Proposed Medicaid Fiscal Accountability Rule Could Dramatically Lower Reimbursement for Providers

Today, CMS released their proposed Medicaid Fiscal Accountability Rule (MFAR), which works to ensure transparency in Medicaid payments and clamp down on impermissible financing arrangements.

From CMS’ Press Release:

“States often make additional payments to providers above the normal reimbursement for billed services.  These payments have increased from 9.4 percent of all other Medicaid payments in FY 2010 to 17.5 percent in FY 2017.  The proposed rule will address several additional areas of program vulnerabilities while clarifying existing financial policies.  The proposed rule would establish new requirements for states to report provider-level information on Medicaid supplemental payments, responding to calls from oversight organizations to increase transparency.

Many of the vulnerabilities in Medicaid financing arise from high risk financing mechanisms that states have used, or sought to use, to finance the state portion of Medicaid payments. These include intergovernmental fund transfers, certified public expenditures, provider taxes, and provider donations that provide additional payments to institutions with no clear link to improving care for patients.  The proposed rule would provide clearer guidance on the law to states and other stakeholders, help close regulatory loopholes, and improve reporting to help CMS ensure that states fund their share of payments to providers through only permissible sources and with methodologies that comport with statutory requirements and align with Medicaid program goals.

The proposed rule would also clarify Medicaid financing definitions by proposing new regulatory definitions for Medicaid “base” and “supplemental” payments, which would allow CMS to better monitor and enforce statutory requirements around the non-federal share of Medicaid expenditures and regulatory requirements for upper payment limits.  It would also clarify definitions and processes associated with provider ownership categories to close loopholes that have allowed states to attempt to inappropriately fund their share of Medicaid expenditures and to be more consistent with the statute.

To ensure payment arrangements align with both state and federal Medicaid program goals, states would also be required to sunset supplemental payments and tax waivers after no more than three years, with the option to request renewal.”

For more details on the proposed rule, read CMS’ Fact Sheet.

Read CMS Administrator Seema Verma’s Speech to the National Association of Medicaid Directors here.