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Providers, payers, others speak out against federal proposals for Medicaid funding

American Hospital Association, American Health Care Association question rule; Democrats call block grants illegal.

Susan Morse, Managing Editor

Providers, insurers and other healthcare organizations have come out against  two federal proposals to change how states fund Medicaid.

The Centers for Medicare and Medicaid Services released the initiatives in the  state optional Healthy Adult Opportunity and in a proposed Medicaid Fiscal Accountability Regulation rule.

Those opposed to the Healthy Adult Opportunity said it dangerously curtails federal funding because it converts these funds to block grants.

CMS sent a letter to state Medicaid directors telling them they can now apply for block grant flexibilities and receive a fixed federal payment based on the number of adults in the program.

States currently receive the federal portion of their Medicaid funds based on per capita incomes, services provided, hospital costs, and whether the state has expanded Medicaid. Block granting forces states to limit access to care, hospital organizations said.

Numerous House Democrats wrote a letter to Health and Human Services Secretary Alex Azar and CMS Administrator Seema Verma calling any effort to "steal" Medicaid coverage not only immoral, but illegal.

The proposed Medicaid Fiscal Responsibility Rule would allow CMS and states to evaluate the effects of supplemental Medicaid payments by sun-setting existing and new supplemental payment methodologies after no more than three years and requiring states to request a new CMS approval to continue a supplemental payment beyond the maximum three year approved period.

The American Hospital Association and the American Health Care Association said many of the rule's proposed changes would violate federal laws, including the current Medicaid statute. The AHA and AHCA requested the agency to withdraw the proposed rule in its entirety.


CMS wants to cut Medicaid spending, while hospitals, especially those that serve a large number of Medicaid patients, said the regulatory changes would  be at their expense and that of a vulnerable population.

Hospitals that treat a large share of Medicaid patients operate, on average,  with a 1.6% margin, about a fifth that of other U.S. hospitals, America's Essential Hospitals said. These providers rely on the supplemental support the Medicaid Fiscal Accountability Regulation largely would constrain.

CMS said the last several years have seen a rapid increase in Medicaid spending from $456 billion in 2013 to an estimated $576 billion in 2016. Supplemental payments, or additional payments to providers beyond the base Medicaid payment for particular services, have steadily increased from 9.4%  of all other payments in 2010, to 17.5% in 2017.


Dr. William Jaquis, president of the American College of Emergency Physicians said, "While we appreciate the intention to provide states greater flexibility and embrace value-based care, curtailing federal funds may leave states without sufficient resources to meet the needs of those most vulnerable in our communities."

Dr. Gary LeRoy, president, American Academy of Family Physicians said, "Moving to a block grant system will likely limit the ability of Medicaid patients to receive preventive and needed medical care from their family physicians, and it will only increase the health disparities that exist in these communities, worsen overall health outcomes, and ultimately, increase costs."

Association for Community Affiliated Plans, which represents 67 safety net health plans, said some of components of the program represent genuine steps forward for Medicaid, including an option to offer continuous eligibility for enrollees for up to 12 months. And ACAP applauded the requirement for states taking up this waiver opportunity to measure the quality of care delivered through the adult core quality measure set.

But ACAP CEO Margaret A. Murray said, "ACAP has long advocated for Medicaid modernization, so long as it adheres to certain key principles -- that it covers all Medicaid enrollees equitably and provides state budget writers with certainty. Some Medicaid innovations are faithful to these principles. The Healthy Adult Opportunity initiative is not."

AARP Senior Vice President for Government Affairs Bill Sweeney said, "Capping the program's funding structure and limiting benefits and services could leave millions without the coverage and care they need."

U.S. Rep. Bill Pascrell, Jr., D-New Jersey blasted the plan, saying President Trump and Republicans want to destroy Medicaid while purportedly trying to save it.

"This is one of the most cynically fiendish schemes I've ever seen in government," Pascrell said. "Trump's name for this measure, the so-called 'Healthy Adult Opportunity,' is an Orwellian fable, conjured up by the most shameless pack of liars to ever occupy the executive branch."


America's Health Insurance Plans President and CEO Matt Eyles said, "We recognize and appreciate CMS' responsibility to protect the fiscal integrity of Medicaid, but we have serious concerns that this proposed rule could undermine the ability of many states to fund their Medicaid programs and inhibit access to care for millions of Americans.

"There is another approach that would ensure Medicaid's fiscal integrity while ensuring continued access to care for the 1 in 5 Americans who rely on the program," he said. "Instead of moving forward with new regulations without a clear and data-driven understanding of the impacts, we ask CMS to modify their proposal and first proceed with a full analysis of state Medicaid funding and payment mechanisms."

Rick Pollack, president and CEO at the American Hospital Association and Mark Parkinson, president and CEO at the American Health Care Association said, "We appreciate CMS' responsibility to oversee appropriate Medicaid financing and service delivery. However, the bleak reality is that Medicaid funding is already inadequate. Enacting this proposed rule would cut up to $50 billion nationally from the Medicaid program annually, further crippling Medicaid financing in many states and jeopardizing access to care for the 75 million Americans who rely on the program as their primary source of health coverage.

"Entire communities could lose access to care under this proposal, especially in rural areas where 15 percent of hospital revenue and nearly two-thirds of nursing facility revenue nationwide depend on Medicaid funding," they said.

America's Essential Hospitals President and CEO Dr. Bruce Siegel called on CMS to withdraw the MFAR in its entirety.

"The provisions would cut at the very core of the Medicaid program by introducing unprecedented restrictions on states' ability to fund their share of the Medicaid program," Siegel said. "Prohibiting states from using traditional local sources of funding leaves them with an untenable choice between enacting painful program cuts or turning to state and local taxpayers to replace the funding this rule would prohibit."


The Trump administration is looking at sustainability of the Medicaid program, while providers say these efforts will roll back the safety net program for 75 million low-income Americans.

CMS said the Healthy Adult Opportunity program holds states accountable for results while maintaining protections for at risk populations. States will have more negotiating power to manage drug costs by adopting a formulary similar to those provided in the commercial market, with special protections for individuals with HIV and behavioral health conditions.

In exchange for increased flexibility offered through the Healthy Adult Opportunity, states must accept increased accountability through financial metrics for program results, CMS said.

Under the Trump Administration, CMS has allowed states other flexibility, such as the ability to enact mandatory work requirements for those receiving Medicaid benefits.


CMS Administrator Seema Verma said of the Healthy Adult Opportunity, "This opportunity is designed to promote the program's objectives while furthering its sustainability for current and future beneficiaries, and achieving better health outcomes by increasing the accountability for delivering results. We've built in strong protections for our most vulnerable beneficiaries, and included opportunities for states to earn savings that have to be reinvested in strengthening the program so that it can remain a lifeline for our most vulnerable."

Twitter: @SusanJMorse
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