CMS Proposes Rule To Eliminate Medicaid Financing Agreements

CMS on Friday made public a proposed rule under which state Medicaid reimbursements to health care providers operated by local governments could not exceed actual costs, the AP/San Francisco Chronicle reports. Under the rule, health care providers, rather than state and local governments, would have to receive all Medicaid reimbursements to which they are entitled.

Dennis Smith, director of the Center for Medicaid and State Operations at CMS, said that the rule would help eliminate financing agreements under which health care providers receive state Medicaid reimbursements that exceed the actual cost of services and states receive extra matching funds from the federal government as a result. The rule would save the federal government an estimated $3.9 million over five years, CMS said.

The rule states, "We expect this rule to have a significant economic impact on a substantial number of small entities, specifically health care providers that are operated by units of government." According to CMS, local governments or hospital districts nationwide operate 1,153 hospitals, 822 nursing homes and 113 intermediate care centers for the mentally retarded.

In most cases, health care providers "not affected by the proposal tend to be more in urban, more affluent areas," the AP/Chronicle reports. CMS will issue a final rule after a 60-day public comment period.

Rachel Klein, deputy director of health policy at Families USA, said that the rule would affect the ability of states to fund their Medicaid programs and make "it harder for people to get the critical health care services they rely on" (Freking, AP/San Francisco Chronicle, 1/14).