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CMS proposes rule to prevent Medicaid payments from being diverted away from primary provider

CMS said the change is intended to ensure that providers receive their complete payment and that any diversion of funds is legal.

Susan Morse, Senior Editor

The Centers for Medicare and Medicaid Services has proposed changing a regulation that currently allows states to divert Medicaid payments away from the primary provider.

In 2014, CMS created a new exception to the direct payment requirement which allowed states to divert part of the Medicaid payment to third parties such as independent, in-home personal care workers, on behalf of the provider. 

After further review, CMS has determined that this exception is not consistent with the law and in fact, may have resulted in payments being diverted without the express knowledge of the provider.

This proposed regulatory change would eliminate a state's ability to divert Medicaid payments, with the exception of those arrangements explicitly authorized by law. This is to ensure that taxpayer dollars dedicated to providing healthcare services for low-income vulnerable Americans are not siphoned away for other purposes, CMS said.

"The law provides that Medicaid providers must be paid directly and cannot have part of their payments diverted to third parties outside of a few very specific exceptions," said Tim Hill, acting director for the Center for Medicaid and CHIP Services. "This proposed rule is intended to ensure that providers receive their complete payment, and any circumstances in which a state does divert part of a provider's payment must be clearly allowed under the law."

The Social Security Act generally prohibits states from making payments for Medicaid services to anyone but the provider. The statute gives a few specific exceptions to this requirement, such as withholding payment due to a court order for wage garnishments, child support orders, or judgments for monies that are owed to the state. 

CMS is seeking comment and specifically would like feedback on which payment arrangements between states and providers would be considered acceptable assignments of Medicaid payments.

Twitter: @SusanJMorse
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