule in November because it worried that states were gaming the state-federal Medicaid financing system to collect additional federal dollars. But experts were concerned that the administration's efforts to increase program integrity would destabilize Medicaid and make it more difficult for doctors and hospitals to care for enrollees.
Providers and others balked at the proposed rule, in part, because it threatened to take away Medicaid funding, even though CMS didn't study how it would affect state or provider finances. MFAR would have also given CMS broad new authority and discretion over state financing mechanisms, which could have affected states' ability to fund other priorities like education or transportation.
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 revenues collapse. It's putting tremendous strain on state and Medicaid budgets, both of which could negatively affect providers reliant on Medicaid to pay for care costs.
CMS "made a wise and welcome decision today to withdraw its proposed Medicaid Fiscal Accountability Regulation, especially as state budgets and providers strain under the heavy financial burden and economic fallout of COVID-19," America's Essential Hospitals CEO Dr. Bruce Siegel said in a statement.
MFAR could resurface if President Donald Trump is reelected in November, especially if CMS Administrator Seema Verma continues to head the agency. But even a Biden win may not be a death knell for regulations addressing transparency and accountability in the Medicaid program. Policymakers have been interested in addressing both issues since the program began decades ago.
Verma's "clearly been very passionate about this particular issue, and it's something she's pushed forward aggressively, but she's not the only person in the administration that feels that way. Even if she were to leave … I don't think changes the calculus all that much," said Matt Salo, executive director of the National Association of Medicaid Directors.