As the Obama administration winds down, a federal agency is ignoring a congressional request to halt new regulations as some believe it is seeking to withhold funds from states that have not adhered to the administration’s healthcare agenda.
The Centers for Medicare & Medicaid Services (CMS) issued a new rule ahead of the Thanksgiving holiday that would end supplemental funding for pass-through payments to Medicaid managed care plans. The payments have primarily been used by states that refused the required Medicaid expansion under Obamacare but have still acted through a combination of state and federal dollars to boost their safety net for the uninsured. The payments primarily affect 16 states and $3.3 billion in average annual funding.
While CMS issued guidance earlier this year saying that the payments could be phased out over the next 5 to 10 years, the new rule would only allow payments on contracts submitted to CMS before July 5, 2016. This sudden policy change puts a significant burden on states.
InsideSources previously reported that CMS may be leveraging the payments to force states to expand Medicaid. Florida, Texas, Kansas, and Tennessee received letters from CMS threatening to withhold funding if Medicaid was not expanded. In 2015, ten state attorneys general wrote to Congress expressing their concerns with the pressure used by the Obama administration to force states to act.
“CMS informed Florida that it would no longer provide the over $1 billion in annual funding to support Florida’s Section 1115 program unless and until Florida expanded Medicaid,” the letter stated. “Kansas, Tennessee, and Texas face similar threats regarding their uncompensated care pools and are experiencing increasing pressure from CMS.”
Congressional Republicans earlier this month asked regulators to not issue any new rules ahead of the change in administrations. This has been a courtesy extended by previous administrations as government changes hands. If the Obama administration pushes through any “midnight regulations,” the Congressional Review Act allows Congress to overturn those actions.
A Republican aide with the Senate Committee on Health, Education, Labor, and Pensions tells InsideSources: “Uncompensated care payments are incredibly important for states to make sure they can cover services hospitals provide to people who otherwise can’t afford them. This is the sort of Washington-knows-best thinking that we hope will change in the coming administration.”
InsideSources asked CMS whether the rule would force more states to expand Medicaid and whether the agency expected the rule to be overturned by Congress or the new administration.
“This proposed rule proposes clarifying changes to the pass-through payment transition periods and the maximum amount of pass-through payments permitted annually during the transition periods under Medicaid managed care contracts and rate certifications,” said a spokesperson for CMS. “The proposed changes will prevent increases in pass-through payments, and the addition of new pass-through payments beyond those in place when the pass-through payment transition periods were established in the final Medicaid managed care regulations.”
CMS also emphasized to InsideSources that the rule is intended to clarify questions from states wishing to add new pass-through payments or expanding existing ones as these payments are phased out.
The Trump transition team did not respond to repeated requests for comment.