CMS Proposes Rule to Curb Supplemental Medicaid Payments

Agency says states scheme to jack up federal share of Medicaid in several ways
Robert Calandra

CMS  proposed a new rule this week to clamp down on supplemental Medicaid payments that critics say are a ploy to boost the federal share of the federal–state financing of the program. 

“We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system,” CMS Administrator Seema Verma said  in statement released Tuesday.

The rule is supposed to allow CMS to better monitor and enforce requirements surrounding state Medicaid expenditures. The proposal comes after calls from oversight organizations and Congress for greater transparency for state Medicaid supplemental payments.The proposed rule would end the practice of states making additional payments above the normal reimbursement for billed services under Medicaid. 

In fiscal year 2016, states made $48.5 billion in supplemental payments, according to an April 2019 report from the Senate Finance Committee. The federal share of the supplemental payments was $27.8 billion, about 57% of the $48 billion, Fierce Healthcare reported.

CMS cited examples of financing arrangements that the proposed rule would stop or limit. According to the agency, states that generate extra payments for private nursing facilities that enter into arrangements with local governments to bypass tax and donation rules. They tax managed care entities 25 times higher for Medicaid business than for similar commercial business. CMS says that states can then use that tax revenue to generate additional federal payments, with no commensurate increase in state spending.