On April 30, the U.S. Government Accountability Office (GAO) released a report on CMS oversight of Medicaid program financing entitled "Federal Oversight Initiative is Consistent with Medicaid Payment Principles but Needs Greater Transparency," which is available at http://www.gao.gov/new.items/d07214.pdf. The report was jointly requested by Senators Max Baucus (D-MT) and Charles Grassley (R-IA) (Chairman and Ranking Member of the Senate Finance Committee, respectively) in order to review transparency and consistency in the treatment of states under CMS’s initiative to end inappropriate state financing arrangements begun in August 2003.
According to the GAO, between August 2003 and August 2006, 29 states ended financing arrangements involving supplemental Medicaid payments to health care providers owned or operated by government entities because CMS found that the providers did not retain all of the payments made to them. The full financial impact of these changes could not be estimated because nearly two-thirds of states ending financial arrangements had plans to replace the terminated financing with other mechanisms (such as certified public expenditures) but had not yet received CMS approval. GAO concludes that CMS’s approach of requiring states to end arrangements in which providers do not retain the full amount of supplemental payments is a departure from the agency’s past approach, but is nevertheless consistent with Medicaid payment principles. CMS changed its policies governing Medicaid financing as reported by 24 of the 29 states (although CMS continues to deny that its policy has changed, and has taken such a position in federal court). The GAO also finds that the agency has not implemented its initiative transparently, failing both to provide written guidance on standards for appropriate financing mechanisms and to provide states with clear, written explanations of the basis for CMS’ determination that existing financing practices were impermissible. As a result, many states have raised concerns about this major change in CMS policy, the apparent inconsistent treatment under it, and the ability to adequately finance their programs through alternative arrangements.
The report recommends that CMS:
- issue guidance in some form to clarify for states what constitutes allowable arrangements for financing the nonfederal share of Medicaid payments; and
- provide specific written explanations of agency determinations on the appropriateness of various financing arrangements to each state it reviews and to the public.
GAO states that a proposed Medicaid cost limit regulation issued on January 18, 2007 could, when finalized, provide the necessary guidance to satisfy its first recommendation. Numerous provider groups and advocates, including the National Association of Public Hospitals (NAPH) with assistance from Powell Goldstein, have gained Congressional support for a moratorium to delay implementation of this rule, which was included in the vetoed Iraq supplemental bill. In dueling press statements, the Finance Committee Chair and Ranking Member used the report to argue their opposing viewpoints regarding the need for the Medicaid proposed rule moratorium. Finance Committee Chairman Baucus said that the report emphasized the need for a moratorium on CMS’ proposed regulation to allow Congress to carefully consider the complex issues involved rather than hastily cutting payments to public providers. Senator Grassley said that the report underscored the need to allow CMS’ proposed rule to proceed without delay.
Grassley April 30, 2007 press release: http://grassley.senate.gov/index.cfm?FuseAction=PressReleases.Detail&PressRelease_id=5365&Month=4&Year=2007
Gaucus press release:
http://finance.senate.gov/press/Bpress/2007press/prb043007.pdf
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