The Biden administration is attempting to expand its power over the management of Medicaid at the local level.
The Centers for Medicare & Medicaid Services is reviving the Medicaid Fiscal Accountability Rule (MFAR) regulating how Medicaid funds are handled and putting at risk matching federal dollars for the states.
Proposed in 2019, the goal of MFAR was to contain costs and make state Medicaid payment programs more transparent.
However, MFAR would have given CMS significant authority over states’ Medicaid financing plans. But at a recent Medicaid funding roundtable, former Department of Health and Human Services Deputy Secretary Eric Hargan said MFAR “gave a lot of discretion to the agency and to the staff at the agency to decide … whether or not a state’s financing proposal was acceptable to them or not.”
The rule also would have cut $50 billion or more in federal Medicaid funds.
As a result, MFAR faced serious bipartisan opposition, and President Donald Trump ordered CMS to withdraw the rule in January 2021.
“When the Reverend Al Sharpton and (Texas) Gov. Greg Abbott are on the same side opposing something, you know it’s unpopular,” Republican strategist Dave Carney said at the roundtable.
But now it is back. Despite President Biden and Vice President Harris campaigning against MFAR in 2020, a repackaged version of the rule has emerged from Biden’s CMS. The courts have routinely blocked those updated proposals, but the new rules now rely on a novel interpretation of the “hold harmless” prohibition.
Under federal Medicaid law, it is illegal for a state government to impose a tax on healthcare providers and then hold those taxpayers harmless for any portion of the tax costs by transferring dollars back to them.
But while the state cannot move Medicaid dollars in that way, it has been generally understood that private entities can transfer money. “For example, the Missouri Hospital Association gets money every year,” Hargan said. “They then reapportion the money — some of the wealthier hospitals end up transferring money to smaller, rural hospitals, by and large, to keep them open.”
Hold harmless arrangements are illegal if the state is involved. So, is the state involved if private entities reapportion money between themselves in a way similar to Hargan’s example? Apparently so, according to CMS.
“The agency now says, even if it’s two private hospitals, the state knows nothing about it, they’re transferring money, and it’s not legally enforceable … that’s a hold harmless,” Hargan added. “And that means that the state’s Medicaid proposal can be criticized, reduced, bounced back, (and) made to be redone.”
Or CMS can require states to certify that these arrangements aren’t taking place, which is what happened to Texas. “(CMS) said they wanted the state to certify that no private entities in Texas were transferring money between one another directly or indirectly,” Hargan said. “And Texas said, ‘We’re not going to do it.’”
Texas took this to court and won, putting the rule on hold. Meanwhile, the states that have challenged this authority are now being audited by CMS, including Missouri, Texas, Florida and South Carolina. All red states, Hargan pointed out.
Additionally, if big, urban hospitals are prohibited from helping small, rural facilities, one of two outcomes would likely result: Either the small hospitals would close, or the big hospitals would buy the small ones and transfer the money within their system, which would be permitted under the CMS rule.
“They can just cycle the money inside their system, and so it’s a pressure towards consolidating systems across all of these smaller communities,” Hargan said. “This just adds impetus to it, either to close or to consolidate.”
And who does this hurt most?
“You’re talking about shutting down access to the underserved in urban areas and to the underserved in rural areas, and we’ll basically have suburban hospitals and the big hospitals,” Carney said.
When all is said and done, those CMS rules could threaten Medicaid’s original intent as a mostly state-run program. With a persistent bureaucracy facing unwavering bipartisan and judicial opposition, the question remains: Where’s Congress?
“Well, Congress is incapable of action,” Carney said. “Congress could veto these rules. … There’s no will to fix this. The only way there’ll be will to fix this is if the public gets engaged on this massive ‘fifth estate’ that is running the government.
“It’s the lack of personal responsibility where the federal bureaucrats think, ‘We know better.’”
As Hargan proposed, “The question is going to be whether we can figure out how to thread the needle, either Congress write a specific law or give the states far more discretion to manage the programs.”
