CMS Now Prohibits States from Making Certain Medicaid Payments to Third Parties – An Update to Last Edition’s Article

An IHHC Allied member contribution by Markus P. Cicka, J.D., LL.M. (Health Law)

In the July 2, 2019 edition of the Communicator Xpress, I discussed a CMS final rule (the “Final Rule”), effective July 5, 2019, which removed the regulatory text that allows a state to make Medicaid payments to third parties on behalf of an individual provider for benefits such as health insurance, skills training, and other benefits customary for employees. CMS concluded this provision is neither explicitly nor implicitly authorized by section 1902(a)(32) of the Social Security Act (the “Act”), which identifies the only permissible exceptions to the rule that only a provider may receive Medicaid payments.

As an update to that discussion, I note that on May 13, 2019, five states (California, Connecticut, Oregon, Massachusetts and Washington) filed a lawsuit in the United States District Court for the Northern District of California challenging the Final Rule.

In the lawsuit, these states claim the federal Department of Health and Human Services (HHS) and its Secretary Alex M. Azar II (Defendants) “unlawfully attempted to reinterpret the Medicaid Act in service of anti-union objectives that bear no relationship to the purpose of that Act. In doing so, Defendants seek to upend careful arrangements created by States to allow older adults and individuals with disabilities to maximize their autonomy and independence by directing their own care, with support from state and local governments relating to the financial logistics of paying care providers.”

At the date of this writing (July 8, 2019), the federal court hearing the case has not made any ruling on the merits of the lawsuit.

If you have questions about the Final Rule, the federal lawsuit discussed above, or other issues pertaining to Medicaid reimbursement, you should contact your health law attorney.