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Medicaid Chief Says New Rule Would Be ‘Crippling’

The Florida Channel
Courtesy of iStock

The administration of Gov. Ron DeSantis, a steadfast supporter of President Donald Trump, is raising concerns about a proposed federal rule that would strike a financial blow to the state’s Medicaid program if allowed to go into effect. 

The rule deals with arcane funding mechanisms used by state governments to draw down billions of dollars in federal money for Medicaid, which provides health-care services to 3.8 million poor, elderly and disabled Floridians.

Since taking office last year, DeSantis has touted his ability to work with Trump to steer federal money and help the Sunshine State.

But Florida Medicaid director Beth Kidder wrote to federal Centers for Medicare & Medicaid Services Administrator Seema Verma last month and asserted that a proposal meant to increase transparency related to supplemental Medicaid payments would be “crippling.”

“It is abundantly clear the CMS (the federal agency) has not sufficiently assessed the substantial consequences this proposed rule would have on both the providers serving and the recipients relying on Medicaid program services that would be impacted by a myriad of the draft positions,” Kidder wrote in her Jan. 31 letter.

“While we are unable to calculate the specific impact to all our state programs based on the existing ambiguities in the proposed rule, it is clear that the impact would be immediate and crippling,” Kidder added.

CMS also has not calculated a fiscal impact related to the proposed rule.

But in a letter to Verma, the Florida Health Care Association estimated the proposed changes could jeopardize $660 million in Medicaid funding for the state’s nursing-home industry.

Also, Safety Net Hospital Alliance of Florida Chief Executive Officer Justin Senior told The News Service of Florida that he conservatively estimated the changes would amount to a $631 million hit for hospitals that are members of his organization. Those hospitals include Jackson Health System in Miami, Orlando Health, UF Health Jacksonville, and UF Health Shands Hospital in Gainesville.

Senior estimated that medical faculty teaching programs at the University of Florida and the University of Miami could lose about $250 million if the proposed rule were to take effect.

“In terms of all the rules that the Trump administration has put out … this is so far, I would say, the most significant proposed rule we have seen with the respect to the future of the Medicaid program from this administration,” Joan Alker, executive director of the Center for Children and Families at Georgetown University, told the News Service of Florida on Wednesday. “This rule has the potential, if finalized, to throw existing state financing approaches into chaos, It is definitely a way to undermine Medicaid spending, no question, by making it harder for states to come up with their share.”

Medicaid is jointly funded by state and federal governments. Typically, standard payments, or base payments, go to providers on a per-claim basis for providing services to Medicaid patients. Base payments are also made to account for higher levels of care or complexity or intensity of services.

States can offer extra compensation to providers by establishing supplemental payments, which are in addition to the base payments. In recent years, the amount of money the federal government spends for supplemental payments has grown exponentially.

Verma unveiled the proposed rule, which affects Medicaid programs across the country, at a November meeting of the National Association of Medicaid Directors in Washington, D.C.

"We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system," Verma said in a statement accompanying the proposed rule.

The statement said the proposed rule “will shine a light on these practices, allowing CMS to better protect taxpayer dollars and ensure that Medicaid spending is directed toward high-value services that benefit patient needs."

The rule has been fast-tracked, said Alker, who also is a research professor at Georgetown’s McCourt School of Public Policy.

Among other things, the proposed rule would require that any health-care tax collected by the state to draw down supplemental funds be broad-based to ensure no undue burdens on Medicaid providers or services.

That requirement runs afoul a 2009 Florida law that authorized a tax, or assessment, on every nursing-home resident whose care is not funded by Medicare. The assessment is not uniformly paid by all providers. For example, the law exempts nursing homes with fewer than 45 beds and nursing homes that are co-located on the campuses of continuing care retirement communities.

Also, not all nursing homes pay the same assessment rate. Tom Parker, director of finance for the Florida Health Care Association, said the current daily tax rate on non-Medicare residents is $24.88. For nursing homes with high volumes of Medicaid residents --- or those with more than 53,000 annual Medicaid days --- the rate is $5.07.

Nursing homes could stand to lose $660 million in supplemental Medicaid payments, or about $40 a day, if the proposed rule takes effect. 

The Florida Health Care Association, in its letter to Verma, asked that the financing mechanism be exempt from the undue-burden tests unless the state changes how the assessment is levied and collected. The organization, which represents about 550 nursing homes across the state, also asked that the federal government not require it to meet the undue burden tests as part of a Medicaid “waiver” approval.

“Florida worked collaboratively with CMS to develop its provider tax waiver, including the current class exemptions, and has requested and received waiver approval every year since 2009,” the letter said.

Another portion of the proposed rule would require that local tax funds used to help pay for Medicaid come specifically and directly from local taxes. 

Senior, the head of the Safety Net Hospital Alliance of Florida, said Broward County’s Memorial Health System contributes funding for supplemental payments with money that comes from operating revenue budgets. The same is true for Lee Health in Southwest Florida, Senior said.

The proposal, Senior said, would either result in cuts in health care spending or “force hospital taxing districts in Florida to substantially raise taxes.”

The proposed rule also would change supplemental payments for physicians and how they can be set. Senior, who once served as Florida’s Medicaid director, said the rule essentially places a cap on provider payments and will eliminate $250 million from medical faculty teaching programs at the University of Florida and the University of Miami.

“Medical school faculty physicians treat the sickest and most vulnerable patients in the state and provide the most sophisticated care available for the most dire and complex medical diagnoses,” Senior said.