CMS proposes more Medicaid oversight

CMS has proposed a new rule intended to increase oversight of the fiscal integrity of the Medicaid program. Specifically, the proposal would increase reporting on supplemental payments, clarify some Medicaid financing definitions and attempt to crack down on questionable financing mechanisms.

The proposal, Medicaid Fiscal Accountability Rule (MFAS), aims to boost transparency in financial arrangements and reduce impermissible payments. According to the agency, fraudulent payments or payments that don’t follow the rules are on the rise.

“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 a statement. “Today’s rule proposal will shine a light on these practices, allowing CMS to better protect taxpayer dollars and ensure that Medicaid spending is directed toward high-value services that benefit patient needs.”

CMS pointed out that federal oversight power, including the Government Accountability Office and the Office of Inspector General have both recommended stronger understanding of Medicaid supplemental payments, which states often make to providers above normal reimbursement for billed services. Supplemental payments have increased from 9.4% of all Medicaid payments in 2010 to 17.5% in 2017, according to CMS.

Specifically, expenditures for hospital upper payment limit (UPL) has increased over the last few decades. In 2016, supplement payments came to $16.4 billion for UPL.

Under the proposed rule, states would have to follow more reporting rules with provider-level information on supplemental payments, identify the specific authority for the payments and source the nonfederal share of the payments.

CMS also called out some “schemes” states are using to increase Medicaid payments, including arrangements between local governments and private nursing facilities. These arrangements bypass tax and donation rules, with a loophole that taxes managed care facilities 25 times higher for Medicaid businesses compared to commercial businesses. States are then using those taxes as higher Medicaid payments without increasing state spending, CMS explained in its announcement.

Under the proposal, states would have to sunset supplemental payments and tax waivers after three years, though they can request renewal. The rule would also clarify Medicaid financing definitions of base and supplemental payments, as well as clarify other definitions, processes and procedures aimed at closing loopholes.