The Centers for Medicare & Medicaid Services (CMS) on Monday withdrew a proposed rule that would’ve restricted how states fund their share of Medicaid, causing serious cuts in services.
The Texas Medical Association had urged CMS not to adopt the Medicaid Fiscal Accountability Regulation, which was proposed in November to promote transparency, CMS said at the time.
“TMA applauds the administration’s decision to withdraw the proposed rules, which coincide with a new report showing Texas’ uninsured rate increased again in 2019,” TMA President Diana Fite, MD, said Tuesday. “Had the rules taken effect, they would have severely harmed the state’s ability to provide needed health care coverage to our most vulnerable populations, both during and after the COVID-19 pandemic.”
The regulations would’ve required states to give CMS certain information on supplemental funding arrangements. Any new supplemental sources would’ve had to be “consistent with the proper and efficient operation of the state plan,” the regulations said.
TMA and other medical organizations argued that the rule would restrict states’ ability to use supplemental funds and established no clear standard for how states can raise funds.
“We’ve listened closely to concerns that have been raised by our state and provider partners about potential unintended consequences of the proposed rule, which require further study,” CMS Administrator Seema Verma said Monday. “Therefore, CMS is withdrawing the rule from the regulatory agenda.”
States use general-revenue tax dollars plus supplemental funding – including hospital fees, provider taxes, and intergovernmental transfers – to pay their required “nonfederal” share of Medicaid services. Over the years, states such as Texas have had to increase supplemental funding because of lawmakers’ reluctance to increase the amount of general revenue that goes to Medicaid.
In Texas, which has the nation’s largest uninsured population, supplemental funding accounts for as much as 60% of hospitals’ Medicaid payments, finance experts report.
“These dollars serve as the lifeblood of safety net hospitals and health systems, including teaching facilities, children’s hospitals, and rural hospitals, which together serve the vast majority of Medicaid and low-income Texans while also providing critical community services, such as neonatal, maternity, and trauma care,” several Texas medical organizations, including TMA, wrote in a letter to Ms. Verma in January. “Without these dollars, many of these facilities would cease to exist or be forced to sharply limit their services.”
In addition, the state’s Medicaid 1115 Transformation Waiver, which will provide an additional $25 billion until 2022, relies almost exclusively on supplemental funding. That waiver has helped thousands of low-income Texans receive medical, behavioral, and dental services.
Without the ability to use supplemental funding, lawmakers would be unlikely to support any future Medicaid waiver, Texas’ letter says.