WASHINGTON, D.C. (July 11, 2018)—The Centers for Medicare & Medicaid Services (CMS) proposed changes to the Medicaid Provider Reassignment regulation that would eliminate a state’s ability to divert Medicaid payments away from providers, with the exception of payment arrangements explicitly authorized by statute. This proposed regulatory change is designed to ensure that taxpayer dollars dedicated to providing health care services for low-income, vulnerable Americans are not paying for other purposes.

One such potential impact of the proposed rulemaking would be that states stop reassigning homecare workers’ dues to unions. While it was estimated that unions may currently collect as much as $71 million from such assignments, the variety of payments to third parties (which may include health insurance, skills training and other benefits) may exceed $100 million. CMS seeks comment on the estimate, particularly the types of payments currently being reassigned.

“The law provides that Medicaid providers must be paid directly and cannot have part of their payments diverted to third parties outside of a few very specific exceptions,” said Tim Hill, Acting Director for the Center for Medicaid and CHIP Services. “This proposed rule is intended to ensure that providers receive their complete payment, and any circumstances in which a state does divert part of a provider’s payment must be clearly allowed under the law.”

If a state elected to maintain the same level of payment, and if homecare providers opt to continue all voluntary payments presently being reassigned, then the rule may have no impacts. However, if a state elected to reduce payment levels and/or if homecare providers opt to discontinue all voluntary payments, then the impacts of the rule may be close to the full amount of current reassignments, thus making the rule economically significant, the proposed rule states.

Section 1902(a)(32) of the Social Security Act generally prohibits states from making payments for Medicaid services to anyone but the provider. The statute provides only a few specific exceptions to this requirement, such as withholding payment due to a court order for wage garnishments, child support orders or judgments for monies that are owed to the state.

In 2014, CMS revised the regulation to provide for a new exception to the direct payment requirement for certain providers, which primarily include independent in-home personal care workers. This new regulatory exception authorized a state to divert part of the Medicaid payment to third parties that could then be used to fund other costs on behalf of the provider. After review, CMS determined that the new exception created by the 2014 rule is not consistent with the statute, may have resulted in provider payments being diverted in ways that do not comply with the law, and, in some cases, may have occurred without the express knowledge of the provider.

CMS is seeking comments to inform the development of CMS guidance and help explain which payment arrangements would be considered acceptable assignments of Medicaid payments under the current law, especially those between the states and providers.

Find the text of the proposed rule here.