CMS Proposes New Rule on Medicaid Supplemental Payments

Could have far-reaching impact on state-level Medicaid financing

November 21, 2019

The Centers for Medicare & Medicaid Services (CMS) proposed a comprehensive new rule on Nov. 12 looking to address fiscal accountability in the Medicaid program. The rule is intended to address perceived weaknesses in Medicaid integrity identified by the Office of Inspector General (OIG) of Health and Human Services, Government Accountability Office (GAO), and the Medicaid and CHIP Payment and Access Commission (MACPAC). CMS Administrator Seema Verma described some current payment arrangements as “shady recycling schemes [that] drive up taxpayer costs and pervert the system.”

The proposed rule defines supplemental payments as any payment that is not tied to a specific service or is not a Disproportionate Share Hospital (DSH) or base payment. In order to better track supplemental payments, it proposes that states report provider-level payment details for CMS to compare to the currently required aggregate reporting of upper payment limit (UPL) of supplemental payments. CMS would cap supplemental payments at 50% of the fee-for-service base payments or 75% in designated health professional shortage areas. Approved payment methodologies would sunset and have to be reapproved every three years.

States would also have to identify the non-federal source of Medicaid funding (that make up the required state match), and CMS proposes clarifying how providers are able to help fund this share. For instance, the rule would no longer allow private providers to donate to state entities to trigger an intergovernmental transfer (IGT), while traditional IGTs that are derived from state or local government providers would continue to be allowed. CMS also proposes a number of new requirements that apply to certified public expenditures, state provider taxes or assessments, and DSH audit requirements.

WHA has long taken a prudent and conservative approach to Medicaid supplemental payments, with the recognition that they can be volatile from one administration to another at both the state and federal levels. WHA is continuing to analyze this rule to determine potential impacts to Wisconsin in anticipation of the mid-January comment deadline.

Contact WHA Director of Federal and State Relations Jon Hoelter for more information.

This story originally appeared in the November 21, 2019 edition of WHA Newsletter