Proposed Rule Could Mean Cuts in Federal Medicaid $$ to States
5 min read
fairly difficult
Efforts by opponents to rescind or delay MFAR unsuccessful so far
WASHINGTON -- A proposal to change the way the federal government pays some states under the Medicaid program is causing headaches for healthcare groups and Medicaid directors, even though it hasn't actually been enacted yet.

The Medicaid Fiscal Accountability Rule (MFAR), released last November by the Centers for Medicare & Medicaid Services (CMS), would reduce the amount of money that CMS gives to states as part of their Medicaid matching funds when the money is generated through various supplemental means.

"CMS is aware of numerous schemes states have used that are not consistent with federal statute," the agency said in a press release. "Some examples include states that generate extra payments for private nursing facilities that enter into arrangements with local governments to bypass tax and donation rules, and the use of a loophole to tax managed care entities 25 times higher for Medicaid business than for similar commercial business. States can then use that tax revenue to generate additional payments, with no commensurate increase in state spending."

"Many of the vulnerabilities in Medicaid financing arise from high-risk financing mechanisms that states have used, or sought to use, to finance the state portion of Medicaid payments," the release continued. "These include intergovernmental fund transfers ... provider taxes, and provider donations that provide additional payments to institutions with no clear link to improving care for patients. The proposed rule would provide clearer guidance on the law to states and other stakeholders, help close regulatory loopholes, and improve reporting to help CMS ensure that states fund their share of payments to providers through only permissible sources and with methodologies that comport with statutory requirements."

Concerns About Payment Cuts

But critics of the proposed rule say that it would mean a cut in federal Medicaid funds that states have come to rely on.

"Through the proposed rule, CMS outlines a…
Joyce Frieden
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