CMS Proposes Medicaid Fiscal Accountability Regulation
The Centers for Medicare and Medicaid Services (CMS) announced on Dec. 30th that they are extending the comment period for the Medicaid Fiscal Accountability Regulation (MFAR) proposal until Feb. 1, 2020. This proposed rule would make significant changes to key parts of state Medicaid financing structures for nursing homes and hospitals, including Medicaid-reimbursable provider taxes and supplemental payments such as Intergovernmental Transfer (IGT) payments. LeadingAge National played a key role in obtaining the extended opportunity to provide feedback.
According to CMS, the proposed regulation is aimed at strengthening the fiscal integrity of the Medicaid program and ensuring that state supplemental payments and financing arrangements are transparent and value-driven. CMS notes that overall Medicaid spending grew by 26 percent between 2013 and 2016, and that the federal share grew by 38 percent during the same period due in part to states’ increased use of provider taxes and supplemental payments to enhance federal Medicaid matching payments.
Implications for Provider Taxes
Provider taxes would not be banned outright under the proposed rule but would be subject to new criteria and CMS scrutiny. Current policy requires that provider taxes be broad-based and uniform (in other words, applied to providers equally), and that if states want more targeted tax structures, they must receive a CMS waiver to do so.
Waivers would still be available under the proposed rule, but states would be disallowed from receiving federal funds for taxes that “impose undue burden” on the Medicaid program, such as: (1) taxing providers that provide less Medicaid services at lower rates than high-volume Medicaid providers; (2) taxing Medicaid services more than non-Medicaid services (except when excluding Medicare/Medicaid revenue); and (3) not taxing, or taxing at a lower rate, providers with no Medicaid services versus those that accept Medicaid.
Finally, all provider taxes for which a state wants to receive federal matching funds would sunset every three years under the proposal. States could renew at the end of the three-year period but would need to get CMS approval to do so. States would have three years to comply with the MFAR requirements once the rule is finalized.
New York imposes a 6 percent Medicaid-reimbursable provider tax on nursing home patient care and other operating revenues (i.e., the “cash receipts assessment”), excluding Medicare revenues. LeadingAge NY is analyzing this aspect of the proposed regulation in relation to New York’s cash receipts assessment program.
Implications for Supplemental Payments and Upper Payment Limits
In addition to provider taxes, the MFAR proposal seeks to revise supplemental payments such as IGT programs. For the most part, this affects state Medicaid agencies and imposes new reporting requirements, including payment amount by provider and the criteria and methodology used to calculate these payments.
Under longstanding policies, each state must calculate and demonstrate that its total Medicaid payments to nursing homes (and hospitals) do not exceed the Medicare Upper Payment Limit (UPL), which is the total amount that Medicare would pay for a comparable set of services. The UPL is calculated for each provider type (e.g., nursing homes) and by ownership type (i.e., state government-operated, non-state government-operated, and privately owned).
Provided that a state’s baseline Medicaid payments are less than the UPL, federal rules allow for supplemental payments such as IGT arrangements. Under an IGT program, a local government (such as a county or city) that operates a nursing home can receive a supplemental payment to bring total Medicaid payments up to the UPL amount by contributing the non-federal share of the payment (50 percent in New York) to receive a federal matching payment. New York’s IGT program allows county governments and the New York City Health and Hospitals Corporation to participate in these arrangements, at no cost to the State.
The proposal includes new requirements for how UPLs can be calculated and which data sources to use.
It would also limit the amount of time that a state could have supplemental payment policies without federal review. If finalized, MFAR would sunset supplemental payments every three years. In order to continue payments beyond that time, CMS approval would be required. Like the provider taxes, states would have three years to comply with these MFAR requirements.
LeadingAge NY is analyzing the MFAR proposal and whether it could affect our nursing home members and the residents they serve. Given the central role that Medicaid plays in nursing home financing, it is important to make sure that any policy change would not have an adverse effect on a Medicaid enrollee’s ability to receive the care they need. We are coordinating our efforts with New York State as well as LeadingAge National and invite member comment.
Contact: Dan Heim, dheim@leadingageny.org, 518-867-8866