January 31, 2020 VIA Electronic Filing at http://www.regulations.gov Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P Mail Stop C4-26-05 7500 Security Boulevard Baltimore, MD 21244-1850 Re: CMS-2393-P: Medicaid Program; Medicaid Fiscal Accountability Regulation To Whom This May Concern: The Health and Hospital Corporation of Marion County (“HHC”), located in Indianapolis, Indiana, and operating across the State, respectfully submits these comments to the Centers for Medicare & Medicaid Services (“CMS”) regarding the proposed rule set forth at 84 Fed. Reg. 63722 (Nov. 18, 2019) (“Proposed Rule”), which, among other things, proposes to add requirements for the use of funds for the non-federal share, add newly defined terms, including but not limited to non-state government providers (“NSGP”), base payments, and supplemental payments, add State plan approval and reporting requirements for supplemental payments, and limit Medicaid practitioner supplemental payments. HHC respectfully requests that CMS consider this comment document as a whole, and specifically review, consider and respond to each question, comment, or request designated in bold italic below. BACKGROUND ON HHC HHC, a statutorily-defined municipal corporation, is a governmental entity, which has a statutory responsibility to provide public health services and public hospital services in Marion County Indiana and has the authority to extend its programs and facilities throughout the State.1 HHC furnishes such care through numerous programs, including the Marion County Public Health Department, Eskenazi Health, Indianapolis EMS, and its long-term care division. Eskenazi Health (“Eskenazi”) is the public hospital division of HHC. It is one of America’s five (5) largest safety-net health systems, which includes ten (10) federally qualified health centers (“FQHCs”), Sandra Eskenazi Mental Health Center (a community mental health center (“CMHC”) formerly known as Midtown), and Sidney & Lois Eskenazi Hospital (“Hospital”). Eskenazi is specifically required to “be for the benefit of the residents of the county and of every 1 Ind. Code §§16-22-8-34(a)(6) and 16-22-8-39(b). Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 2 person who becomes sick, injured or maimed within the county,” as well as permitted to extend to persons residing outside of the county.2 Serving Indiana’s most populated county, HHC is an integral part of Indiana’s safety-net and has public obligations far greater than typical private hospitals (or even other governmental hospitals) within the State. As a result, HHC relies extensively on its Medicaid reimbursement, as well as its relationship with the State, to help finance such reimbursement through the appropriations it receives. Therefore, Medicaid reimbursement, particularly the ability to obtain such reimbursement and assist the State of Indiana in its administration and operation of the Medicaid program, is of particular importance to HHC and is crucial to HHC’s ability to fulfill its mission. Like other members of the health care safety-net, HHC provides a substantial portion of care for the underserved and indigent members of our community, and any reduction of reimbursement will undoubtedly endanger HHC’s ability to provide care to Medicaid patients, as well as to other members of the community at large. In 2018, the Hospital’s payer mix was 27% Medicare, 43% Medicaid, 13% commercial, 12% uninsured, and 5% other. Eskenazi provides approximately 70% of the inpatient uncompensated care in Indianapolis. It is the largest safety net hospital in Indiana with a Hospital Specific Limit (“HSL”) of more than $127 million in 2017. Eskenazi provides care through nearly 1 million outpatient visits per year at facilities both on and off the main campus, including at the ten (10) FQHCs. HHC has long been a partner with the State of Indiana in providing innovative programs and needed health care safety-net services for both Medicaid-eligible individuals in the community and throughout the State of Indiana. HHC is critical to maintaining appropriate access to care for Indiana Medicaid patients. As a local governmental entity, with the mission of providing medical care to every person who becomes sick, injured or maimed in Marion County, as well as the authority to provide care throughout the State and ability to levy local property taxes,3 HHC helps support Indiana’s Medicaid program by contributing local property tax dollars for the Medicaid program, via intergovernmental transfer (“IGT”),4 permissible health carerelated taxes, and certified public expenditures (“CPE”), including for the non-federal share of Medicaid outreach services, Medicaid disproportionate share payments, payments for the Medicaid non-state government owned or operated nursing facility program (“NSGO NF Program”), access to care adjustments for services provided by medical school faculty physician and practitioners, payments for government ambulance transportation services, and the nonfederal share of other general State Medicaid expenditures. Ind. Code §§16-22-8-39(a) and (b)(1). Ind. Code §16-22-8-34(a)(9). 4 Ind. Code §16-22-8-34(a)(34). 2 3 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 3 The strong collaborative relationships with federal, State and local governments, and provider partners, in the State of Indiana have led to the creation and operation of various programs that have improved access to care and quality services throughout the State. The Proposed Rule significantly restricts the State's ability to use non-state sources of funds, including funds historically contributed by HHC. By eliminating these sources of funds, HHC will be forced to significantly reduce services to Medicaid and self-pay patients in Indianapolis and throughout the State of Indiana. EXECUTIVE SUMMARY OF COMMENTS ON PROPOSED RULE HHC understands and shares in CMS’ desire to strengthen transparency and the longterm fiscal sustainability of the Medicaid program. However, HHC is concerned with the specific approach that CMS has taken in the Proposed Rule for several key reasons, including that CMS is acting (1) beyond its authority, (2) without sufficient transparency (with such lack of transparency likely leading to inconsistent application of the Rule and other significant unintended consequences), and (3) without adequate time for States to transition. HHC would welcome the opportunity to be a supportive partner with CMS as the agency seeks to achieve its goals of improving the accountability of Medicaid financing. As a first step in this partnership, HHC has spent substantial time and taken significant care to provide the agency a thorough analysis of the Proposed Rule, including identifying legal vulnerabilities, potential unintended consequences, and opportunities for improvement with the shared goals of improving the integrity of the Medicaid program. CMS has stated that one of the purposes of the Proposed Rule is to constrain the growth of Medicaid spending, in part, by preventing abuses of supplemental payment programs that it considers to be inconsistent with the Social Security Act (“the Act”) and the purposes of the Medicaid program. To the extent CMS believes specific programs are inconsistent with the Act, it has adequate authority to address those inconsistencies under current rules and laws. Pursuant to such authority, CMS should pursue those specific examples of inconsistency and root out the issue using the tools it has available. Given CMS’ concern with lack of full transparency, a more targeted approach seems a more prudent course than a complete overhaul of the current rules. The new interpretation of the Act via the Proposed Rule has the potential of undermining numerous quality programs that are consistent with the Act along with the few specific programs CMS is targeting through this Proposed Rule. Further, the breadth of the Proposed Rule goes far beyond supplemental payment programs, giving CMS unilateral control over not just these programs, but more generally the methods in which States finance their Medicaid programs, seemingly obscuring the distinct concepts of provider payments and State methods of finance. The level of unilateral federal discretion and control seems inconsistent with the hallmark of the current administration to date which has been based on fostering State level innovation. In fact, in its preamble to the Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 4 November 2018 Medicaid managed care proposed rule, CMS stated the proposed rule “reflects a broader strategy to relieve regulatory burdens; support state flexibility and local leadership; and promote transparency, flexibility, and innovation in the delivery of care.”5 HHC is surprised by the drastic change in position, as the effect of this Proposed Rule will be to significantly increase regulatory burdens on both CMS and the States, severely restrict State and local participation in the financing of Medicaid, and possibly eliminate many innovative payment programs that increase access and quality of care. The Proposed Rule, if enacted, will give this administration and all future administrations unfettered control over supplemental payment programs and several other aspects of State Medicaid financing. Putting aside these broader issues, HHC is particularly concerned with the lack of transparency in the Proposed Rule. While the narrative to the Proposed Rule suggests that CMS is trying to achieve greater transparency in the financing of Medicaid, it seeks to promulgate a rule that provides little to no standards to allow transparency into the federal review and approval process. The nature of the Proposed Rule will allow CMS to constrain (or potentially eliminate) supplemental payment programs that are fully consistent with the Act but might include unfavorable policy preferences of any one administration. Without clear guidance in the Proposed Rule, HHC is left guessing not only about this administration’s interpretation and the possible impact of the Proposed Rule under its interpretation, but also any future interpretation and the impact that interpretation could have. The ambiguity coupled with the broad scope leads us to consider potential worst-case impacts of the Proposed Rule. For example, changes to the limitation on health care-related taxes could potentially eliminate the ability of the Hospital Assessment Fee (“HAF”) to fund Medicaid expansion in Indiana. Based on Indiana statute, the elimination of the HAF would cause the termination of Medicaid expansion having disturbing impacts to health coverage in the State. Further, the potential loss of approximately $3 billion in Medicaid expansion funding would be overwhelming to the healthcare industry, but, combined with skyrocketing uninsured rates and uncompensated care simultaneous with the implementation of federal Medicaid Disproportionate Share Hospital (“DSH”) cuts, the potential impact to Indiana would be devastating. Similarly, the Proposed Rule seems to directly target Indiana’s Medicaid NSGO NF Program (“Program”), and HHC is concerned that CMS will use the Proposed Rule to eliminate this successful program that has functioned for nearly 20 years. For purposes of promoting transparency, HHC would like to provide some additional background and operational details on the Program and what it means to our mission and patients we serve. This Program has enabled facilities throughout the State to increase wages, expand training, increase staffing levels, enhance benefits, increase staff-to-patient ratios and expand clinical and non-clinical services for residents all of which improves the quality and care for nursing home residents in Indiana. 5 83 Fed. Reg. 57264 (Nov. 14, 2018). Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 5 Specifically, this Program funding has allowed HHC to improve the facilities, install electronic medical records systems, install full system generators and upgrade medical equipment that has allowed nursing homes to improve clinical care and to significantly reduce hospital readmissions and Medicaid cost overall.6 HHC, complying with the Act and current CMS rules, also uses surplus from its owned nursing home operations to support its hospital division. Eskenazi will have an estimated $145 million Medicaid DSH cap in 2020 but will receive only $30 million from the Medicaid DSH program. The additional funding from HHC’s owned nursing home operations helps fund the Medicaid shortfall and uncompensated care losses in the hospital division. Indiana’s NSGO NF Program is functioning today because the State has made sure that hospitals follow CMS guidelines via oversight and review processes. In addition, the State has proactively, without prompting by CMS, enhanced oversight of and implemented requirements on Program participants to ensure compliance with certain funds flow requirements that are even more stringent than the federal requirements. The Proposed Rule would allow the NSGO NF Program to be eliminated if CMS determines through the “totality of the circumstances” that it is not an appropriate use of supplemental payments even if all of CMS’ rules are followed. Eliminating the Program would reduce Indiana’s Medicaid budget by $1 billion. It would close nursing facilities, reduce care for seniors and underserve patients in public hospitals and force thousands of lost Hoosier jobs.7 The premise of the Proposed Rule is to prevent abuse and ensure stability in Medicaid. CMS admits that it is unable to effectively address those issues because of a lack of transparency in supplemental payment programs. To that end, CMS should first work on transparency to better understand the programs that exist today and then measure their results. In the case of Indiana, supplemental payment programs have been created to improve care and coverage to underserved individuals. However, instead of working to lay the proper foundation for the Proposed Rule, CMS has rushed the process by simply drafting the language with complete open-ended flexibility for it to make determinations on a case-by-case basis once more information is understood in the future. However, this hasty approach misses the mark, and the lack of clear federal standards leaves these critical programs vulnerable. HHC cannot support a Proposed Rule that would leave vital programs open to unchecked discretion in the future. The Proposed Rule is not the proper method to address Medicaid’s See OPTIMISTIC, created as part of a national CMS Demonstration Project in September 2012 at Indiana University. Available at: https://www.optimistic-care.org/ (accessed Jan. 30, 2020). 7 IHCA commissioned and received the results of an analysis from Leavitt Partners on the impact of eliminating Indiana’s NSGO NF Program. The analysis suggested that 36% of the homes in Indiana would close over a 5-year period. Care for rural communities would be hit hardest with significantly less care options, longer drives to family members and $773 million in lost jobs. 6 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 6 problems because it creates too many new problems for States, health systems, clinicians and most importantly patients. Instead, CMS should continue to make improvements through the current rules as it has done, quite effectively, for the past several years. HHC requests CMS withdraw the Proposed Rule in its entirety, including all preamble commentary imposing regulatory standards that have not gone through notice-and-comment rulemaking. However, if CMS continues with finalizing a rule, HHC requests that CMS focus on transparency and data gathering for at least a five (5) year period to fully understand the complex nature of state financing of Medicaid, including the impact of various supplemental payment programs that exist today. Only then will CMS have sufficient data to draft a fully informed rule to help ensure a sustainable future for Medicaid. If CMS decides to forgo a data gathering period and continues with finalizing the Proposed Rule, HHC requests that CMS commit to a transition period of at least five (5) years for all aspects of the Proposed Rule, due to their interrelated nature, and to reflect the actual time period required for States to assess any final rule and implement any and all required changes through the appropriate statutory, regulatory, and political process. DETAILED COMMENTS ON PROPOSED RULE To the extent CMS believes it has the authority to pursue finalizing the Proposed Rule, HHC notes several areas in the Proposed Rule that are ambiguous, contradictory or will have unintended consequences and is recommending changes to the Proposed Rule. The detailed comments below are organized by the following broad topic areas, and contain detailed questions, concerns, and suggestions related to each: I. II. III. IV. Authority to Implement the Proposed Rule Transparency Transition Analysis of Specific Provisions i. Limitations on Use of State or Local Funds ii. Limitations on Health Care-Related Taxes iii. Limitations on CPE iv. Retention of Payment v. Definition of NSGP vi. Definition of Base Payment vii. Definition of Supplemental Payment viii. Application of UPL ix. State Plan Approval and Renewal Process x. Reporting Requirements xi. Medicaid Practitioner Supplemental Payment Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 7 I. AUTHORITY TO IMPLEMENT THE PROPOSED RULE As a threshold matter, HHC questions CMS’ authority to implement a number of elements contained in the Proposed Rule. Specifically, the Proposed Rule contains several provisions that appear inconsistent with the Act, including the new definition of NSGP and the new requirements for IGTs, CPEs, health care-related taxes, and State plans. HHC respectfully requests that CMS consider whether it has the necessary statutory authority to implement the proposed requirements contained in the Proposed Rule and eliminate those specific requirements for which CMS lacks such authority. Congress has expressly supported State flexibility in financing the State share (also referred to as “non-federal share”) of Medicaid from funds derived from State or local taxes or transferred from or certified by units of government. Yet, under the Proposed Rule, CMS disregards the Congressional intent by narrowly defining “public funds” to only “funds derived from State or local taxes” and from only specific entities meeting certain CMS defined conditions. Seemingly given CMS’ own recognition of its lack of authority to restrict the types of funds used for IGT or CPE under Section 1903(w)(6)(A) of the Act (“Section 6(A)”), CMS also proposes to simultaneously define NSGP, citing authority under Section 1902(a)(30)(A) of the Act (“Section 30(A)”), in a way that ultimately restricts the types of entities and funds used for IGTs and CPEs. HHC is concerned that CMS is using its broad authority under Section 30(A) to regulate IGTs and CPEs, since it is not permitted to do so under Section 6(A). However, even with the broad authority under Section 30(A), the proposed definition of NSGP is arguably also impermissible as it presumes to give CMS the authority to determine what is or is not a unit of local government, raising State sovereignty issues in the Proposed Rule as well. CMS similarly, but unsuccessfully, tried to implement restrictions on provider categories, upper payment limit (“UPL”) amounts and sources of the non-federal share of Medicaid payments to tax revenues in a May 29, 2007 Final Rule (the “2007 Rule”).8 CMS even refers to this 2007 Rule and its attempt to then limit payments to governmentally operated providers to the cost incurred, in the Proposed Rule, stating “[i]n 2010, the [2007 Rule] was rescinded (75 FR 73972) and we have not moved forward with this or any similar approach.”9 However, CMS is 72 Fed. Reg. 29748 (May 29, 2007). The 2007 Rule was vacated due to ruling in Alameda County Medical Center v. Leavitt, No. 1:08-cv-00422 (D.C. filed March 11, 2008). The Court held that the Secretary had improperly abridged Congressional authority by displaying the finalized version of the 2007 Rule on the Federal Register between Congress passing a bill placing a moratorium on the rule, and the President signing the bill into law. The Court held that this action violated the prohibitions of the moratorium. The Court further concluded that the remedy for when a rule has been improperly promulgated is to vacate the rule and remand the matter to HHS. Congress also legislated in the American Recovery and Reinvestment Act of 2009, Sec. 5003(d) (Pub.L. 111-5) that “it is the sense of Congress that the Secretary of Health and Human Services should not promulgate as final regulations… [the proposed regulation and purported final regulation setting forth cost limits for certain providers]”. 9 84 Fed. Reg. at 63737. 8 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 8 doing exactly that by once again attempting to limit the source of the non-federal share of Medicaid payments provided by governmental providers to tax revenues. CMS even proposes language at 42 CFR 447.206 – Payments Funded by Certified Public Expenditures Made to Providers that are Units of Government and 42 CFR 447.207 – Retention of Payments, in the same sections and with nearly the same requirements as the 2007 Rule.10 Even if CMS’ approach in the Proposed Rule is a little different from the 2007 Rule, the effect and seeming goal of the 2007 Rule and this Proposed Ruled are the same – to severely restrict or eliminate altogether the ability of States to implement and finance supplemental payment programs – a result that was clearly rejected by Congress.11 As Congress has spoken that it is Congress’ sense that CMS should not promulgate as final regulation, the 2007 Rule, such position should equally apply to any rule, such as the Proposed Rule, with the same goal and effect as the 2007 Rule. In addition, the new language in the Proposed Rule related to health care-related taxes, particularly the undue burden provision and the direct guarantee provision, appears outside the scope of statutory authority and significantly restricts a State’s ability to utilize these types of funds. In fact, a strict reading of the direct guarantee provision would effectively prevent the use of any health care-related tax to reimburse health care providers under the Medicaid program, as the language blurs the concept of a hold-harmless arrangement and Medicaid reimbursement based on utilization. A large tax-paying Medicaid provider would seemingly always have a reasonable expectation that some portion of the tax amount would be ‘returned’ through the course of regular Medicaid reimbursement activities. However, the broad language contained in the Proposed Rule would seemingly implicate even these relationships, which threatens the continuance of any health care-related tax used to finance Medicaid. Lastly, HHC questions CMS’ authority to automatically expire health care-related tax waivers and Medicaid State plans for supplemental payment programs. The statutory provisions do not expressly state or even imply that these tax waivers or State plans may automatically terminate. Further, the Proposed Rule introduces reporting requirements and significant financial penalties by withholding Federal Financial Participation (“FFP”) for failing to comply, which implicates federal spending clause concerns. A detailed analysis of our concerns related to the underlying authority to implement the Proposed Rule is attached hereto in Appendix A and incorporated herein. See 72 Fed. Reg. at 29833 setting forth § 447.206(d) – Cost Limit for Providers Operated by Units of Government and requiring CPEs relate to cost reports and interim and final reconciliations. See 72 Fed. Reg. at 29834 setting forth §447.207 – Retention of Payments which contains the exact same language as the Proposed Rule. 11 Congress legislated in the American Recovery and Reinvestment Act of 2009, Sec. 5003(d) (Pub.L. 111-5) that “it is the sense of Congress that the Secretary of Health and Human Services should not promulgate as final regulations… [the proposed regulation and purported final regulation setting forth cost limits for certain providers]”. 10 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 9 Request: HHC respectfully requests that CMS review, consider, and respond to each of these concerns regarding CMS’ statutory authority to implement the Proposed Rule for each of the elements set forth in Appendix A, as incorporated herein. II. I. TRANSPARENCY Transparency with Medicaid Supplemental Payments In the preamble to the Proposed Rule, CMS notes that various government oversight bodies have commented on the need for greater transparency regarding Medicaid payments. HHC supports CMS’ proposed steps to facilitate such transparency. However, transparency is the first step towards understanding and evaluating a State’s Medicaid environment and must be fully completed and considered prior to making any programmatic changes, particularly the type of sweeping changes set forth in the Proposed Rule. Indeed, CMS recognizes its own lack of understanding, when it states that “[w]ithout complete provider-level payment information, we do not have sufficient information to evaluate whether rate methodologies result in payments within a service type and provider ownership group that are economic and efficient as required under section 1902(a)(30)(A) of the Act”12 and “this information would improve the transparency of Medicaid payments and provide us with more information to understand the basis of Medicaid supplemental payments at the individual provider level.”13 While CMS appears to suggest that it is only proposing to gather additional information to better understand how States distribute supplemental payments to individual providers and whether there are benefits to the Medicaid program resulting from the supplemental payments, 14 this Proposed Rule goes far above and beyond this approach by effectively ending some supplemental payments altogether, as well as impacting numerous other payment programs, some which are supplemental, some that are not. The broad impact of this rule coupled with CMS’ self-proclaimed lack of understanding are key reasons why this rule should not be promulgated in its current form and requires significant changes, likely requiring an additional public comment period, before it is finalized. The changes to many of the existing definitions alone threaten the continuation of many programs. However, even with transition and sunset periods proposed for State plans authorizing supplemental payments and health care-related tax waivers, additional requirements and new review processes will be time extensive and place an enhanced, unfunded burden on States and providers. Such administrative requirements and review processes will also place a massive resource burden on State and federal governments, as both will need to increase staffing levels 84 Fed. Reg. at 63726. 84 Fed. Reg. at 63750. (emphasis added) 14 84 Fed. Reg. at 63726. 12 13 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 10 to facilitate the implementation of the new requirements and review and determination processes.15 However, specific to CMS staffing requirements, it is questionable whether CMS has the authority to incur such additional staffing expenditures, as CMS’ budget is set by Congress and likely does not reflect the increased federal expenditures required by this Proposed Rule (particularly as such costs were not adequately accounted for and calculated in the Proposed Rule). By substantially changing long-standing Medicaid financial structures without, by its own admission, fully understanding the impact of these programs on access and quality of care, CMS gravely endangers the Medicaid program. CMS’ preemptive change to the requirements, before fully understanding States’ Medicaid payments and financing, will also have a broader impact than CMS suggests in the preamble by causing numerous Medicaid provider “bystanders” to be subject to unnecessary regulation and requirements and causing other Medicaid providers to be subject to more regulation and administrative processes than CMS intends, as further described herein. HHC is concerned that the effect of the Proposed Rule, not just on supplemental payment programs, but on all programs, will have widespread impact on access to care, by eliminating statutorily authorized use of local funds as the State share,16 and by placing a substantially greater fiscal burden of the Medicaid program on States and their limited Medicaid budgets (by limiting their access to funds provided by local governments and governmental entities), while at the same time requiring States to use additional, yet unfunded resources to comply with the tri-annual renewal requirements for SPAs and health care-related tax waivers and quarterly and annual provider-specific reporting requirements. This will require States to decrease overall reimbursement to providers, causing numerous providers to have to close their doors.17 Indeed, CMS’ stated goal of ensuring that Medicaid funding flow directly to providers, and not used to pay administrative costs, is directly undercut by the substantial new administrative burdens the Proposed Rule would impose on both providers and State Medicaid agencies (a burden which, as noted below, CMS appears to dismiss out of hand). Request: HHC requests CMS continue its path toward transparency in order to better understand States’ Medicaid financing and payment process but wait until it has fully assessed Note, HHC believes that the additional requirement and review and determination processes taken on by CMS in the Proposed Rule will clearly require increased CMS staffing to facilitate such processes. To the extent CMS believes that the Proposed Rule will not require additional staff at the Federal level, HHC questions whether this rule is establishing realistic thresholds that CMS will be evaluating as suggested by the rule, or if this Rule is instead establishing overly aggressive “thresholds” that are impossible for any State or provider to comply with or even apply for, eliminating any additional CMS process. 16 Soc. Sec. Act 1902(a)(2) and 1903(w)(6)(A) clearly authorize the use of local funds for up to 60% of the non-federal share of Medicaid expenditures. 17 Leavitt Partners study commissioned and completed prior to the Proposed Rule by IHCA, Hope and Leading Age estimates that 35% of nursing homes in Indiana will close if nursing home supplemental payment programs are eliminated with significant impact on rural communities where residents and families will have very long commutes and $773 million of lost jobs. 15 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 11 and understands such processes, including how these programs support improved patient care, before trying to promulgate new requirements. II. Transparency with CMS discretion While CMS emphasizes its own need for transparency, States and providers also need transparency, which will become non-existent if CMS promulgates the Proposed Rule with the numerous discretionary sections allowing CMS to make determinations based on the “totality of the circumstances.” In several sections of the Proposed Rule, CMS establishes a detailed methodology for its review of various definitions. However, despite the presence of a specific test or list of elements, CMS maintains that its review will look to the totality of the circumstances rather than any specific elements of a test. Without a standard to measure itself against, States and providers have no way to assess their programs and operations to ensure they are in compliance with such “standard.” Indeed, the areas of most concern for lack of clear standard, and unchecked discretion, are as follows: • • • • • • • 42 CFR 433.51(d) – IGT from Unallowable Source: Fails to define what is an “unallowable source” and what constitutes funds “that are contingent upon the receipt of funds by, or are actually replaced in the accounts of, the transferring unit of government from funds from unallowable sources.” 42 CFR 433.52 – Net Effect: Considers the “totality of the circumstances,” including “reasonable expectations” and “consideration of reciprocal actions.” 42 CFR 433.52 – Provider-Related Donation: Examines the “totality of the circumstances” and “judging the arrangement’s net effect.” 42 CFR 433.55(c) – Health Care-Related Tax: Determines “differential treatment,” including consideration of the “parameters of the tax” and the “totality of the circumstances.” 42 CFR 433.68(e)(3) – Undue Burden for Health Care-Related Tax: Fails to define what constitutes a “lower” tax rate and meaning of phrases like “any commonality,” “considering the totality of the circumstance,” CMS “reasonably determines,” “proxy,” and “relatively lower” Medicaid activity. 42 CFR 433.68(f) – Direct Guarantee for Health Care-Related Tax: Fails to establish a threshold for the amount that constitutes “any portion of the tax amount” and consideration of totality of the circumstances, net effect (which also refers to totality of the circumstance and other unclear phrases as noted above), and reasonable expectation. 42 CFR 447.286 – NSGP and State government provider (“SGP”): Considers the “totality of the circumstances, including, but not limited to” six (6) elements, as well as considering the character of the relevant entity (undefined), including “but not limited to” three (3) elements. In addition, the phrasing of the elements leaves open discretion on what constitutes “authority” and “responsibility.” Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 12 Each of these determinations requires CMS to consider the “totality of the circumstances,” as well as numerous other vague and discretionary elements that either are not specifically listed or are not refined in the Proposed Rule. Therefore, States and providers are inhibited from ever proactively complying with the standard, because there is no standard at all. Indeed, such a lack of clear standard is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law, pursuant to 5 U.S.C. 706(2)(A). If CMS intends to impose a condition on the grant of federal moneys, it must do so unambiguously,18 as “States cannot knowingly accept conditions of which they are ‘unaware’ or which they are ‘unable to ascertain.’”19 CMS has not set forth conditions unambiguously, as CMS is attempting to promulgate regulations with no clear standards and incredible discretion left to CMS. In addition, with the cyclical political cycle and differing political goals of each administration, a State’s supplemental payment program or health care-related tax could perceivably be approved by one CMS administration, but then when the state plan amendment (“SPA”) or waiver expires three (3) years later and the State seeks renewal from a new CMS administration, for the exact same SPA or waiver with no change in Medicaid financing, utilization, etc., the then-current administration could have a different interpretation and disapprove the SPA or waiver. Such reoccurring termination and renewal process will serve to place States at the hand of the then current CMS administration and its specific political agenda, rather than “ensur[ing] that [payments] remain consistent with efficiency, economy, and quality of care,” “ensur[ing] the continuing consistency of supplemental payments,” “ensur[ing] the tax program continues to meet all applicable requirements under [42 CFR 433],”20 and ensuring “greater clarity and consistency.”21 Further, not only could determinations based on such non-existent standards vary from one period to the next, they also could vary from one State plan to the next depending on who at CMS is reviewing and/or auditing a particular plan. Under the Proposed Rule there is a very distinct possibility – indeed a probability – that two States with substantially similar programs will receive different determinations from CMS, with one State having its State plan approved and the other having its plan rejected. The only way to prevent such an outcome is for CMS to give its reviewers and auditors more substantive, unambiguous guidance as to the elements of a State plan that will cause it to pass muster and the elements that will cause it to fail to do so. But if such guidance exists, it should be reflected in the Proposed Rule, and if it does not exist, the Proposed Rule is too ambiguous and will result in too many inconsistent determinations to be legally supportable. Hawaii Department of Human Services et al., Ruling on Request for Reconsideration, DAB No. 1981, issued February 22, 2006 (citing Pennhurst State School and Hospital v. Halderman, 451 U.S. 1, 17 (1981)). 19 Arlington, 548 U.S. at 296, 126 S.Ct. 2455 (quoting Pennhurst, 451 U.S. at 17, 101 S.Ct. 1531). 20 84 Fed. Reg. at 63742. 21 84 Fed. Reg. at 63742, 63747. (emphasis added) 18 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 13 In short, the lack of standard and certainty will have a chilling effect, in which States decline to use permissible funding sources and implement supplemental payment programs for fear that CMS will decide – either now or at some future date – that considering the “totality of the circumstances” (i.e. any factor deemed relevant by CMS), the arrangement is no longer permissible. Providers and the entire health care industry need clear rules by which to establish sustainable business models and partnerships. HHC is concerned about the level of unfettered discretion left to CMS throughout the Proposed Rule. In fact, nearly every new rule includes such a level of discretion that it is impossible for potentially impacted parties to fully analyze the impact of the Proposed Rule and provide effective comment on the same. Due to the discretionary nature of the Proposed Rule, it is vague and provides little clarity to the industry. States, Medicaid providers, and other health care partners need clear and stable business rules by which to plan, budget, and invest in new models of care. Request: HHC requests that CMS modify the Proposed Rule throughout to provide more transparency and certainty. This is necessary to even solicit meaningful public comment to analyze the potential impact of the Proposed Rule. HHC requests that CMS describe in unambiguous terms how it will give States and providers clear standards to measure their programs and operations against to ensure compliance, and how CMS will protect these programs from being arbitrarily revoked or disapproved simply due to a change in CMS administration and its associated political agenda (essentially resulting in the use of the discretionary aspects of this Proposed Rule to avoid transparency requirements in the formal rule making process). III. Transparency on Impact As noted in the preamble to the Proposed Rule, Executive Order 1313222 establishes certain requirements that an agency must meet when it issues a proposed rule that imposes substantial direct requirement costs on State and local governments, preempts State law or otherwise has Federalism implications. CMS dismisses this directive stating “[t]his rule does not impose substantial direct costs on State or local governments or preempt state law.” 23 However, HHC is concerned that CMS is ignoring and failing to address the substantial direct costs on State and local governments. For example, the proposed tri-annual renewal process for SPAs authorizing supplemental payments and waivers, and the quarterly and annual provider-specific and enhanced reporting requirements, will result in States and providers incurring substantially more administrative costs related to such ongoing and cyclical requirements. In addition, the Proposed Rule essentially 22 23 Executive Order 13132 of August 4, 1999; 64 Fed. Reg. 43255 (Aug. 4, 1999). 84 Fed. Reg. at 63775. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 14 serves to eliminate the use of IGTs, CPEs, and health care-related taxes, which will result in States having to fund nearly 100% of the non-federal share, rather than the 40% required by statute.24 Yet CMS does not even attempt to determine the impact of these sweeping restrictions on non-federal share funding, admitting ““[t]he fiscal impact on the Medicaid program from the implementation of the policies in the proposed rule is unknown.”25 Therefore, it is difficult to imagine any analysis that supports the Rule that does not acknowledge and account for the substantial direct costs on States. Request: HHC requests CMS comply with Executive Order 13132 by properly analyzing and addressing the substantial direct compliance costs on State and local governments that will occur with the promulgation of the rule. If CMS intends to finalize the Proposed Rule without fully accounting for these costs, we request that CMS provide an explanation of (i) how such analysis is not required by Executive Order 13132; and (ii) how CMS reconciles its ability to promulgate the rule without conducting a full analysis of its impact to each States’ financial structures and programs. III. I. TRANSITION Transition for SPAs authorizing Supplemental Payments (42 CFR 447.252(e) and 447.302(d)) The Proposed Rule requires the authority for State plan provisions authorizing supplemental payments that are approved as of the effective date of the final rule to expire two (2) or three (3) calendar years following the effective date of the final rule.26 After such expiration, States will be required to comply with the proposed requirements for State plans set forth at proposed §§447.252(d) and 447.302(c).27 In addition, while the Proposed Rule includes this transition period for SPAs authorizing supplemental payments, the Proposed Rule does not explicitly provide a transition period for all the determinations and data elements that go into such SPA and its implementation, as further discussed below. While HHC appreciates CMS’ willingness to offer a good faith transition period, HHC is concerned that such transition period is technically limited only to the SPA itself and not the determinations and information that go into the SPA and therefore does not adequately consider the total amount of time all the determinations will take. See Soc. Sec. Act 1902(a)(2). 84 Fed. Reg. at 63773. 26 84 Fed. Reg. at 63779-63780. 27 84 Fed. Reg. at 63779-63780. 24 25 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 15 A transition period more akin to the five (5) or ten (10) year transition period CMS allowed for Medicaid managed care pass-through payment programs (similar to fee-for-service (“FFS”) supplemental payment programs) to come into compliance with the permissible directed payment program requirements28 would be more appropriate here. II. Transition for NSGP Determination, UPL Calculation, and UPL Standards (42 CFR 447.286, 447.272, 447.288, 447.321) A. Time for CMS to Conduct Review and Determination The Proposed Rule establishes that CMS will determine whether a provider is an NSGP, SGP or private provider, as defined in §447.286. The UPL proposed in §§447.272 and 447.321 is then calculated, based on UPL demonstration methodologies proposed at §447.288(b), separately for each provider category -- NSGP, SPG, and private provider.29 Therefore, before the UPL can be calculated, CMS must make its determination of each provider’s category to ensure the providers are reflected in the appropriate provider category. In Indiana alone, there are more than 500 nursing facilities that Indiana Medicaid had previously determined are non-state government owned or operated but under the Proposed Rule would apparently need to be re-determined by CMS to be an NSGP, in addition to more than 20 county and city hospitals and a couple of State hospitals30 that would similarly require CMS review and determination (as well as the numerous other providers that are likely private providers but would need verification from CMS). In addition, because the determination process considers the “totality of the circumstances,”31 HHC expects each CMS determination of each respective entity to take a substantial amount of time. Therefore, in theory, it could take months or years for CMS to be able to determine each entity that qualifies or does not qualify as an SGP or NSGP. B. Treatment until CMS makes Determination Because the UPL calculation is dependent on CMS’ determination of provider category, it is not clear how States should calculate the UPL until such time as CMS conducts its review and determination of each provider’s category. On one hand, States could continue calculating 42 CFR 438.6. Note, while §447.288 sets forth the reporting requirements for UPL demonstrations and supplemental payments, this section also sets forth the UPL methodology data sources, data standards, and methods for calculating the UPL pursuant to §§447.272 and 447.321. Therefore, the provider category definitions at §447.286, UPL at §§42 CFR 447.272 and 447.321, and UPL reporting requirements at §447.288 all inter-relate and work together for purposes of calculating the level of Medicaid payments eligible for FFP. 30 CMS would review State hospitals for SGP status, rather than NSGP. 31 84 Fed. Reg. at 63780-63781. 28 29 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 16 the UPL based on States’ determination of state governmental, non-state governmental, and private status until such time as CMS conducts it review and determination. However, without clear guidance from CMS, this could potentially subject States to financial risk if CMS later decided a provider was not an NSGP. On the other hand, because the Proposed Rule defines “private provider” as a health care provider that is not an SGP or NSGP, such definition can be interpreted to require States to consider every single provider a private provider until such time as CMS determines the provider to be an SGP or NSGP. In addition, because CMS links a provider’s ability to provide the nonfederal share of FFP to the provider’s status,32 that could mean the State cannot receive IGTs or CPE from any unit of government until such determination is made. As noted above, because of the likely enormous amount of time it will take CMS to complete the determination process, this could mean that States must consider all providers as private providers and fully fund all Medicaid expenditures using State sources, and not local sources, for years. This would entirely undermine the ability of States to use local sources to fund the State share as permitted by §1902(a) of the Act33 and would be a direct violation of Section 6(A), which expressly prohibits the Secretary from restricting States’ use of funds where such funds are derived from State or local taxes. This significant restriction on the funding of States’ Medicaid programs and potential violation of federal law resulting from the time needed to complete the determinations and lack of clarity regarding how to categorize providers until such determinations are made support the need for a longer transition period (again at least five (5) years) specific to the NSGP definition proposed at §447.286 and its incorporation into the calculation of the UPL at proposed §§447.272 and 447.321. C. Time for States to Respond to CMS’ Determination If CMS determines that certain providers that a State had previously determined to qualify as non-state governmental entities, do not meet the new definition of NSGP, the State will need time to assess such determination and respond. Such response may be in the form of discussing the process with CMS to better understand CMS’ standards and determination process, disputing CMS’ determination, or making revisions to the providers’ structure to comply with the new requirements of the NSGP definition. Either one of these responses would take time, further supporting the need for a reasonable transition period for the NSGP definition See preamble stating “[w]e propose to consider the entity’s access to and administrative control over state-appropriated funds from the legislature or local tax revenue in this definition to link the provider category to the ability of the provider to supply the nonfederal share funds in a manner consistent with section 1903(w)(6)(A) of the Act.” 84 Fed. Reg. at 63752. See also the CPE requirements proposed at §433.51(b)(3) and §447.206. 33 See Soc. Sec. Act 1902(a)(2) allowing local sources to fund up to 60% of the State share. 32 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 17 and UPL calculation, as well as additional transparency about what the determination standard is and what the process will entail. D. Time for States to Comply with Medicaid and State-Specific Requirements States also need time to comply with other applicable Medicaid rules and State statutory, regulatory, and policy requirements. Many Medicaid payment programs and related financing are explicitly authorized or required by State law. Each State’s budget cycle is different and while Indiana has a bi-annual budget cycle, it still may be problematic if the two (2) or three (3) year transition period is retained in any final rule. Once the final rule is published, a State will need time to review the rule and its impact on all of the State’s Medicaid programs, and then advise state legislators on the need for any statutory amendments. Depending on the date any final rule is published, it may be difficult for a State to seek such statutory amendments in time for both (i) the next bi-annual budget and (ii) any two (2) or three (3) year transition period. If States are unable to obtain such statutory amendments in time for the next bi-annual budget and within the two (2) or three (3) year transition period, it is possible that a State may have statutory language that contradict any final rule requirements. Therefore, States need additional time to ensure any and all State statutory changes are properly made to support any required revisions to the State Medicaid programs and authorize the submission of any necessary SPA. In addition, where there is a significant change to its methods or standards for setting payment rates of inpatient hospital and long-term care facility services, existing federal rules require the Medicaid agency to comply with public notice requirements. 34 Indeed, such notice must be published before the proposed effective date of the change.35 Therefore, State Medicaid agencies need time to comply with the public notice requirement, in the event the State determines the application of the NSGP definition to the calculation of the UPL results in a significant change in the methods or standards for setting payment rates. Similarly, States need time to comply with any SPA requirements, if the State determines there is a change or needed change as a result of the Rule, in the method or standard for setting payment rates.36 42 CFR 447.205 and 447.253(h). 42 CFR 447.205(d)(1). 36 Because States are required to pay for inpatient hospital and long-term care services using rates determined in accordance with methods and standards specified in an approved State plan (42 CFR 447.253(i)), any change in the payment methods or standards require an SPA, which can be effective no earlier than the first day of the calendar quarter in which an approvable amendment is submitted (42 CFR 447.256). In addition, some States, such as Indiana, require SPAs be submitted to the state budget committee for review further delaying the SPA process. (See Ind. Code 1215-1.3-17.5). 34 35 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 18 In addition to a State potentially needing to provide public notice and seek SPA approval due to any change in its methods or standards for setting payment rates, a State may determine (whether independently or at the direction of CMS) that a regulatory or policy change is required to implement the NSGP definition and its application to the UPL calculation in accordance with the Proposed Rule. Any such regulatory or policy change process would further delay the State’s ability to comply with any immediate effective date, supporting the need for a transition period. III. Transition for Health Care-Related Tax Waivers The Proposed Rule requires currently approved waivers for health care-related taxes cease to be effective three (3) years from the effective date of the final rule and then waivers approved after the effective date of the final rule to expire every three (3) years. 37 The preamble to the Proposed Rule indicates the three (3) year period is intended to allow States to come into compliance with the undue burden requirement proposed at §433.68(e)(3) stating: We are proposing to require states to ensure compliance with the proposed requirement at paragraph (e)(3) to avoid placing an undue burden on the Medicaid program beginning on the effective date of any final rule for tax waivers that have not yet been approved before the effective date of any final rule. For tax waivers approved before the effective date of any final rule, we are proposing that states must come into compliance with this requirement when submitting a new waiver request.38 However, the regulatory text does not explicitly state that such transition period is for compliance with the proposed undue burden requirement at §433.68(e)(3). In addition, the preamble and the regulatory text do not provide States time to come into compliance with the other new health care-related tax requirements, such as the revised direct guarantee requirement. These new requirements, among the other proposed changes, will require States to review and assess their current tax programs to determine whether they comply with any final regulation and then implement changes to the State plan and/or waiver as well as applicable State statutes, regulations, and policy to come into compliance with any final regulations. All of those activities will impose burdens on the State and take significant time to complete. While CMS suggests that some of the health care-related tax changes, such as the direct guarantee language, is “a clarification of existing policy and would not impose any new obligations or place any new restrictions on states that do not currently exist,”39 HHC has concerns that the broad and vague language of the rule and the discretion it gives to CMS will result in new obligations and 84 Fed. Reg. at 63778. 84 Fed. Reg. at 63742. (emphasis added) 39 84 Fed. Reg. at 63742. 37 38 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 19 restrictions on States, necessitating substantial time for States to come into compliance and/or find new funding sources. IV. Other Transition Periods Missing Other areas of the Proposed Rule also implement new requirements that States will need time to assess and comply with, but that do not provide a specific transition period, including but not limited to: • • • • §433.51 – State and Local Funds Requirements §447.206 – CPE Requirements §447.207 – Payment Retention Requirements §447.286 – Definitions of Base and Supplemental Payments Each of these proposed provisions places new requirements on States that States will need to review to determine whether they require any statutory, regulatory or policy changes, whether they require a SPA, and whether there is a change in its methods or standards for setting payment rate, requiring notice and SPA processes. This further supports the need for a meaningful transition period – greater than two (2) or three (3) years -- that applies to all of these proposed provisions. V. Requested Transition Period Request: Due to the various elements of the Proposed Rule being interrelated and impacting each other, HHC requests a transition period that applies to all aspects of the Proposed Rule, including definitions and other similar aspects. In addition, due to the lengthy process relating to the provider category determination and its implementation in the UPL demonstration methods, UPL calculation, and SPA, and States’ determination of compliance with State law requirements, as well as the various budgeting cycles of State government, HHC requests CMS utilize at least a five (5) year transition period, consistent with other CMS transitions in situations likely to have comparable, enormous programmatic and financials effects, rather than a two (2) or three (3) year period set forth in the Proposed Rule. In addition, HHC requests CMS clarify that no current, approved SPAs will be audited, and no federal share monies under such SPAs will be withheld/deferred or recouped, during the Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 20 transition period, so long as the State and its providers comply with the provisions of previously approved SPAs.40 IV. ANALYSIS OF SPECIFIC PROVISIONS Aside from the threshold issue of underlying authority and the twin concerns of ensuring both transparency and adequate transitions, HHC has several additional concerns related to the specific provisions contained in the Proposed Rule and the potential impact these provisions will have on HHC, the Hospital, and the entire health care safety-net in the State of Indiana. I. Limitation on Use of State or Local Funds (42 CFR 433.51) HHC was established by statute as part of the Marion County government, and it has the statutory authority to impose and collect taxes to finance its general operations budget. HHC has long been a partner with the State in funding a portion of the State share in furtherance of its statutory mission to provide health care to all residents in Marion County. Historically, all IGTs from HHC to the State have been paid solely from HHC’s tax revenues. However, the Proposed Rule places significant limitations on the use of State or local funds for purposes of serving as the State share. HHC is concerned that these limitations will unduly restrict the State in its ability to finance Medicaid as well as limit HHC’s ability to responsibly manage funds to limit the tax liability for the taxpayers of Marion County. A. Inclusion of Local Appropriations and Other Local Funds The plain language of the statute recognizes that permissible IGTs can be derived from sources other than just State or local taxes. Section 6(A) only prohibits the Secretary from restricting use of IGTs derived from State or local taxes, thereby permitting the use of IGTs derived from other sources. Indeed, the last portion of the statute prohibits transferred funds (IGTs) derived from non-allowable donations or taxes from serving as the non-federal share. If a permissible IGT can only be derived from a State or local tax, as CMS suggests in the Proposed Rule,41 Congress would have so stated and the reference to the ability for IGTs to be derived The Proposed Rule implies but does not expressly state that no current, approved SPAs will be audited, and no federal share monies under such SPAs shall be withheld/deferred or recouped, during the transition period, so long as the State and its providers comply with the provisions of previously approved SPAs. The burdens contained in the Proposed Rule will be difficult enough for States bear without the additional costs and resources that would need to be devoted to a CMS audit during the transition period 41 In the preamble, CMS states “[…] created confusion among states, and has led to state requests to derive IGTs from sources other than state or local tax revenue (or funds appropriated to state university teaching hospitals), which is not 40 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 21 from donations or taxes would be irrelevant and contradictory. Therefore, because the statute recognizes that an otherwise permissible IGT can be made impermissible due to it being derived from an unallowable donation or tax, it is inherent that a permissible IGT can be derived from sources other than just State or local taxes. In addition, and as noted above, CMS is interpreting a statutory provision that permits States to use State or local taxes as permissible sources of IGTs as instead requiring that State or local taxes be used as the only permissible sources of IGTs, thus turning the statutory provision on its head. Request: As discussed in more detail below, HHC requests CMS clarify that IGTs may be derived from (i) funds appropriated to the unit of local government by the legislature, (ii) funds appropriated to the unit of local government by another unit of local government, and (iii) other permissible funds in addition to State and local taxes, to serve as the State share, consistent with federal law and CMS’ precedence. i. Funds Appropriated to Unit of Local Government by Legislature The Proposed Rule allows State General Fund dollars appropriated by the State legislature directly to the State or local Medicaid agency to serve as the State share. 42 However, the Proposed Rule does not explicitly recognize funds appropriated by the State legislature to a unit of local government, other than a local Medicaid agency, as the State share, although such funds may support the governmental unit’s NSGP status. Because funds appropriated to the unit of local government by the legislature are originally from the State, CMS’ concerns about States not properly participating in the State and federal financing partnership are not implicated by allowing such funds to serve as the State share. Request: HHC requests CMS continue to permit IGTs derived from funds appropriated to the unit of local government by the legislature to serve as the State share. ii. Funds Appropriated to Unit of Local Government by Unit of Local Government The Proposed Rule permits the use of IGTs derived from State or local taxes as the State share. The phrase “derived from State or local taxes” is not defined, but CMS implies in the preamble43 that “derived from State or local taxes” may include IGTs indirectly derived from permitted under the statute in section 1903(w)(6)(A) of the Act.” (84 Fed. Reg. at 63737) As noted herein, HHC disagrees with this position. 42 84 Fed. Reg. at 63776. 43 See 84 Fed. Reg. at 63738 stating “[t]he proposed provisions would make clear that allowable state general fund appropriations under §433.51(b)(1) are those made directly to the state or local Medicaid agency, and are differentiated from appropriations made to other units of government that otherwise may be tangentially involved in financing Medicaid payments through IGTs or CPEs.” (emphasis added) Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 22 State or local taxes, such as where a unit of local government uses local taxes to fund appropriations to another unit of local government, and such appropriation is then used for the IGT (the IGT is thereby clearly, if indirectly, “derived” from State or local taxes). However, the regulatory text does not expressly state this. Request: HHC requests CMS clarify in the regulatory text that IGTs may be directly or indirectly derived from State or local taxes, to incorporate the use of State or local appropriations. iii. Funds Derived from Other Funds As discussed in Appendix A, the Congressional intent is to allow IGTs to be derived from other units of local government sources, such as operational revenue. 44 However, the Proposed Rule severely restricts IGTs to funds derived from State or local taxes, requiring units of local government to use tax revenues rather than its own operational revenue. While HHC is statutorily authorized to levy taxes, there may be reason to choose not to request such tax funding, because there is adequate operational funding to cover its obligations. By limiting IGTs to funds derived from State or local taxes only, CMS is essentially requiring providers to unnecessarily utilize tax revenue, placing an enhanced and needless burden on taxpayers, when such burden is not otherwise required due to HHC’s prior good stewardship of public funds. In addition to thwarting Congressional intent, the proposed prohibition on this type of prudent financing contradicts CMS’ own statutory requirement that payments be consistent with efficiency and economy, as CMS is requiring payments to be financed in a less efficient and economic manner. Request: HHC requests CMS revise the Proposed Rule to permit IGTs to be derived from other funds of the unit of local government, including operational revenues of a government entity. B. Contradiction with NSGP Definition In the preamble to the Proposed Rule, CMS states its intent to link the provider category to the ability of the provider to supply the State share funds,45 suggesting that where a unit of local government has access to funds that may be used to fund the State share under proposed §433.51, such unit of local government will qualify as an NSGP and vice versa. However, the See H.R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1426 stating, in part, “a hospital district may transfer or certify to the State Medicaid agency a portion of its revenues, which may be collected by the district's facilities as payment for services rendered.” 45 See 84 Fed. Reg. at 63752, as well as the proposed CPE requirements at 42 CFR 433.51(b)(3) and 42 CFR 447.206. 44 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 23 types of funds that qualify a unit as an NSGP under proposed §447.286 versus the types of funds that may serve as the State share under proposed §433.51 appear inconsistent, raising the question of what types of funds may be used as the State share. For instance, the definition of NSGP includes a requirement that the unit of local government have access to and exercise administrative control over “state funds appropriated to it by the legislature or local tax revenue,”46 which implies that a State legislature may appropriate funds to a unit of local government. However, the proposed requirements for funds to serve as the State share appear to only recognize State General Fund dollars appropriated by the State legislature directly to the State or local Medicaid agencies.47 Where a unit of local government is not a local Medicaid agency, any appropriations by the legislature will appear to support the unit of local government’s NSGP status but may not be used to fund the State share under the current language of the Proposed Rule. HHC is concerned about this inconsistency. Request: HHC suggests CMS clarify that State General Funds appropriated by the State legislature to a unit of local government that is not a local Medicaid agency may be used as the State share. C. Proposed Rule versus Intended Policy The Proposed Rule adds new language at §433.51(d) stating “State funds that are provided as an intergovernmental transfer from a unit of government within a State that are contingent upon the receipt of funds by, or are actually replaced in the accounts of, the transferring unit of government from funds from unallowable sources, would be considered to be a provider-related donation that is non-bona fide under §§433.52 and 433.54.”48 Note, the term “unallowable source” is undefined in both the proposed regulation and the preamble, which may lend itself to abuse by future CMS administrations. The preamble states that this proposed language is intended to implement the preclusion under Section 6(A) on the use of IGTs, where the IGT is derived from a non-bona fide provider-related donation. However, the proposed language appears to be far more expansive that the cited statute, which only refers to funds derived by the unit of government from donations or taxes that will not otherwise be recognized as the non-federal share under §1903(w) of the Act49 and will likely have unintended consequences. The Proposed Rule states that where a unit of government provides an IGT, but then receives funds from an undefined “unallowable source,” such IGT may not be used as the State 84 Fed. Reg. at 63780. See 84 Fed. Reg. at 63776. (emphasis added) 48 84 Fed. Reg. at 63776. (emphasis added) 49 Section 6(A). 46 47 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 24 share. Neither the Proposed Rule nor preamble provides any context regarding (i) the source of the funds received, other than that they are from an undefined “unallowable source,” (ii) the amount of the funds received, such as whether they are equal to the amount of the IGT or are above or below fair market value, or (iii) whether a lack of intent will be considered when reviewing such receipt of funds. Without such context, the language, as currently drafted, suggests that when a unit of local government makes an IGT and then receives any amount of funding from any source, the IGT may not be used as the State share. In the most extreme case, this language could be interpreted to make an otherwise permissible IGT impermissible, such as (a) when a public hospital utilizes local tax funds for the IGT but then receives private pay patient revenues and places those revenues in the account from which the IGT is paid, or (b) when a public hospital hosts a fundraiser and receives donations from the community to support the public hospital’s operations. HHC believes that these examples were not CMS’ intended target with this proposed language at §433.51(d), nor consistent with the relevant statutory language, and therefore believes the proposed restrictions must be narrowed or eliminated. Request: HHC requests CMS reconsider this new language at §433.51(d) and whether it exceeds the underlying statutory language, as well as the potential for future abuse due to the lack of context and clarity in the regulatory language. II. Limitation on Health Care-Related Taxes (42 CFR 433.68) Indiana currently utilizes several health care-related taxes that, in part, fund various Medicaid programs in the State. Specifically, there are two (2) significant permissible provider tax programs in which HHC participates: (1) the nursing facility quality assessment fee (“QAF”) and (2) the hospital assessment fee (“HAF”). Both programs are statutorily authorized50 and operate pursuant to CMS waiver approvals. The Proposed Rule places new limitations on health care-related taxes through new regulatory interpretations related to the undue burden standard and the direct guarantee prohibition. HHC is very concerned that the vague and discretionary nature of the new standards for each jeopardize the continuation of these health care-related taxes and thus jeopardize the very programs that they support, including but not limited to the continuation of Indiana’s Medicaid expansion through the Healthy Indiana Program, which was developed and implemented under the leadership of then-governor Vice President, and is funded through the HAF. A. Lack of Clear Standard for Undue Burden Requirement (42 CFR 433.68(e)(3)) 50 See Ind. Code. 16-28-15 and 16-21-10. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 25 Currently, both the QAF and the HAF permit a carve-out of certain providers from the tax programs and assess different tax rates based on characteristics that do not and are not intended to relate to the Medicaid activity of the taxpayers. However, due to the vague nature of the Proposed Rule, it is unclear whether the QAF and the HAF will meet the requirements of the undue burden test as set forth in the Proposed Rule. Such lack of clarity makes it impossible for States to implement new provider tax programs or revise existing tax programs to comply with the Proposed Rule and thereby jeopardizes the numerous Medicaid programs funded by such provider taxes. In addition, such lack of clarity may result in States being required to continue operating Medicaid payment programs without the original funding source - provider taxes until such time as the statute or State plan can be amended to reflect applicable changes to the program and funding source. Request: As discussed in more detail below, HHC requests CMS provide (i) a clear standard for States to comply with regarding when there is an undue burden on health care items or services reimbursed by Medicaid and (ii) clarification that, when a taxpayer group is defined based on a primary commonality that does not relate to the taxpayer group’s Medicaid utilization, such tax will not be considered to impose an undue burden, simply because a second or third commonality in the taxpayer group happens to be that the group has lower Medicaid utilization or because the group’s Medicaid utilization may have changed. Related to this, HHC also requests CMS clarify how changes in Medicaid utilization over time will be addressed for purposes of CMS’ review of the tax. i. Lack of Standard For States requesting waivers of the broad-based tax requirement and/or uniform tax requirement for health care-related taxes, the Proposed Rule adds a requirement that the tax avoid imposing undue burden on health care items or services reimbursed by Medicaid. 51 While CMS sets forth three (3) circumstances or standards to be measured against for purposes of determining when a tax imposes an undue burden, CMS also provides a “catch-all” that allows CMS to determine a tax imposes an undue burden when “the tax excludes or imposes a lower tax rate on a taxpayer group defined based on any commonality that, considering the totality of the circumstances, CMS reasonably determines to be used as a proxy for the taxpayer group having no Medicaid activity or relatively lower Medicaid activity than any other taxpayer group.”52 This language is increasingly troubling, as it gives CMS boundary-free discretion to make a determination of whether a tax poses an undue burden, potentially on whether CMS likes the tax or the programs the tax is funding. CMS could seemingly find a commonality or relatively lower Medicaid activity in any tax involving a Medicaid provider as a taxed entity. 51 52 84 Fed. Reg. at 63778. 84 Fed. Reg. at 63778. (emphasis added) Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 26 ii. Consideration of Intent for Commonality While CMS is supposed to consider whether there is a commonality that CMS reasonably determines is a proxy for relatively lower Medicaid activity, the proposed “standard” does not at all consider whether it is a State’s intent to exclude or impose a lower tax rate on a taxpayer group, because such taxpayer group has no Medicaid activity or relatively lower Medicaid activity, or whether when the waiver was originally requested, the taxpayer group had Medicaid activity equal to other taxpayer groups and only over time did such taxpayer group’s Medicaid activity lower, leading CMS to potentially determine that such tax poses an undue burden. Oftentimes States will exclude a taxpayer group or impose a lower tax rate on a taxpayer group on a common characteristic of the group that does not primarily (or even secondarily) relate to - and is not intended to be based on - the group’s Medicaid utilization. However, with CMS’ discretion and lack of consideration of the State’s intent, under the Proposed Rule, CMS can find a commonality that each provider has “relatively lower Medicaid activity” and therefore that the tax imposes an undue burden. For example, frequently States will exclude continuing care retirement communities (“CCRCs”) or certain federal or State hospitals because of their unique nature or will impose differing tax rates based on total patient days (not Medicaid days) or level of uninsured care. At some level, these taxpayer groups could be deemed to be imposing no tax or a lower tax rate based on the group’s lower Medicaid activity at the time of the waiver or some later date, although that was not the State’s intent and the group’s Medicaid utilization may have changed. B. Broad and Unclear Standard for Direct Guarantee (42 CFR 433.68(f)(3)) The language added in the Proposed Rule regarding the direct guarantee is impermissibly overbroad and unclear. Request: HHC requests CMS remove the discretionary language and give States a clear standard to apply in developing new tax programs and ensuring their current tax programs are compliant. In addition, HHC requests CMS clarify that reimbursement to providers based on Medicaid utilization, where such reimbursement may be funded by a health care-related tax, does not constitute a direct guarantee and/or hold harmless arrangement. i. Lack of Standard When promulgating the initial regulations implementing the hold-harmless provision (including the direct and indirect guarantee language), then-HCFA took care to create clear rules following the language of the authorizing statute and expressly confirmed the need for specific standards to measure health care-related taxes against, stating: Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 27 [w]e believe that subjective analysis does not allow for a reasonable test of the hold harmless provisions. The use of subjective analysis would result in a lack of specific standards by which hold harmless could be measured. In addition, a subjective analysis would be administratively burdensome and virtually impossible to apply fairly throughout the nation.53 However, the language in the Proposed Rule describing when a direct guarantee exists for health care-related taxes provides exactly what then-HCFA was seeking to avoid – subjective analysis, extreme discretion to CMS, and anything but a specific standard (or indeed any standard) for CMS and States to assess any current or potential health care-related tax against for purposes of attempting to comply with the Proposed Rule. The use of the terms “totality of the circumstances,” “net effect,” and “reasonable expectation” provides an immense amount of discretion to CMS for purposes of interpreting and applying the requirement that ultimately and easily may be reversed by the next CMS administration, and that may result in inconsistent application of the proposed prohibition across States at any given time. The proposed language regarding what constitutes a direct guarantee and therefore hold harmless arrangement is anything but clear and consistent, as CMS suggests in the preamble, stating: […] allows states and CMS to work more harmoniously together by solidifying a shared understanding regarding what constitutes a guarantee to hold taxpayers harmless for the cost of a health care-related tax and reduces the likelihood of disagreement concerning the interpretation of the regulation. As such, the proposed amendment would allow states to operate their Medicaid financing programs with greater clarity and consistency than before.54 CMS seems to be oversimplifying the reaches and minimalizing the impact of this proposed prohibition. In practice, this broad and vague language will likely, whether intentionally or unintentionally, impact numerous health care-related tax programs. Indeed, with the change in the administration at CMS over the years, there is concern that the discretionary language may result in varying agency interpretations and therefore promote the exact opposite of the consistency of which CMS is hoping. In addition, unless CMS reviewers and auditors have clear standards, this vague language and unfettered discretion could – and likely will – have the effect of impermissibly differential treatment of States with substantially similar health care-related tax programs. As noted above, the only way to prevent such an outcome is for CMS to give its reviewers and auditors more 53 54 58 Fed. Reg. 43166, 43167 (Aug. 13, 1993). 84 Fed. Reg. at 63742. (emphasis added) Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 28 substantive, unambiguous guidance as to the elements of a health care-related tax program that will cause it to pass muster and the elements that will cause it to fail to do so. Such critical guidance must be developed and reflected in the Proposed Rule. Until such unambiguous standards are developed, the Proposed Rule is too ambiguous and will result in too many inconsistent determinations to be legally supportable. CMS suggests that the proposed change for the direct guarantee “represents a clarification of existing policy and would not impose any new obligations or place any new restrictions on states that do not currently exist.”55 However, again, due to the broad and vague language regarding the circumstances that CMS may, in its discretion, determine to be a direct guarantee, there is concern that this proposed language will in fact be a new obligation and restriction on States and their current health care-related tax programs. Regardless of this administration’s potential intent to simply clarify existing policy, the level of discretion in the Proposed Rule provides no such guarantee that current or future administrations will take the same interpretive approach as prior administrations. As such, the language is a broad departure from existing policy. Request: HHC urges clarification and a clear and consistent standard for determining when a direct guarantee exists, including by eliminating the use of “totality of the circumstances”. ii. Proposed Rule Potentially Eliminates Health Care-Related Taxes for Medicaid The language in the Proposed Rule suggesting that “any portion of the tax amount” being returned results in a direct guarantee is similarly unclear and discretionary. In fact, the language is so overbroad that it can be interpreted as disallowing any tax that supports any Medicaid program in which a taxed entity participates as a Medicaid provider under that program. For example, where a hospital pays $100 in otherwise permissible health care-related taxes, but then receives $1 in Medicaid reimbursement, entirely unrelated to the tax, CMS may interpret such reimbursement as a return of a portion of the tax amount. Such an interpretation – permissible and perhaps likely under the language of the Proposed Rule - would, in all practical effect, eliminate the use of any health care-related tax for purposes of funding Medicaid, as strictly speaking, any Medicaid participating provider would have a reasonable expectation that at least a portion of the taxed amount would be returned in the form of Medicaid standard reimbursement. Of particular concern is the permissibility of Indiana’s current HAF program under the new direct guarantee provision of the Proposed Rule. HHC supported the imposition of the HAF to fund the State share of Medicaid expansion in Indiana through HIP 2.0 under the leadership of 55 84 Fed. Reg. at 63742. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 29 then-governor Vice President Mike Pence. The hospitals in Indiana supported this tax knowing that Medicaid expansion would make significant strides in reducing the uninsured rate in the State. By providing a means for health care coverage, hospitals providing the tax arguably have a reasonable expectation that a portion of the tax expenditure would be returned to the hospital by means of Medicaid reimbursement and less unreimbursed costs from the uninsured. This example is far from any type of true “direct guarantee” or “hold harmless” arrangement; however, given the vague and discretionary language contained in the Proposed Rule, the language jeopardizes the continuation of this enormously beneficial (and clearly non-abusive) program, as well as any similar type of health care-related tax program that helps fund and support expanded access to Medicaid beneficiaries. Request: HHC specifically requests that CMS expressly clarify in the regulatory text that a direct guarantee does not exist simply by virtue of a taxed Medicaid-enrolled provider receiving utilization-based reimbursement in the normal course of business for the Medicaid program. III. Limitations on CPE (42 CFR 447.206) The Proposed Rule sets forth new requirements at §447.206 that payments funded by CPEs must meet.56 In Indiana, CPEs are used to support supplemental Medicaid payments to emergency transport services (911 ambulance services) owned and operated by public and private health systems, local tax supported fire departments and voluntary fire departments. The Proposed Rule would put a significant burden on public safety programs that rely on Medicaid funds to provide adequate 911 ambulance services. The significant additional requirements will make it increasingly difficult for fire departments, which often operate as the safety-net for rural communities, to earn the enhanced funds they use to support their services. A. Additional Requirements for Payments funded by CPE The new requirements on payments funded by CPEs appear to be overly prescriptive and confusing. For instance, the proposed regulation refers to “payments,” but the preamble recognizes that CPEs are not necessarily “payments” in the usual sense of the term and instead they are transactions which take the place of regular FFS payments, and that CMS refers “to payments generally to mean the total computable amount the provider receives for performing Medicaid services.”57 In addition, the Proposed Rule will require a State to implement processes by which all claims for medical assistance are processed through Medicaid management information systems 56 57 84 Fed. Reg. at 63776. 84 Fed. Reg. at 63744. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 30 (“MMIS”) in a manner that identifies the specific Medicaid services provided to specific enrollees.58 The intent of this provision is unclear as Section 6(A), the authorizing statute for CPEs, does not specify the need to link the CPE to a service provided to a specific enrollee. The requirement for processing through MMIS is similar to the definition of base payment, so it is not clear whether CMS is intending to require CPEs only be used for base payments and not supplemental payments; if so, such restriction is not authorized by law. The Proposed Rule also requires that if CPEs are used as a source of the non-federal share under the State plan, the State plan must include, as necessary, a list of the covered Medicaid services being furnished by each provider certifying a CPE.59 However, in the preamble, CMS states that in most settings where the provider certifies a CPE, this step is not necessary, since the services furnished by the provider certifying the CPE will be coextensive with a Medicaid benefit category.60 Therefore, it is not clear when the State plan will be required to set forth the specific Medicaid services, and when it will not. Request: HHC requests CMS clarify these CPE requirements to provide States a more clear and certain understanding of what standards must be met in order to fund a Medicaid expenditure with a CPE. B. Application of CPE to Administrative Expenditures The application of the CPE requirements to different kinds of expenditures, such as amounts expended for medical assistance under the State plan (“State Plan Expenditures”)61 versus amounts expended for the proper and efficient administration of the State plan (“Administrative Expenditures”),62 is also unclear. The proposed requirements at §447.206 state that “this section applies only to payments made to providers that are [SGP or NSGP …] where such payments to such providers are funded by a certified public expenditure, as specified in § 433.51(b)(3) of this chapter.”63 While the Proposed Rule switches between the terms provider, certifying entity, and certifying provider, it later clarifies they are one and the same, and the provider is the certifying entity64 – and under the definition of NSGP and SGP, such provider is a “health care provider.” The Proposed Rule then continues on to refer to actual, incurred costs of providing covered services to Medicaid 84 Fed. Reg. at 63779. 84 Fed. Reg. at 63779. 60 84 Fed. Reg. at 63746. 61 Under Soc. Sec. Act §1903(a)(1). 62 Under Soc. Sec. Act §1903(a)(7). 63 84 Fed. Reg. at 63779. 64 See 84 Fed. Reg. at 63779 stating “each provider certifying a [CPE].” 58 59 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 31 beneficiaries.65 While “covered services” is not defined, the preamble suggests that covered services are those Medicaid services authorized by §1903(a)(1) of the Act.66 Note, §1903(a)(1) of the Act authorizes FFP for amounts expended for State Plan Expenditures, whereas §1903(a)(7) of the Act authorizes FFP for amounts expended for Administrative Expenditures. This implies that the enhanced CPE requirements at §447.206 only apply where the CPE is made by a health care provider, and the CPE is for a payment for State Plan Expenditures.67 However, the proposed regulation at §433.51(b)(3) regarding State share of FFP does not so limit the CPE requirements to health care providers incurring State Plan Expenditures, as it states “State or local funds that may be considered as the State’s share are […] Certified Public Expenditures, which are certified by a unit of government within a State as representing expenditures eligible for FFP under this section, and which meet the requirements of § 447.206 of this chapter.”68 This language suggests not that the new requirements apply only where a CPE is for a payment for State Plan Expenditures, but rather that, going forward, the only permissible CPEs are those made by health care providers and used for State Plan Expenditures. This is inconsistent with the authorizing statute, Section 6(A), and current policy. CPEs are frequently utilized to fund Administrative Expenditures, with such services being provided by various entities, none of which are required to be “health care providers.” Such use of CPEs to fund Administrative Expenditures is supported by Section 6(A), which states that “the Secretary may not restrict States’ use of funds […] certified by units of government within a State as the non-Federal share of expenditures under this title […]”. Expenditures under Title XIX of the Act include State Plan Expenditures and Administrative Expenditures, among others.69 Therefore, CPEs are permitted to be used for both State Plan Expenditures and Administrative Expenditures. By incorporating the new requirements at §447.206 into all CPEs under the crossreference at §433.51(b)(3), the Proposed Rule is effectively eliminating the use of CPEs for Administrative Expenditures, such as outreach and intake services, as such CPEs do not utilize cost reports, do not directly relate to MMIS claims, are not necessarily made by health care providers, etc. HHC does not believe this was CMS’ intent, but is concerned that such elimination of CPEs for Administrative Expenditures may be an unintended by-product of the Proposed Rule. Request: HHC urges CMS to eliminate the cross-reference to §447.206 in §433.51(b)(3) and further clarify that the CPE requirements at §447.206 do not apply to Id. 84 Fed. Reg. at 63745. 67 Note, the term “covered services” is not defined. 68 84 Fed. Reg. at 63776. 69 See Soc. Sec. Act 1903(a)(1) – (7). 65 66 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 32 Administrative Expenditures and other authorized expenditures that are not incurred by health care providers for State Plan Expenditures. IV. Retention of Payment (42 CFR 447.207) The Proposed Rule adds §447.207(a) requiring payment methodologies to permit the provider to receive and retain the full amount of the total computable payment for services furnished under the approved State plan.70 The Proposed Rule continues on to describe “associated transactions” that the Secretary will examine to ensure that the State’s expenditures match and that the full amount of the non-federal share of the payment has been satisfied and provides examples of such “associated transactions,” focusing on instances where States retain an administrative or processing fee.71 While the latter portion of the rule focuses on State expenditures and State retention of a portion of the payment, due to the vague language in the first sentence of the Proposed Rule, it is not clear whether the intent of this rule, specifically the first sentence requiring retention of total computable payment, is to require providers to retain the total computable payment for services in all instances. HHC is concerned that the first sentence of this rule can be interpreted to require providers to retain the full amount of the payment and prohibit use of such payment for ordinary business expenses, capital outlays, investments, etc.72 Regardless of CMS’ current intent for the rule, without clarification in the regulatory text, the rule can be interpreted and applied by future CMS administrations to limit providers’ use of all Medicaid payments, beyond simply prohibiting the use of Medicaid payments to reimburse the State for administrative or processing fees. Such interpretation and application will impinge a provider’s ability to operate its business and make business decisions, even where such operation and use of payments is consistent with the three (3) pillars of Medicaid: efficiency, economy, and quality of care. In addition, while CMS has review and audit authority, such authority is limited to payments made under the Medicaid program. Under Section 1902(a)(32) of the Act, as cited by CMS, “no payment under the [state Medicaid] plan for any care or service provided to an individual shall be made to anyone other than such individual or the person or institution providing such care or service.” CMS does not, however, have authority over providers’ use of 84 Fed. Reg. at 63779. Id. 72 HHC notes that the preamble states “the use of Medicaid revenues to fund payments that are normal operating expenses of conducting business, such as payments related to taxes (including permissible healthcare-related taxes), fees, or business relationships with governments unrelated to Medicaid in which there is no connection to Medicaid payment would not be considered an associated transaction.” (84 Fed. Reg. at 63747). However, this is only stated in the preamble and not clarified in the regulatory text. 70 71 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 33 received Medicaid payments.73 CMS’ attempted regulation of providers’ use of received Medicaid payment proposed in §447.207 is beyond CMS’ authority. HHC would also like to remind CMS that while CMS adamantly states in the Proposed Rule that it has not moved forward with any similar approach to the 2007 Rule, by proposing the exact same language at §447.207 as in the 2007 Rule,74 it is doing just that. Indeed, HHC recommends CMS heed Congress’ express direction in the American Recovery and Reinvestment Act of 2009 that CMS not promulgate the provisions of the 2007 Rule, including the replicated §447.207, via the Proposed Rule.75 Request: HHC requests that CMS remove proposed §447.207. If CMS retains §447.207 in any final rule, HHC requests CMS clarify in the first sentence of the regulatory text at §447.207(a) that it is prohibiting States from requiring providers to pay State administrative fees or processing fees and not prohibiting providers from expending Medicaid funds for other purposes. V. Definition of NSGP (42 CFR 447.286) The Proposed Rule defines NSGP76 as a health care provider that is a unit of local government in the State that has access to and exercises administrative control over State funds appropriated to it by the legislature or local tax revenue, including the ability to dispense such funds.77 In making such a determination, CMS will again consider the “totality of the circumstances,” which will include but not be limited to six (6) elements relating to the sharing of ownership or operational responsibilities with other entities and three (3) elements relating to the character of a “relevant entity” (these nine (9) elements referred to herein as “NSGP Elements”). Note, the definition refers to both provider and entity, inconsistently, within the NSGP definition. HHC will use the term “entity” herein for purposes of consistency. See Englund v. Los Angeles County, 2006 U.S. Dist. LEXIS 82034, at *26 (E.D. Cal. 2006). When analyzing supplemental Medicaid funding paid to Los Angeles County, the Court noted “once the County received the [Medicaid] payment it was not limited to how it used the money” (citing testimony of Bruce Vladeck, Administrator of Health Care Financing Administration, 1993–1997). The Court also cited Vladeck’s statement, “[M]oney is fungible. Once it was paid to the hospitals, if it was paid for services that were actually being provided, at that point our [HCFA’s] sort of formal jurisdiction over it and interest of what became of the funds ended.” 74 See 72 Fed. Reg. at 29834 setting forth §447.207 – Retention of Payments 75 Congress legislated in the American Recovery and Reinvestment Act of 2009, Sec. 5003(d) (Pub.L. 111-5) that “it is the sense of Congress that the Secretary of Health and Human Services should not promulgate as final regulations… [the proposed regulation and purported final regulation setting forth cost limits for certain providers]”. 76 And SGP, in a similar fashion as the NSGP definition. The focus of HHC’s concern is with the NSGP definition, and therefore only NSGP is addressed here, with all discussion of NSGP likely also applying to the SGP definition. 77 84 Fed. Reg. at 63780. 73 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 34 HHC is established by statute as a local unit of the Marion County government, responsible for such tasks as administration of the public health department and the county’s local safety-net hospital. Despite this clear statutory history establishing HHC as both a unit of government with taxing authority and a hospital provider, under the Proposed Rule, even HHC may have difficulty in meeting the definition of an NSGP. The Proposed Rule is so narrowly defined that in effect the Proposed Rule may eliminate the category of NSGP altogether. Specific to the definition of NSGP, HHC has the following primary concerns, each of which is discussed in more detail below: • • • • • The Proposed Rule improperly limits the definition of a unit of local government. The Proposed Rule disrupts the federal-state partnership through its extreme limitation on a State’s use of local sources of funding for its Medicaid State share. In an attempt to end paper-only business arrangements, the Proposed Rule sets forth elements of shared responsibility that are so broad they challenge all forms of standard delegation and third-party contracting common throughout the entire health care industry. The Proposed Rule does not establish a process for CMS to make determinations of NSGP status following implementation of the Proposed Rule. The sections of the Proposed Rule defining NSGP are vague and at times contradictory with the statute definition of unit of local government and other sections of the Proposed Rule. A. Improper Limitation on Unit of Local Government CMS’ proposed definition of NSGP takes the statutory definition of “unit of local government”78 and imposes additional limitations not expressly permitted by the statute by creating a new term, “NSGP.” The definition focuses on tax revenue and how CMS perceives the entity’s relationship with other entities. HHC is concerned that CMS is not taking into account whether the State considers the entity to be a NSGP and all the various elements that may support an entity’s non-state governmental status and that CMS thereby is improperly narrowing the entities that may qualify as NSGP (and therefore eligible to provide IGTs and CPEs, as further discussed herein). By failing to take into account State determinations of its own units of local government and failing to recognize common characteristics of units of local government, the new narrow definition threatens to severely limit the application of, if not eliminate, the NSGP category. i. Fails to Take into Consideration States’ Determination of NonState Governmental Status 78 See Soc. Sec. Act 1903(w)(7)(G). Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 35 The proposed definition of NSGP does not give adequate consideration to whether the State within which the entity operates considers the entity to be a non-state governmental entity and therefore NSGP. Often, statutes will specifically provide whether an entity is a unit of local government or non-state governmental entity. For instance, Indiana law defines HHC as a “municipal corporation,” with the authority to levy taxes, adopt and enforce certain ordinances, enforce Indiana laws, rules, and ordinances, and use levied taxes or other funds to make IGTs to the State to fund governmental health care programs.79 The statutory designation and the various powers HHC is authorized to carry out support that HHC is a governmental entity. While the Proposed Rule suggests that it will consider States’ characterization of the entity when considering the “totality of the circumstances,” by considering whether the State characterizes the entity as a “unit of non-State government” solely for the purposes of Medicaid financing and payments, and not for other purposes (for example, taxation), such consideration appears to be illusory. CMS’ reservation of the ability to consider the NSGP Elements, as well as other elements not identified in the Proposed Rule, in making CMS’ determination, effectively eliminates any deference to the State’s categorization and will drive inconsistency by allowing CMS to determine an entity to not be an NSGP, where the entity is statutorily defined as a nonstate governmental entity. Whether a State considers an entity to be a unit of local government should be of primary significance in CMS’ determination of whether the entity is an NSGP, to perpetuate the consistency for which CMS seems to be striving. ii. Additional Attributes that Support Non-State Governmental Status In addition to how a State categorizes the entity, there are numerous other attributes that can and often do support that an entity is a non-state governmental entity, beyond just receipt of tax revenue or how the entity delegates responsibilities for its daily operations, such as: • • • • • • 79 An entity receives appropriations, tax subsidies or other public subsidies from the public, including from other units of local government (ex: county nursing facility receiving appropriations from a county). An entity is subject to audit by the state board of accounts. An entity is subject to the State’s access to public records law. An entity is subject to a State tort claims statute. An entity’s staff is eligible to participate in the Public Employees’ Retirement Fund. An entity exercises executive, administrative, judicial or legislative power of the State or a delegated local governmental power. Ind. Code §§16-22-8-34(a)(1), (3), (9), (23). Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 36 • • • • • • • • • An entity is governed by a unit of local government (ex: the county executive appoints the entity’s board). An entity is subject to a budget review by the department of local government finance or the governing body of a unit of local government. Upon the sale of an entity’s real property, the respective unit of local government must execute a deed of conveyance to the purchaser. An entity cannot be dissolved or sold without a resolution of the unit of local government, and the proceeds from such a sale are controlled by the unit of local government. An entity’s assets cannot be transferred without a resolution of the unit of local government, and the proceeds from such a transfer are controlled by the unit of local government. An entity has the power of eminent domain. An entity requires a referendum to pursue debt. An entity is excluded from state bankruptcy laws. A unit of local government is responsible for known and unknown liabilities arising from operations of the entity. Each of these attributes, individually, supports an entity’s status as a legally recognized unit of local government. When these functioning units of local government are also coupled with the entity’s status as a health care provider, these factors alone should support the entity’s status as an NSGP. However, CMS does not propose to consider these attributes in its determination of whether an entity is an NSGP and, indeed, CMS has the discretion under the Proposed Rule to disregard all of them. iii. Existing Standard for Unit of Local Government Congress already defined “unit of local government” in statute.80 If Congress desired to define a “unit of local government” based upon the entity’s access to taxes, it would have. However, Congress did not. Rather, the statute defines a unit of local government as “a city, county, special purpose district, or other governmental unit in the State.”81 An entity’s status as a “unit of local government” under the statutory definition, along with the entity’s status as a health care provider, should qualify the entity as an NSGP, without regard to tax revenues or the entity’s perceived relationship with other parties. Because CMS expressed its intent to link the provider category, NSGP, to the ability of the provider to supply the non-federal share of funds82 and its desire for the proposed definition See Soc. Sec. Act 1903(w)(7)(G). Soc. Sec. Act 1903(w)(7)(G). 82 See 84 Fed. Reg. at 63752 and the CPE requirements at §§433.51(b)(3) and 447.206. 80 81 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 37 of NSGP to “work together with the UPL rules and the provisions governing non-federal share financing,”83 the statutory definition of “unit of local government” that applies to subsection §1903(w) of the Act, addressing the non-federal share of funds, also applies to the definition of NSGP, and anything more limiting, such as the requirement that the entity have access to, exercise administrative control over, and have the ability to dispense tax revenue, or that the entity not delegate any of the day-to-day decision making to another entity, is contradictory to the statute. iv. Requested Changes to Definition of NSGP Request: HHC requests CMS eliminate the definition of NSGP or revise to rely on the entity’s status of being a unit of local government, as defined in statute and as designated by State law, and a health care provider. To the extent CMS desires to take into consideration other characteristics, HHC recommends CMS consider all of the characteristics that a State may consider when making the determination of whether an entity is governmental and not just tax revenue or how CMS perceives the entity’s relationships with other entities, and where State law specifically designates a provider as a non-state governmental entity, CMS defer to such designation rather than making a contrary determination based on what CMS rationalizes as the “totality of the circumstances.” B. State Participation and Flexibility While CMS emphasizes the need for State participation when discussing concerns over States manipulating the UPL calculation and funding of supplemental payments with IGT,84 CMS eliminates States’ participation by eradicating States’ ability to make the determination of whether the State’s unit of local government qualifies as an NSGP. CMS calls for State participation, via cost, but ignores the value of participation via other mechanisms such as administration, determinations, and oversight. “Participation” cannot and should not be solely measured in dollars, and to exclusively focus on States’ participation in cost is ignoring that States better understand the State-specific organizational and programmatic structure and therefore are in a better position to administer States’ Medicaid programs and make decisions regarding the same. This contradiction similarly arises in CMS’ emphasis on preserving States’ flexibility in the Proposed Rule, while simultaneously eliminating such flexibility with CMS’, rather than States’, determination of whether a State’s unit of local government is an NSGP. 83 84 84 Fed. Reg. at 63753. 84 Fed. Reg. at 63750, 63752. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 38 Request: HHC requests CMS continue to support State participation in the Medicaid program by relying on States to administer and make determinations related to the Medicaid program, rather than only permitting States to participate in the cost of the Medicaid program. C. Permissibility of Sharing of Responsibilities Health care providers play one of the most important roles in their patients’ lives, such role which is most effectively and efficiently carried out through partnership, collaboration, and delegation of areas to those with certain expertise. The proposed definition of NSGP states that CMS will consider the totality of the circumstances, including but not limited to the nine (9) NSGP Elements.85 Each of the NSGP Elements arguably can be, and frequently is, delegated by entities to other entities, such as managers, in a way that allows the manager to run the day-to-day operations and make on-the-spot decisions, while remaining accountable to the entity that is provider, operator, and licensee. This is typical in all forms of health care and non-health care business, at the entity and personnel level. For example, a chief executive officer (“CEO”) is typically responsible for an entire entity, but because the CEO has limited time and areas of expertise, the CEO often delegates individual responsibilities and daily activities to other individuals. Such individuals and actions are subject to the CEO’s oversight, and certain decisions or purchases above a threshold require the CEO’s authorization. The CEO is still responsible and accountable for all of the responsibilities the CEO delegates but is freed up to focus on the overall operations of the company rather than being consumed with details and other areas outside the CEO’s expertise. Just because the CEO delegates certain functions to other individuals does not invalidate the CEO’s title or ultimate responsibility. Rather, such delegation is standard practice. The same occurs at the provider level. Just because an entity delegates certain services to another entity that has better expertise in providing certain management services or targeted patient care services, or delegates such functions for other legal and business purposes, does not invalidate the entity’s provider status. HHC is concerned that by applying the NSGP Elements, CMS will be interfering with standard business practice of healthcare entities, specifically standard delegation and contracting practices, that reach far beyond the “non-legitimate business interests” CMS is attempting to limit. Further, CMS is creating further burdens on providers by requiring entities to operate in accordance with a standard that is not clearly set forth (as once again, the Proposed Rule dispenses with clear standards in favor of a vague and amorphous “totality of the circumstances” test) and is not statutorily authorized. Because each of the NSGP Elements is subject to various interpretation and application based on the provider type and organization and the current CMS administration’s agenda or view of any Medicaid programs in which the entity is participating, 85 84 Fed. Reg. at 63780, 63781. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 39 and because the NSGP Elements form only part of the “totality of circumstances,” the entity may be required to constantly reorganize its business and contracting practices to meet the current administration’s interpretation of the NSGP Elements, and even that may not be sufficient to meet CMS’ vague and arbitrary (and potentially ever-shifting) “totality of circumstances” test. In addition to its concern related the breadth of CMS’ discretion in the totality of the circumstance review, as well as the general vagueness of the Proposed Rule, HHC has several additional concerns related to the specific NSGP Elements comprising CMS’ evaluation of an entity’s shared responsibilities of ownership or operation, including but not limited to the elements of immediate authority for decisions regarding the operation, immediate authority for disposition of revenue, immediate authority with regard to personnel issues, legal responsibility for the entity, and the various characterizations of the entity. Each is discussed in more detail below. i. Concerns with Immediate Authority for Decisions and Revenue The question of whether the entity has immediate authority for making decisions regarding the operation of the provider and for the disposition of revenue from operations of the provider is both vague and irrelevant. The phrase “immediate authority” is subject to numerous interpretations. Indeed, a manager or other service contractor may have the immediate authority to make decisions about food purchases and minor maintenance services, but the immediate authority to make decisions about capital improvements over a certain threshold or make other system-wide financial decisions remains with the operator. Similarly, the licensed operator may have authority and responsibility for approval of annual budgets, but as is common, a manager may then have the “immediate authority” to make day-to-day operational decisions, including spending decisions, within the constraints of the operator-approved budget. Such delegation of day-to-day decisions has no impact on the governmental status of the provider, rather such delegation is part of standard business practices governed by the contract. In addition, the manager/contractor’s decisions and actions may still be subject to the provider’s oversight and ultimate financial and legal liability. Thus, this element within the Proposed Rule does not expressly take into consideration which entity has ultimate authority and liability for the decisions, instead relying on vague terms that are subject to CMS’ unfettered discretion. ii. Concerns with Immediate Authority for Personnel The consideration of whether an entity has immediate authority with regard to hiring, retention, payment, and dismissal of personnel performing functions related to the operation of the provider is similarly vague and may be contradictory to standard business practices of operating health care facilities. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 40 Without clarification, this element may be interpreted as requiring the provider to directly employ all of the provider’s staff, which is not necessarily common practice within the health care industry – health care providers often rely on third-party contracting rather than direct employment. Oftentimes nursing facilities will utilize an agency to supply nurses or a hospital will contract with a physician group to supply specialty physicians. In these cases, the nursing facility or hospital retains overall authority and responsibility, both to patients and regulators, regarding such personnel, their actions and their performance. However, it is the contracted entity directly employing the nurses or physicians that has the most immediate authority regarding personnel matters, including typically some (and perhaps substantial) discretion regarding hiring and firing. In addition, even if a provider directly employs service staff, the provider may delegate personnel duties to a manager, in which case the manager may have immediate authority to make point-in-time decisions about certain personnel, but such authority is subject to input from the operator, as well as advanced approval by the operator when such decisions relate to key personnel such as CEOs, administrators, etc. Under potential CMS interpretation, this vague element regarding immediate authority for personnel decisions could jeopardize nearly all providers categorized as NSGPs, due to the provider utilizing standard service and management contracts commonly relied on by the entire health care provider industry regardless of the specific sector. In addition, the phrase “personnel performing functions related to the operation of the provider” is overly expansive and could include numerous individuals that are “related” to the provider but do not actually provide services in furtherance of the provider’s mission – requiring the provider to have “immediate authority” for a massive number of individuals (such as accountants who work for contractor accounting firms that prepare the provider’s annual audit, or personnel that work for a provider’s linen and laundry service contactor, to provide just two of numerous examples). iii. Concerns with Responsibility The language regarding bearing legal responsibility and responsibility for payment of taxes and insurance premiums similarly raises the issue of what it means to “bear responsibility” for paying versus “bear responsibility” for non-payment. For example, a provider may delegate payment of taxes or insurance premiums to a manager or billing agent, and therefore, the manager/agent “bears the responsibility of payment,” but only in the sense of making the payment. In such a case, the payment may be made using the provider’s funds, and the provider may continue to be the entity that is responsible and liable if the manager/agent to which the provider delegated the payment function to fails to pay. However, this element does not appear to take into account whether the provider will be responsible for any past due amounts and will be liable in the case a penalty is assessed for such non-payment. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 41 Finally, oftentimes the provider is separate from the land owner for liability purposes, and therefore, it will be appropriate for the land owner to pay real estate taxes, rather than the provider. However, this element does not appear to take into consideration this standard business practice. iv. Concerns with Consistent External Communications CMS proposes that one of the NSGP Elements is whether the entity “[i]s described in its communications to other entities as a unit of non-State government, or otherwise.”86 It is unclear what communications CMS will consider and whether there is a threshold that CMS will apply. For example, if an entity that operates as a hospital is statutorily designated as a non-state governmental entity, and all of the hospital’s websites and marketing materials reflect the hospital as a non-state governmental entity, but one small brochure or one entry-level employee improperly reflects the hospital as a private corporation, it is unclear whether that will result in a determination by CMS that the communication element is not met, and therefore, the entity is not an NSGP. Moreover, this element does not appear to take into account whether it is appropriate or customary to mention, in a particular communication, the governmental or non-governmental status of a facility or entity. To give just one obvious example, most television, radio and social media advertisements for health care providers do not mention whether they are governmental, non-governmental, or even whether they are for-profit or non-profit, although such advertisements do often mention something much more relevant to patients: whether a facility will provide care to patients regardless of the patient’s ability to pay. It would be truly bizarre – and would leave viewers scratching their heads – if an advertisement said something to the effect of: “Get compassionate care at ACME skilled nursing facility, a unit of non-State government.” v. Concerns with Consistent Governmental Status Characterization as Non-State Further, CMS proposes that one of the NSGP Elements is whether the entity is characterized as a “unit of non-State government” by the State solely for the purposes of Medicaid financing and payments and not for other purposes (for example, taxation).87 This suggests that CMS is also striving for consistency among State classifications of non-state governmental status. However, CMS’ discretion and consideration of the “totality of the circumstances” as set forth in the Proposed Rule will result in the exact opposite, inconsistency. Even where State statute designates an entity as a non-state governmental entity for every single purpose and power (ex: tax, audit, executive powers, Medicaid financing, etc.), if the entity 86 87 84 Fed. Reg. at 63781. 84 Fed. Reg. at 63781. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 42 delegates any “immediate authority” or “legal responsibility,” as CMS interprets and applies those terms, or if the entity fails to meet any of the other elements or fails in some other, unspecified way to meet the totality of circumstances test, CMS may determine the entity to not be an NSGP. Upon such determination, the entity will not be an NSGP for Medicaid financing and payments but will be a non-state governmental entity for every other purpose resulting in the exact inconsistency CMS claims to be striving to eradicate. vi. Requested Changes Related to the NSGP Elements While CMS is clearly attempting to attack paper-only arrangements, the NSGP Elements demonstrate a lack of understanding for standard, legitimate business practices, as the NSGP Elements (i) are vague, (ii) raise questions about how CMS will interpret and apply them to each individual entity and provider type and whether there is a threshold that CMS will apply (ex: meet five (5) of the nine (9) NSGP Elements), (iii) appear to be in contradiction with standard business practices, and (iv) look at micro-decision making rather than overall authority, responsibility, and liability. These elements and their application to each entity will require an in-depth understanding of each provider’s organization, beyond simply reviewing contracts. In addition, these elements may be subject to varying interpretation upon changes in CMS’ administration, potentially requiring providers to be in a constant state of change and reorganization to meet the current administration’s interpretation and standards. Further, as noted, the vague nature of both the elements themselves and the “totality of the circumstances” test means (a) that providers can never be sure if an arrangement will pass muster under the test; and (b) that CMS may, and likely will, interpret its requirements inconsistently, depending on the individual(s) conducting the CMS review in a particular instance, resulting in similarly situated arrangements being approved in one instance an dis-approved in another. Request: HHC requests CMS remove these NSGP Elements and focus on the entity’s status as a health care provider and unit of local government, deferring to States in their determination of whether an entity is an NSGP, thereby promoting consistency and ease of administration. If CMS retains its determination process, HHC requests that CMS refine and expand the elements that support the non-governmental nature of the entity and the overall liability of the provider; for example, whether the entity is ultimately liable for any corporate integrity agreement, whether the entity has final approval of budgets, policies and compliance plans, whether survey citations are the responsibility of the entity, whether the entity has ultimate responsibility to the patient for the care provided, etc., rather than simply the delegation of day-to-day decisions. HHC also requests the “totality of the circumstances” test be removed in favor of well-articulated requirements and clear standards. D. Process for Reviewing and Approving NSGPs Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 43 The Proposed Rule states that “[i]n determining whether an entity is a non-State government provider, CMS will consider […]” and “[i]n determining whether a relevant entity is a unit of a non-State government, we would consider […].88 As further discussed above, these statements imply that it is CMS that will make the determination of whether an entity is an NSGP. However, the Proposed Rule does not set out a process or timeframe for CMS’ initial determination of whether an entity is an NSGP nor a dispute process related to such determination. Request: For purposes of efficiency, HHC requests that CMS eliminate its determination process for NSGP, instead relying on the entity’s status as a health care provider and unit of local government, as determined by the State. If CMS retains its separate determination process, HHC requests that CMS clarify (i) the initial determination process, (ii) how the review and determination process will be implemented, and (iii) the dispute process that will apply to such determinations. Further, pursuant to the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et seq.), CMS should include an analysis of the collection of information required pursuant to such CMS determinations of NSGP (and SGP and private) status. i. Initial Determination Regarding the initial determination process, it is unclear when CMS will make the determination – at the time a new provider enrolls in the Medicaid program,89 at the time the State submits a SPA authorizing base or supplemental payments to the provider,90 at the time the State submits its UPL demonstration, or some other time. ii. Determination Process It is unclear what the determination process will entail. To fully understand and make an informed and accurate determination regarding each entity’s category based on the “totality of the circumstances” regarding the entity’s relationships and the “legal responsibility” or “immediate authority” for certain tasks, CMS will have to obtain an in-depth and detailed understanding of the entity’s business and operations. Such understanding may be obtained only 84 Fed. Reg. at 63780-63781. Procedurally, this would be difficult to implement, since the Medicaid provider enrollment process is separate from the Medicare enrollment process and does not necessarily incorporate a federal review element. 90 Which would suggest that, for State plans authorizing supplemental payments, States have a two (2) or three (3) year transition period to obtain CMS’ determination of every providers’ status, since current State plans authorizing supplemental payments will expire after two (2) or three (3) years under the Proposed Rule. In addition, the NSGP definition applies to all FFS payments and will require CMS to determine NSGP status for all providers, regardless of whether they receive base payments and/or supplemental payments. 88 89 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 44 through a lengthy review process, where the entity has an opportunity to educate CMS on the provider’s organizational structure. To simply review copies of service contracts without a full understanding of operational context, will in no way provide CMS with the “totality of the circumstances” upon which to base its determination. The ability to correspond directly with the provider seems critical. However, it is unclear whether CMS will correspond directly with the entity or simply limit correspondence with the State for all information requests and questions for its determinations – raising concern not only about effectiveness, but also about undue burden on the States.91 iii. Dispute Process Once CMS makes its determination, it is similarly unclear how such determination will be communicated and, to the extent the determination can be disputed (as must be permitted in order for the determinations to be lawful), whether such dispute must be conducted by the entity or the State.92 E. Inconsistent and Confusing Language i. Dispense versus Expend The Proposed Rule defines a NSGP by referring, in part, to whether the health care provider “has access to and exercises administrative control over State funds appropriated to it by the legislature or local tax revenue, including the ability to dispense such funds.”93 In addition, the Proposed Rule states that CMS will (once again) consider the totality of the circumstances to determine whether a relevant entity is a unit of a non-state government by considering whether the entity “[h]as access to and exercises administrative control over State funds appropriated to it by the legislature and/ or local tax revenue, including the ability to 91If CMS directs questions and information requests to the State, rather than the entity, the State will be required to request documentation and information from each individual entity and return it to CMS -- such process will be unduly burdensome on the already limited State resources. In addition, it is not proper, efficient or economical as required by §§1902(a)(30)(A) and 1902(a)(4) of the Act, requirements that CMS continues to emphasize throughout the preamble of the Proposed Rule. 92 Again, if the State is responsible for disputing any NSGP determinations on behalf of the providers, it will be unduly burdensome on the already limited State resources. 93 84 Fed. Reg. at 63780. (emphasis added) Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 45 expend such appropriated or tax revenue funds, based on its characterization as a governmental entity.”94 These two provisions within the definition of NSGP use inconsistent language. The first provision refers to the ability to dispense funds, whereas the second refers to the ability to expend funds. Dispense and expend are two entirely different terms with different meanings. While an exact meaning of what is intended by the terms “dispense” and “expend” is not clarified in the text of the Proposed Rule, the Webster’s definition of the word “dispense” means “to divide and share out according to a plan, to deal out in portions, administer,” and the definition of the word “expend” is “to pay out.”95 These terms are not interchangeable, and the utilization of both terms within the same rule causes inconsistency and confusion. ii. Relevant Entity and Unit of A Non-State Government When describing CMS’ review of the totality of the circumstances, CMS states “[i]n determining whether a relevant entity is a unit of a non-State government […]”96 This phrase is problematic for two reasons: (i) use of the undefined term “relevant entity;” and (ii) use of the phrase “unit of a non-State government.” The proposed regulation does not define relevant entity. Although the preamble indicates that “relevant entity” is “the provider and any entity or entities other than the provider that share responsibilities of ownership or operation of the provider,”97 this is not defined in the regulatory text. In addition, the regulation refers to a determination of whether such relevant entity is a “unit of a non-State government,” which is also undefined and inconsistent with other language in the regulation, such as the phrase “unit of local government.” Request: HHC requests CMS (i) review and respond to these instances of inconsistent and confusing language (as well as review the regulation as a whole for other areas of inconsistency and confusion), and (ii) make revisions to the regulatory text necessary to eliminate confusion or inconsistent application and interpretation by CMS administrations, States, and providers. VI. Definition of Base Payment (42 CFR 447.286) A. Circular Definition of Base Payment and Supplemental Payment 84 Fed. Reg. at 63781. (emphasis added) Webster’s online dictionary at https://www.merriam-webster.com/dictionary. 96 84 Fed. Reg. at 63781. 97 84 Fed. Reg. at 63752. 94 95 See Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 46 The Proposed Rule defines base payment, in part, as “a payment, other than a supplemental payment […].”98 However, the preamble then states that “supplemental payments are any payments to a provider other than [b]ase payments or DSH payments.”99 This circular definition results in a never-ending analysis of whether a payment is a base payment or a supplemental payment. Request: HHC requests CMS clarify when a payment is a base payment versus a supplemental payment, without reference to each other. B. Clarity Regarding Provider-Specific Payments When defining base payment, the rule includes payment adjustments, add-ons or other additional payments received by the provider that can be attributed to a particular service provided to the beneficiary, such as payment adjustments made to account for a higher level of care or complexity of services provided to the beneficiary.100 However, the preamble implies that not only will payment adjustments for patient acuity or complexity of services be included in base payments, so can payments based on “characteristics of the provider.”101 In order to promote consistency between the intent set forth in the preamble and the regulatory text, and reduce confusion, provider-specific payments should be included in the regulatory text for the definition of base payment. In addition, the preamble currently contradicts itself regarding whether payments to providers based on patient acuity, complexity of services, and characteristics of the provider, or add-on payments for quality of services, are required to be available to all providers within the Medicaid benefit category stating the following regarding base payments: When states pay providers based on patient acuity, complexity of services, characteristics of the provider, or add-on payments, including but not limited to add-on payments for quality of services, such payments can be directly tied to the provision of a service to an individual Medicaid beneficiary and are available to all providers within the Medicaid benefit category.102 To allow a State to make a base payment based on the characteristics of the provider, yet then require the payment to be available to all providers, is contradictory and not supported by the regulatory text. Indeed, in another area of the preamble, CMS suggests that payments that 84 Fed. Reg. at 63780. 84 Fed. Reg. at 63753. 100 84 Fed. Reg. at 63780. 101 84 Fed. Reg. at 63751. 102 84 Fed. Reg. at 63751. (emphasis added) 98 99 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 47 “target certain providers” are supplemental payments,103 which similarly contradicts the above preamble language stating the base payments can be paid based on the characteristics of the provider. Request: HHC requests CMS clarify explicitly in the regulatory text that base payments may include payments based on the characteristics of the provider, without requiring that such payment be made available to all providers. VII. Definition of Supplemental Payment (42 CFR 447.286) The Proposed Rule defines supplemental payment as “[a] Medicaid payment to a provider that is in addition to the base payments to the provider […].”104 As noted above, the regulatory text and preamble text provide a circular definition of base payment and supplemental payment resulting in a never-ending analysis of whether a payment is a base payment or a supplemental payment. Within this broad and circular definition, there are a variety of program structures that may be implicated within the definition of a supplemental payment as currently defined under the Proposed Rule. Request: First, as detailed below, HHC seeks clarification that a lump sum payment in program structures where the lump sum payment is patient specific, are not automatically supplemental payments, simply because the administration of the payment is via lump sum. In addition, HHC seeks clarification on the treatment of the following payments under the Proposed Rule’s definition of supplemental payments: (i) FQHC wrap-payments; (ii) managed care payments; and (iii) GME payments. A. Clarity on Lump Sum Format, Including Ability for Lump Sums to be Patient Specific The proposed definition of supplemental payment states they “are often made to the provider in a lump sum,”105 whereas the preamble states that “[s]upplemental payments are lump 84 Fed. Reg. at 63764. 84 Fed. Reg. at 63781. 105 84 Fed. Reg. at 63781. (emphasis added) 103 104 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 48 sum payments made to the provider.”106 Whether supplemental payments “are often made” in a lump sum versus “are made” in a lump sum entirely changes the analysis of whether a payment constitutes a base payment versus a supplemental payment, and such lack of clarity results in confusion. The definition of supplemental payment seems to imply that just because a payment is made on a lump sum basis means that the payment cannot be directly linked to a provider claim for specific services provided to an individual Medicaid beneficiary. This is simply inaccurate. Oftentimes the decision of whether to make a service-specific payment on a claims basis versus a lump sum basis is a function of which method is more accurate and less burdensome on the payor and provider, as well as which method gives the State and the providers the most transparency. Many payments that are tied to a specific Medicaid service and use the Medicaid Statistical Information System (MSIS) as a source of the calculation, may ultimately be paid on a lump sum basis, as that allows a more efficient and accurate reconciliation and verification process (as opposed to a claims-based system that may pay claims inaccurately and then require subsequent dispute resolution and reprocessing to fix the payments, which are often cumbersome and time-consuming processes). Indeed, while a claim does set forth the total claim payment amount, the claim often times does not clearly reflect each adjustment or add-on included within the claim payment. This lack of transparency for a claim payment makes it difficult for providers to track whether the claim payment accurately includes all applicable adjustments or add-ons. Such lack of transparency for the provider is often remedied by making the payment as a lump sum, calculated using data and methods that can be reconciled by both the State and the provider. These operational strategies support CMS’ goal of transparency and should be supported in the Proposed Rule. As the Medicaid program moves from FFS to more value-based and innovative payment models, States need flexibility in payment structures. In fact, CMS recognized this fact in a November 2018 Medicaid managed care proposed rule (which has yet to be finalized), which proposed to lift the restriction on State direction of the amount or frequency of managed care payments to providers, stating in the preamble: “We believe that these innovative payment models necessitate acknowledging the complexity and variation in local market forces and that states need more flexible parameters. . .”107 With this proposed change, CMS seems to acknowledge that the payment frequency and detailed mechanics of the payments are less important that the substance of the payment. Whether or not a payment is made on a lump sum basis is not indicative of whether the payment is or is not attributed to a particular provider claim for specific services, and therefore 106 107 84 Fed. Reg. at 63753. 83 Fed. Reg. at 57271 (Nov. 14, 2018). Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 49 the determination of whether a payment is a base payment or a supplemental payment should be based on a review of how the payment is calculated and whether the calculation dives down to a beneficiary and/or service level, rather than the form of the payment. This approach would also be consistent with the approach taken in the proposed Medicaid managed care rule, which states in the preamble that “supplemental payments are not calculated or paid based on the number of services rendered, and therefore, are separate and distinct from State plan approved rates under this proposed rule.”108 Request: HHC requests CMS take a similar approach to the proposed Medicaid managed care rule and eliminate references to the technical mechanics for payment (i.e., lump sum), and instead, narrow the definition to payments not otherwise tied to patient specific services rendered. This would preserve State flexibility to innovate payment models in the most efficient and economical way possible. B. Application of Supplemental Payment Definition to FQHC Wrap Payments i. Classification of Wrap Payments Federal law requires, for services furnished by FQHCs pursuant to a managed care contract, State plans to provide for payment to an FQHC of a supplemental payment equal to the amount by which encounter rate that will be paid for FFS exceeds the amount paid pursuant to the managed care contract (referred to herein as “Wrap Payment”). 109 Federal law requires the Wrap Payment be paid pursuant to a payment schedule agreed to by the State and FQHC, but in no case less frequently than every four (4) months.110 As required by federal law, Indiana’s Wrap Payments are authorized by the Medicaid State Plan to be paid no less frequently than every four (4) months.111 While Wrap Payments are calculated using particular provider claims for specific services provided to an individual beneficiary, they are made on a quarterly lump sum basis under State plan authority. Therefore, due to the lack of clarity in the definition of supplemental payment, it is not clear whether Wrap Payments will be considered base payments or supplemental payments. HHC is concerned that without further clarity, CMS will consider Wrap Payments to be supplemental payments, thereby requiring Wrap Payments to comply with the enhanced approval requirements and renewal process for State plans authorizing supplemental payments proposed at §447.302 and the enhanced provider-specific quarterly and annual reporting requirements proposed at §447.288. 83 Fed. Reg. at 57270 (Nov. 14, 2018). Soc. Sec. Act 1902(bb)(5)(A). 110 Soc. Sec. Act 1902(bb)(5)(B). 111 See Indiana Medicaid State Plan Attachment 4.19-B, Page 3d.1. 108 109 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 50 To require Wrap Payments, which are statutorily required to be paid, to go through a triannual renewal process and require States to submit a monitoring plan and evaluation of the impact of the Wrap Payments on the Medicaid program, in addition to the other requirements proposed at §447.302 and §447.288, will be unnecessary and administratively burdensome. Indeed, the statutory authority for Wrap Payments only requires a State plan to provide for a Wrap Payment in the amount and frequency set forth in the statute 112 and does not set forth any additional requirements with which States must comply in order to make the Wrap Payments. For CMS to require State plans authorizing Wrap Payments to comply with the enhanced State plan approval and renewal requirements proposed at §447.302 and reporting requirements at §447.288 is beyond CMS’ statutory authority and directly contradicts the statutory requirements for Wrap Payments – not to mention that these administrative burdens may chill the use of Wrap Payments to the detriment of FQHCs and the vulnerable populations they serve. Request: HHC requests CMS clarify that it does not intend to include Wrap Payments within the definition of supplemental payments. ii. Request to Explicitly Carve-Out FQHC Wrap Payments The Proposed Rule clarifies that while a supplemental payment is a “Medicaid payment to a provider that is in addition to the base payments to the provider,” a DSH payment is not considered a supplemental payment.113 In the preamble, CMS explains the reasoning for carving out DSH, as they are “distinct payments authorized separately in the statute in section 1923 of the Act which are separate from Medicaid supplemental payments.” CMS continues on to state: Supplemental payments and DSH payments are paid under separate authorities in the Act. Supplemental payments are authorized in section 1902(a)(30)(A) of the Act, which requires that the state plan provide methods and procedures to assure that payments are consistent with efficiency, economy, and quality of care and DSH payments are authorized in section 1923 of the Act. Therefore, supplemental payments and DSH payments are not required to be tied to the same statutory purpose.114 As noted above, Wrap Payments, like DSH payments, are authorized separately in the statute. Wrap Payments are authorized at §1902(bb)(5) of the Act, whereas, according to the Proposed Rule, Medicaid supplemental payments are authorized at §1902(a)(30)(A). Therefore, See Soc. Sec. Act 1902(bb)(5). 84 Fed. Reg. at 63781. 114 84 Fed. Reg. at 63781. 112 113 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 51 similar to DSH payments, Wrap Payments should be carved out from the definition of supplemental payments. Request: HHC requests CMS revise the proposed regulatory text to explicitly carve-out Wrap Payments from the definition of supplemental payment. C. Application of Supplemental Payment Definition to Managed Care Payments The proposed definition of supplemental payment refers to Medicaid payments to a provider under State plan authority or demonstration authority.115 This definition of supplemental payment is very broad and could include certain Medicaid managed care payments and impose additional reporting requirements due to such inclusion. For instance, some payments are authorized under State plan authority or demonstration authority, due to the Medicaid managed care rule requirements, but are only paid on Medicaid managed care claims and are not paid for FFS claims – such as graduate medical education (“GME”) payments.116 Note, FQHC Wrap Payments would also be authorized under the State plan, but only made for Medicaid managed care claims, as discussed above. Under the current definition of supplemental payment, managed care “supplemental payments” could be included in the definition and therefore be subject to the various State plan approval and reporting requirements, potentially contradicting current managed care requirements. The Medicaid managed care rules at §438.6(a) and (c) already separately define “passthrough payments” (which are similar in concept to supplemental payments, but in managed care) and permissible directed payments. To include Medicaid managed care pass-through payments in the definition of “supplemental payments” will complicate how such definitions interact with each other and potentially cause confusion and/or contradiction. Indeed, in the November 2018 Medicaid managed care proposed rule, CMS makes clear that “supplemental payments” are an FFS concept, as CMS proposed to define supplemental payments in §438.6(a) as “amounts paid by the State in its FFS Medicaid delivery system to providers that are described and approved in the State plan or under a waiver thereof and are in addition to the amounts calculated through an approved State plan rate methodology.”117 This supports that the supplemental payment concept should be limited to FFS supplemental payments and not include Medicaid managed care pass-through or supplemental-like payments. 84 Fed. Reg. at 63781. See 42 CFR 438.60 stating “[t]he State agency must ensure that no payment is made to a network provider other than by the MCO, PIHP, or PAHP for services covered under the contract between the State and the MCO, PIHP, or PAHP, except when these payments are specifically required to be made by the State in Title XIX of the Act, in 42 CFR chapter IV, or when the State agency makes direct payments to network providers for graduate medical education costs approved under the State plan.” (emphasis added) 117 83 Fed. Reg. at 57293 (Nov. 14, 2018). (emphasis added) 115 116 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 52 In addition, to cause GME, Wrap Payments, and certain other managed care payments to be subject to additional SPA requirements, including a three (3) year renewal process, would be contradictory to CMS’ currently regulatory requirements to allow these payments to be made via Medicaid managed care without such enhanced oversight. In addition, by including certain managed care payments in the definition of supplemental payments, they would be subject to the enhanced quarterly/annual reporting requirements,118 whereas they are already subject to oversight and reporting pursuant the managed care rules, particularly the 438.6 Preprint and Rate Certification requirements. Request: HHC requests that CMS explicitly carve-out managed care payments, including payments authorized by §438.60, from the definition of supplemental payments. D. Application of Supplemental Payment Definition to GME CMS’ stated goal of the Proposed Rule is to strengthen overall fiscal integrity of the Medicaid program by focusing, in part, on Medicaid program financing and supplemental payments.119 In particular, CMS focuses on programs that do not result in an equitable distribution of supplemental payments to improve adequacy of rates across providers within the service class or ownership group or otherwise improve the Medicaid program in some measurable, value-added way and expresses concern about supplemental payment strategies that appear to target only those providers that can participate in financing the non-federal share funding. 120 GME payments do not fall within the area of concern, as they are a mechanism to allow States to reimburse hospitals and providers for the Medicaid portion of their medical education costs. Typically, GME payments are only available to hospitals or providers that incur GME costs and are calculated based on the provider’s direct and indirect GME costs. Direct costs may include salaries and benefits of medical residents and interns and paramedical education programs, and indirect costs may include increased patient care costs due to extra tests and repeat services, higher staffing levels, lower productivity, standby capacity, and increased patient complexity. By covering the Medicaid portion of such teaching costs, GME payments promote the continuation of such programs to train future physicians and practitioners, thereby supporting the retention of providers and assuring ongoing access to services for the State’s Medicaid population. Therefore, GME payments have a direct and inherent impact on the Medicaid program, supporting economy, quality of care, and access within the State, all elements that CMS reinforces as payment themes throughout the Proposed Rule. Note, the reporting requirements proposed at 42 CFR 447.288 appear to be targeted toward supplemental payments being limited to FFS supplemental payments by inconsistently referring to “total supplemental payments” and “total feefor-service supplemental payments.” 84 Fed. Reg. at 63783. 119 84 Fed. Reg. at 63722. 120 84 Fed. Reg. at 63724. 118 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 53 However, while GME payments are only available to hospitals or providers incurring medical education costs, these hospitals and providers are typically the exact pool of providers otherwise eligible to participate in financing the non-federal share funding by virtue of their associations with State medical schools or other government institutions. While the GME program is not designed for this purpose, it could be interpreted under the vague terms of the Proposed Rule as a supplemental payment program targeting only those providers that can participate in financing the non-federal share. Under the current proposed definition of supplemental payments, GME payments may fall within the definition of supplemental payments, which would make them subject to the enhanced State plan requirements and triannual renewal and the enhanced quarterly and annual reporting requirements. By including GME payments in these enhanced oversight mechanisms, States will be dis-incentivized to continue their GME programs due to the enhanced administrative burden such programs will place on the State, even though they serve an important and necessary purpose in expanding access and quality of care. Further, exposing GME payments to this level of enhanced CMS scrutiny, and CMS’ corresponding unfettered discretion to approve or disapprove them based on vague “standards,” places these crucial programs at risk of disapproval depending on how a particular CMS reviewer happens to interpret the standards on a given day or in a given case. The ongoing education of residents, interns, and health care workers is of utmost importance in ensuring States’ Medicaid populations have access to high quality care. The projected shortfall of 40,800 to 104,900 physicians by 2030, coupled with the increasing demand for medical services, particularly mental health care, supports the need for CMS to continue to support medical education to ensure continuity and access to high quality and specialty care throughout the country by allowing States to continue these programs via the standard State plan process rather than the enhanced supplemental payment State plan process. Request: HHC requests that CMS carve-out GME payments (whether FFS or managed care) from the definition of supplemental payments to allow States to continue to support and facilitate the ongoing operation of teaching hospitals within the State. VIII. Application of UPL (42 CFR 447.272 and 447.321) The current versions of §§447.272(b)(1) and 447.321(b)(1) provide that the “[u]pper payment limit refers to a reasonable estimate of the amount that would be paid for the services furnished by the group of facilities under Medicare payment principles in subchapter B of this chapter.” The Proposed Rule adds: “[…] or allowed costs established in accordance with the cost principles as specified in 45 CFR part 75 and 2 CFR part 200, or, as applicable, Medicare cost principles specified in part 413 of this chapter.”121 The use of the term “or” between each of the 121 84 Fed. Reg. at 63780. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 54 three methods for calculating the UPL suggests that the State may choose which method to use, consistent with current CMS guidance that States have flexibility to develop upper payment limit procedures.122 However, the regulatory text is not clear. Request: HHC requests that CMS clarify, in the regulatory text, that States have the option to choose which UPL calculation they will utilize. IX. State Plan Approval and Renewal Process (42 CFR 447.252 and 447.302) A. Duration of Sunset Period The language proposed at §§447.252 and 447.302 states that the duration of supplemental payment authority shall not exceed three (3) years.123 After such three (3) year period, the State will be required to renew the supplemental payment (or State plan authorizing the supplemental payment), which renewal shall include an evaluation of the impact on the Medicaid program during the current or more recent prior approval period.124 Notwithstanding HHC’s concerns about CMS’ authority to require such a State plan to sunset, as further described in Appendix A, HHC is concerned that even if CMS does have the appropriate authority to apply an automatic sunset to State plans, that the proposed three (3) sunset is not long enough. i. Three (3) Years is Not Enough to Demonstrate That a Plan is Effective Once CMS approves a State plan authorizing supplemental payments, it takes a period of time for the State to implement such program and for the program to be in full effect. Oftentimes it is three (3) or more years before the State plan is fully and efficiently operational. Indeed, with supplemental payments that are tied to quality or access measures, the time it takes to tangibly document and demonstrate the benefit of the supplemental payment is even longer. As discussed below, if States have to commence the renewal process only one (1) or two (2) years after initial approval and submit an evaluation of the impact on the Medicaid program with each such renewal, it will be impossible for the State to provide an accurate evaluation that CMS will approve. While CMS recognizes that there may be cases in which the State’s evaluation of a supplemental payment program’s effectiveness in meeting its stated goals requires more time to evaluate, and in such cases, CMS anticipates approving the renewal, if CMS determines (in its See The State Medicaid Manual (Pub. 45) §6005, stating: “The regulations […] permit a State greater discretion in determining if the requirement has been met and emphasize the State’s flexibility to develop procedures for applying the upper limit test. They relieve the State of the burden of having to use the detailed cost finding principles required by Medicare or of complying with a prescriptive formula approach in ascertaining what would have been paid for such services under the Medicare principles of reimbursement.” 123 84 Fed. Reg. at 63780, 63784. 124 84 Fed. Reg. at 63780, 63784. 122 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 55 sole discretion) that the payment meets all applicable statutory and regulatory requirements,125 HHC is concerned about whether CMS will so approve such renewal or whether it will be consistent in the application of its discretion to do so (or not). The likelihood that the implementation and evaluation process will take longer than the allotted three (3) year period, for purposes of renewal, supports the need for CMS to lengthen the sunset period and allow more time for States to better evaluate the true benefit and impact of the program and have adequate time to demonstrate such impact to CMS’ satisfaction. ii. State Resources Required for Three (3) Year Renewals The State plan approval process is a long process that may take two (2) years from start to approval. Because the Proposed Rule proposes a three (3) year sunset period for State plans authorizing supplemental payments, in order for a State to ensure it has adequate time to prepare and submit the SPA and respond to CMS’ questions and comments regarding the SPA, the State will need to commence the renewal process almost immediately upon receiving approval for the initial SPA. Such constant submission and renewal cycles for all State plans authorizing supplemental payments, in addition to the enhanced quarterly and annual reporting requirements proposed at §447.288, will place an extreme and undue burden on already strained State personnel and administrative resources. It is conceivable – indeed likely - that States will be required to devote at least one or more new full-time employees to address the ongoing SPA approval and renewal process and reporting requirements. In addition, it will be difficult for providers to plan and budget their future finances, due to the potential for CMS to deny, or require substantial revision to, an existing State plan at the time of the tri-annual renewal (particularly in light of CMS’ enhanced discretion and the States’ and providers’ corresponding inherent inability to predict whether a proposed SPA in any given renewal cycle will meet the various “totality of circumstances” tests in the Proposed Rule, as interpreted by the then-current CMS administration and the CMS reviewer assigned to the SPA renewal). Throughout the Proposed Rule, CMS refers to its desire to ensure States are administering their plans in a proper and efficient manner consistent with §1902(a)(4) of the Act and administering their programs in an economic and efficient manner.126 However, to require a State to constantly be submitting, responding to, implementing, and then renewing State plans for supplemental payments, as well as submitting quarterly and annual documentation, is anything but a proper and efficient administration of the State’s Medicaid program and State plans, supporting the need for CMS to revise the three (3) year sunset period set forth in the Proposed Rule. Indeed, if CMS elects not to renew the SPA at the end of the sunset period or makes substantial changes as part of the renewal, the State may be in a predicament of having statutes, regulations, and policy, that are no longer consistent with the State plan, but insufficient 125 126 84 Fed. Reg. at 63749. See 84 Fed. Reg. at 63722, 63728. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 56 time to make the necessary changes to resolve the inconsistency, due to the State’s budget cycle and timeline for amending regulations and policy. In addition, for a provider to revise and adapt its operations and programs every three (3) years in accordance with shifting interpretations of the relevant “standards” depending on the then CMS-administration’s political agenda, or the assigned CMS reviewer, will place an enhanced burden on providers, potentially causing providers to incur substantial costs to revise programs to comply with such changes. iii. Longer Sunset Period and/or Alternating Review/Renewal Request: HHC requests CMS eliminate, or at the minimum lengthen to five (5) years, the sunset period and renewal process proposed for State plans authorizing supplemental payments. Alternatively, HHC suggests that CMS implement a mid-term review process at the three (3) or five (5) year mark, during which CMS can give the State feedback and an opportunity to make any corrections, before the State plan sunsets and requires renewal at the five (5) or ten (10) year mark. B. Lack of Clarity The Proposed Rule states that “CMS may approve a supplemental payment […] provided for under a State plan or state plan amendment (SPA) […]”127 This language implies that CMS is approving the payment itself rather than the SPA authorizing such payment. CMS does not and is not authorized to approve individual payments. Rather, CMS approves the SPA that sets forth the methodology for the payment and then the State calculates, approves, and makes the payment. Statutory language supports this stating “[t]he sums made available under [Soc. Sec. Act 1901] shall be used for making payments to States which have submitted, and had approved by the Secretary, State plans for medical assistance.”128 The statute only requires that the Secretary approve the State plan providing for such payment and not individual payments themselves. Therefore, for CMS to approve the payment itself rather than the State plan authorizing such payment will be in violation of CMS’ statutory authority. While HHC does not believe CMS intended to establish a review and approval process for the supplemental payments themselves, outside CMS’ authority and separate from the SPA process, HHC is concerned that this improper language is another example of the Proposed Rule setting forth a requirement that is inconsistent with law and will have unintended consequences. This supports the need for CMS to reconsider the impact of the Proposed Rule and whether such impact goes beyond the intended purpose of the Proposed Rule, thereby requiring changes. 127 128 84 Fed. Reg. at 63779. Soc. Sec. Act 1901. (emphasis added) Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 57 Request: HHC requests CMS review and respond to this language that appears to be improper and inconsistent with law, and may cause unintended consequences (as well as review the regulation as a whole for other areas of improper language that may have unintended consequences), and make revisions to the regulatory text necessary to correct these instances and to align any impact with the initial purpose of the Proposed Rule. X. Reporting Requirements (42 CFR 447.288) A. Clarity Regarding Acceptable UPL Demonstration Methods The proposed language at 42 CFR 447.288(b)(3)(ii)(C) states: “[t]he State must demonstrate[e] compliance with an applicable UPL using a method described in this paragraph (b)(3). […] To make a payment-based demonstration of compliance with an applicable UPL, the State may use one of the following demonstration types: (C) A payment-based UPL demonstration using an imputed Medicare per diem payment rate determined by dividing total Medicare prospective payments paid to the provider by the provider’s total Medicare patient days, which are derived from the provider’s Medicare census data. Each provider’s imputed Medicare per diem payment rate is multiplied by the total number of Medicaid patient days for the provider for the period. The products of this operation for each provider are summed to determine the aggregate UPL. The demonstration must show that Medicaid payments are not excess of the aggregate UPL, calculated on either a retrospective or prospective basis, consistent with the methodology described in paragraph (b)(3)(ii)(A) or (B) of this section, as applicable. The methodology described in paragraph (b)(3)(ii)(A) or (B) is a retrospective paymentto-charge UPL demonstration methodology and prospective payment-to-charge UPL demonstration methodology that contain additional calculation requirements including the use of ratios. While the introductory regulatory text suggests that the payment-based UPL demonstration is its own demonstration methodology that the State may elect, the cross-reference to the methodologies at paragraph (b)(3)(ii)(A) or (B) causes confusion. HHC is concerned that this language may be another unintended consequence of this Proposed Rule Request: HHC requests that CMS correct the language in this demonstration method by striking the phrase “consistent with the methodology described in paragraph (b)(3)(ii)(A) or (B) of this section, as applicable” in the regulatory text. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 58 B. Consideration of Adjustments for Acuity The proposed language at §447.288(b)(3) sets forth cost-based demonstrations, utilizing cost-to-charge ratios and payment-based demonstrations using payment-to-charge ratios.129 While these demonstration methods allow for adjustments based on Medicaid enrollment utilization, it is not clear whether such adjustments take into account other changes in the Medicaid population, such as complexity, case mix, and service coverage. This can unfairly impact providers that serve certain populations that do not have a comparative Medicare application, such as mothers and babies, and potentially stifle State development of innovative payment models to address certain high risk and high mortality rate populations. Request: HHC requests that CMS clarify that the projected changes in Medicaid enrollment and utilization, including complexity and case-mix changes, may be reflected in the demonstration. C. Clarification on Scope of Reporting Requirements The Proposed Rule sets forth payment reporting requirements at §447.288(c). The proposal at §447.284 states that “[t]he reporting requirements in this subpart are applicable to supplemental payments to which an upper payment limit applies under § 447.272 or § 447.321.”130 As only FFS payments are subject to the UPL, the reporting requirements appear to be intended to apply to only FFS base and supplemental payments. Indeed, because managed care payments, pass-through payments, and directed payments and related information are already reported to CMS through other methods such as 438.6 Preprints and Rate Certifications, it makes sense that managed care payments will be carved out from the reporting requirement, as it would be redundant and burdensome to require such duplicate reporting here. However, the regulatory text is not so clear and switches between referring to “total supplemental payment” and “total fee-for-service supplemental payment” and also refers to “total fee-for-service base payment.” Request: HHC requests CMS revise the regulatory text at §447.288 to use consistent phrases and terminology to clearly apply the enhanced reporting requirements to only FFS base and supplemental payments, not managed care base and supplemental or pass-through payments. XI. Medicaid Practitioner Supplemental Payment (42 CFR 447.406) A. Payment Limit 129 130 84 Fed. Reg. at 63782. 84 Fed. Reg. at 63781. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 59 The Proposed Rule adds new §447.406 to place a limit on Medicaid practitioner supplemental payments of fifty percent (50%) of the total FFS base payments or seventy-five percent (75%) of total FFS base payments for services provided within HRSA-designated geographic health professional shortage areas or Medicare-defined rural areas (“Payment Limit”).131 While Medicaid practitioner payments are currently not subject to a specific regulatory limit like inpatient hospital and nursing facility services are, they have been subject to subregulatory guidance and CMS policy otherwise limiting the amount of Medicaid practitioner payments. For a number of years, Medicaid practitioner payments have been limited to the Medicare rate, average commercial rate (“ACR”), or Medicare equivalent of the ACR, as calculated in accordance with CMS guidance and CMS direction during the SPA approval process (for ease of reference, these three (3) payment methods are referred to herein as the “Current Limit”).132 In such CMS guidance, CMS explicitly states that in meeting the requirements of Section 30(A) for Medicaid payments to be consistent with efficiency, economy, and quality of care, States “have flexibility in establishing and updating physician and practitioner payment rates” and that CMS has determined that the Current Limits are “economic and efficient payments.”133 Medicaid practitioner supplemental payments serve an important role in increasing reimbursement where base payments are inadequate to cover practitioners’ costs of doing business and allow practitioners to continue investing in their business and services in order to evolve, learn new protocols and practices, and implement new programs and processes to better serve their patients. In addition, Medicaid practitioner supplemental payments, particularly those that utilize access and quality measures, incentive practitioners to implement new practices and procedures to increase Medicaid recipient’s ability to obtain practitioner services in an efficient manner, and to increase quality of care. As noted above, there is a projected shortfall of 40,800 to 104,900 physicians by 2030, as well as an increasing demand for medical services. Without proper Medicaid rates, to fully compensate practitioners for their cost of serving Medicaid recipients and to encourage physicians to continue participating in the Medicaid program and serving the Medicaid 84 Fed. Reg. at 63785. See CMS Qualified Practitioner Services Average Commercial Rate Guidance, available at: https://www.medicaid.gov/medicaid/finance/downloads/upl-guidance-qualified-practitioner-services-replacementnew.pdf; CMS Qualified Practitioner Services Average Commercial Rate Instructions, available at: https://www.medicaid.gov/medicaid/finance/downloads/upl-instructions-qualified-practitioner-services-replacementnew.pdf; and CMS Qualified Practitioner Services Average Commercial Rate Template, available at: https://www.medicaid.gov/medicaid/finance/downloads/payment-limit-demonstrations/physician-upl-template.xlsx 133 Id. 131 132 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 60 population, that shortfall will likely continue to grow resulting in access problems. Indeed, base payments are often times insufficient, as there is no regulatory floor on what a State must pay, resulting in the need for supplemental payments. HHC is concerned that restricting Medicaid practitioner supplemental payments to a percentage of a likely nominal base payment will ultimately harm Medicaid beneficiaries, as many practitioners will no longer be able to continue serving Medicaid beneficiaries. Indeed, depending on the State, a supplemental payment in an amount of 50% of the base payment, is still grossly inadequate. HHC understands CMS has concerns that some States may be calculating the Current Limit in a way that is inconsistent with economy and efficiency,134 but HHC requests that CMS focus its efforts on those States and whether they are truly complying with the Current Limit, rather than fundamentally changing the Current Limit to the detriment of all the other States that comply with the Current Limit and their Medicaid beneficiaries. Request: HHC requests CMS withdraw the Payment Limit and instead utilize the existing guidance and Current Limit to support State flexibility and the continuation of practitioner services, focusing its efforts on ensuring States are calculating the Current Limit accurately. If CMS does not withdraw the Payment Limit, HHC request CMS revise the Payment Limit to allow supplemental payments without regard to the amount of the base payment, instead allowing States the flexibility to develop supplemental payments that meets each State’s individual needs. B. Unintentional Application to FQHCs The payments and practitioners that are subject to the Payment Limit are not clearly defined, likely resulting in certain providers being unintentionally subject to the Payment Limit. The Proposed Rule defines the Medicaid practitioner supplemental payments that are subject to the Payment Limit as “supplemental payments as defined in § 447.286 that are authorized under the State plan for practitioner services and targeted to specific practitioners under a methodology specified in the State plan.”135 However, the term practitioner is not defined in proposed §447.406, nor in Part 447 of Title 42 of the Code of Federal Regulations, leaving open the expansive number of practitioners that may be subject to the Payment Limit. In addition, the language regarding the actual limit refers to payments “paid to an eligible provider for the practitioner services”136 raising more confusion regarding which practitioners and/or providers are (and which are not) subject to the Payment Limit. 84 Fed. Reg. at 63763. 84 Fed. Reg. at 63785. 136 84 Fed. Reg. at 63785. 134 135 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 61 For example, FQHC services are billed on a professional claim, similar to physician and non-physician practitioner services. Therefore, under the current language of the Proposed Rule, it is possible that FQHCs are considered “practitioners” subject to the Payment Limit. And, to the extent Wrap Payments, as discussed above, fall under the defined term “supplemental payment,” Wrap Payments will be limited to fifty percent (50%) of the total FFS base payments. Any application of such Payment Limit to Wrap Payments will be in violation of the statutory requirement that State plans provide for Wrap Payments equal to the amount by which encounter rate that will be paid for FFS exceeds the amount paid pursuant to the managed care contract.137 Request: As another instance where the Proposed Rule appears to be placing unintentional requirements and limitations on providers and payment, beyond its statutory authority, HHC requests that CMS clarify the practitioners that are subject to this Payment Limit and ensure that FQHCs are explicitly carved out from such Payment Limit. C. Clarification on Calculation of the Payment Limit The Proposed Rule states “Medicaid practitioner supplemental payments may not exceed— […] of the total fee-for-service base payments authorized under the State plan paid to the138 eligible provider for the practitioner services during the relevant period.”139 First, as noted above, this language appears to confuse provider and practitioner. Second, this language applies the limit to the “relevant period,” which is an undefined phrase. Lastly, it is not clear how the Payment Limit is calculated and applied. For instance, is the Payment Limit calculated and applied on an individual practitioner (or provider) basis or is the Payment Limit calculated and applied on an aggregate basis similar to the inpatient and outpatient UPL? To the extent that the Payment Limit is calculated and applied on a practitioner (or provider) specific basis, this calculation will be unduly burdensome on the State and practitioners. The Proposed Rule seems to emphasize CMS’ preference for payments that are consistent across providers, but to calculate a separate Payment Limit for each and every practitioner will take an immense amount of time, in addition to the tri-annual SPA renewal and approval process and quarterly/annual reporting requirements. Request: HHC requests CMS clarify how the Payment Limit is to be calculated and applied and should not require the calculation to be made on a practitioner (or providerspecific) basis. D. Payments tied to Quality/Access Performance Soc. Sec. Act 1902(bb)(5)(A). 42 CFR 447.406(c)(1) states “an eligible provider” and (c)(2) states “the eligible provider” (84 Fed. Reg. at 63785). 139 84 Fed. Reg. at 63785. 137 138 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 62 The Proposed Rule implies that certain quality-based payments are not subject to the Payment Limit stating “[t]his section does not apply to value-based payment methodologies that are part of a State’s delivery system reform initiative, are attributed to a particular service provided to a Medicaid beneficiary, and that are available to all providers, including as an alternative to fee-for-service payment rates.”140 However, this carve-out seems to be unnecessary, as these excepted payments will appear to be base payments not subject to the limit anyway. Consistent with the desire to carve-out value-based payment methodologies, and to actually carve-out payments that will otherwise be subject to the Payment Limit, as supplemental payments (not base payments), HHC suggests CMS carve-out payments that are directly tied to quality or access measures and performance thereof. CMS appears to favor supplemental payments that support delivery system reform initiatives,141 that support payments that are consistent with efficiency, economy, quality of care and access, 142 and that facilitate monitoring and evaluation of the effects of such payments on the Medicaid program.143 Supplemental payments that are paid based on practitioners reporting and achieving certain access or quality measures do just that. Payments that are dependent on practitioners using the supplemental payments to continue improving access and enhancing quality, on a measurable and payment-dependent basis, are exactly what CMS is promoting. Request: In order to continue facilitating delivery-system reform and value-based models, HHC requests that CMS expressly carve-out supplemental payments that are tied to access, quality or other performance measures from the Payment Limit; otherwise, CMS risks unintentionally suppressing State innovation and payment reform. CONCLUSION For the reasons set forth above and in Appendix A, HHC is concerned that CMS does not have the statutory authority to implement many of the key provisions of the Proposed Rule and the remainder of the Proposed Rule could not be effectively administered, without the provisions for which CMS has no authority to implement; and therefore CMS should therefore withdraw the Proposed Rule in its entirety, including all preamble commentary imposing regulatory standards that have not gone through notice-and-comment rulemaking. Further, although CMS claims not to be pursuing the same sorts of changes that Congress enjoined in 2007, the purpose of the Proposed Rule (and the almost certain effect of the Proposed Rule if enacted in anything like its current form) is the same as CMS sought to accomplish, but was preventing from doing so, in 84 Fed. Reg. at 63785. See carve-out proposed at 42 CFR 447.406(a). 142 See proposed SPA requirement at 42 CFR 447.302(c)(1). 143 See proposed SPA requirement at 42 CFR 447.302(c)(5). 140 141 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 63 2007: namely, effectively putting an end to all Medicaid supplemental payment programs based on the UPL and funded by IGTs and CPEs. We are not aware of any Congressional pronouncements since 2007 that suggest that Congress has changed its antipathy toward CMS’ proposed effective elimination of these programs. Moreover, while CMS has clearly expressed its desire to target supplemental payments with this Proposed Rule, HHC is concerned that the Proposed Rule conflates supplemental payments and financing – instead of regulating the supplemental payments themselves the Proposed Rule constrains or entirely eliminates the financing mechanism for the supplemental payments. Such limitation on the financing mechanism impacts more than the intended supplemental payments – it impacts all Medicaid payments (for both State Plan Expenditures and Administrative Expenditures) and will therefore place significant additional pressure on State budgets that are already reaching, or have reached, the breaking point. The Proposed Rule would only serve to reduce access to care for Medicaid recipients, the precise group that is most vulnerable and in greatest need of improved access to necessary care, and therefore should be withdrawn on policy as well as legal grounds. Although HHC believes the entire Proposed Rule should be withdrawn, we have noted changes to particular sections that should be made if CMS elects to move forward with finalizing the Proposed Rule. Our comments to individual sections should not be construed, however, as an acknowledgement by HHC that the Proposed Rule as a whole is authorized, lawful or good policy, and HHC fully reserves its rights with respect to the Proposed Rule in its entirety as well as with respect to individual sections. Thank you for your time, consideration, and response to HHC’s comments. Sincerely, Daniel E. Sellers CFO and Treasurer The Health and Hospital Corporation of Marion County Attachments KD_10553846_6.docx Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 64 APPENDIX A Analysis Regarding Authority to Implement the Proposed Rule I. Authority Where Congress Has Expressly Spoken When analyzing an agency’s authority, a court will consider whether Congress has expressly spoken to the precise question.144 While CMS suggests that its numerous changes, including the new definition of NSGP and new or revised requirements for IGTs, CPEs, health care-related taxes, and State plans authorizing supplemental payments, are consistent with the Act, HHC believes that the plain language of the Act and review of Congress’ intent demonstrates otherwise, and therefore, the provisions of the Proposed Rule go beyond CMS’ authority, as further described herein. A. State Share and NSGP (42 CFR 433.51 447.286) In the Proposed Rule, CMS proposes to limit the IGTs that may be considered the State share to IGTs of funds from units of government within the State, “derived from State or local taxes” to the State Medicaid Agency and under its administrative control.145 CMS also proposes to limit CPEs that may be considered the State share to CPEs that meet additional requirements set forth at 42 CFR 447.206.146 Lastly, CMS implements new definitions of SGP and NSGP that appear to be intended to limit the types of providers that may fund the State share (including by IGT and CPE) by requiring that a provider have access to, exercise administrative control over, and the ability to dispense local tax revenue in order to qualify as an SGP or NSGP.147 CMS clarifies its intent to tie a provider’s ability to meet the requirements of an SGP or NSGP to the ability to make a permissible IGT or CPE stating “[w]e propose to consider the entity’s access to and administrative control over state-appropriated funds from the legislature or local tax revenue in this definition to link the provider category to the ability of the provider to supply the nonfederal share funds in a manner consistent with section 1903(w)(6)(A) of the Act.”148 CMS also explicitly ties a provider’s ability to make a CPE to the ability to meet the requirements of §447.206, which requires providers to be an SGP or NSGP.149 CMS also reserves discretion regarding the NSGP determination process by considering the “totality of the circumstances.” However, the revised IGT and CPE requirements and definition of NSGP appear to be beyond CMS’ statutory authority. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 S.Ct. 837 (1984). 84 Fed. Reg. at 63776. 146 84 Fed. Reg. at 63776. 147 84 Fed. Reg. at 63780. 148 84 Fed. Reg. at 63752. 149 See 84 Fed. Reg. at 63776, 63779. 144 145 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 65 i. Limit on Statutory Authority CMS cites Section 6(A), the statutory section addressing State share, as the statutory authority for its revised requirements for IGTs and CPEs. Section 6(A) limits CMS’ ability to restrict States’ use of IGTs or CPE to cover the non-federal share stating that: Notwithstanding the provisions of this subsection [concerning provider donations], the Secretary may not restrict States’ use of funds where such funds are derived from State or local taxes (or funds appropriated to State university teaching hospitals) transferred from or certified by units of government within a State as the non-Federal share of expenditures under this title, regardless of whether the unit of government is also a health care provider, except as provided in section 1902(a)(2), unless the transferred funds are derived by the unit of government from donations or taxes that would not otherwise be recognized as the non-Federal share under this section. (emphasis added) Between September and December of 1991, Congress held a series of hearings and passed legislation, the Medicaid Voluntary Contribution and Provider-Specific Tax Amendment of 1991 (“the 1991 Act”), in response to a final regulation promulgated by the then Health Care Financing Administration (“HCFA”). At issue in those hearings was a HCFA regulation that radically altered the agency’s treatment of revenues from voluntary contributions, providerspecific taxes, and IGTs as the non-federal share of Medicaid expenditures. Congress, concerned with the impact of the final regulation (which was expected to be significant), reached a compromise with HCFA regarding regulations related to voluntary contributions, providerspecific taxes, and use of public funds as a source of State share of financial participation under title XIX of the Act.150 That compromise resulted in the passage of Section 6(A), among other provisions, and related testimony defining the contours of its prohibitory scope. As clearly set forth in the 1991 Act, Congress never intended to authorize CMS to establish new regulations under the 1991 Act without first consulting with the States 151 -because the 1991 Act implements Section 6(A), CMS must consult with States before issuing any regulations under Section 6(A), which it appears CMS did not do prior to issuing the Proposed Rule. Medicaid Voluntary Contribution and Provider-Specific Tax Amendment of 1991, PL 102-234, Sec. 5 (Dec. 12, 1991). 151 Under the Medicaid Voluntary Contribution and Provider-Specific Tax Amendments of 1991, Congress required the Health and Human Services Secretary “consult with the States before issuing any regulations under this Act.” H.R. 3595 Sec. 5 (102 Congress 1991) (emphasis added). Available at: https://www.congress.gov/bill/102nd-congress/housebill/3595/text. 150 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 66 In addition, in the original House bill and House Committee on Energy and Commerce Conference, that ultimately resulted in the 1991 Act, the House made clear its intention for CMS to never establish new regulations affecting IGTs, CPEs, and NSGPs without Congressional approval, reminding then HCFA that it lacks statutory authority for actions limiting the use of funds for the State share152 and that the moratorium in the 1991 Committee bill is permanent and applies to “all public funds used as a source of the State share.”153 While ultimately the final language of the 1991 Act was revised pursuant to Senate amendment, the Senate never expressly overturned or commented upon the House’s original intent for the 1991 Act. In addition, such intent was reinforced when in the 2007 Rule154 CMS attempted to tie IGTs to tax revenues,155 but Congress declared its sense that CMS should not promulgate the 2007 Rule as a final regulation.156 As expressed by Congress during the consideration and promulgation of the 1991 Act and reinforced in Congress’ response to the 2007 Rule, if CMS desires to make any such changes in its current policy interpretations or practices related to the source of IGTs or requirements for CPEs, then those changes would be more appropriately handled through Congressional action. In addition, given Section 6(A)’s specificity in this area, including Congressional intent, it is improper for CMS to claim other statutory provisions as authority to proceed with these new requirements in the Proposed Rule. Request: What is CMS’ authority to use administrative regulations to restrict IGTs and CPEs, in light of the above comments regarding the Congressional intent and history of Section 6(A)? How has CMS complied with the 1991 Act’s requirement that HCFA/CMS consult with the States prior to issuing any regulations under Section 6(A) and 2007 directive to not promulgate the 2007 Rule as a final regulation? ii. Congressional Limit on Types of IGT Funds In addition to its intent to prohibit the Secretary from promulgating rules that have the effect of limiting public funds as a source of non-federal share, during conference for the 1991 Act, the House Committee on Energy and Commerce made clear that public funds that may be See H.R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1427, stating: the Secretary of HCFA is “without authority to make any changes in current policy or practice through regulation or administrative procedures” and that any changes, where warranted, must be effected through the normal legislative process, not by regulation 153 H.R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1427 (1991). 154 72 Fed. Reg. 29748 (May 29, 2007). 155 Via its proposed limit on IGTs to funds transferred from “units of government” in §433.51 and §457.220 and then newly defined “unit of government” as a health care provider that has generally applicable taxing authority or direct access to generally applicable tax revenues, in §433.510(a)(1)(i). 156 American Recovery and Reinvestment Act of 2009, Sec. 5003(d) (Pub.L. 111-5). 152 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 67 used as the non-federal share include funds other than those derived from State or local taxes, stating, in part: • • • • “The Committee bill would prohibit the Secretary from issuing any regulation that changes the treatment 42 C.F.R. 433.45(a)) [now § 433.51] of public funds as a source of State share of financial participation under title XIX of the Social Security Act. […]. It would apply to all public funds used as a source of the State share, regardless of whether the public agency contributing the funds is a health care provider delivering services under the State's Medicaid program.”157 “The Committee stresses that, under this bill, intergovernmental transfers that are not subject to disallowance of Federal matching funds include any public funds received by the State Medicaid agency from public entities or local units of government that function as health care providers, including State or local health agencies, counties that operate hospitals or public health departments, public hospital districts, school districts that operate their own school health programs, State institutions for individuals with mental retardation, State residential treatment programs for children with severe education-related disabilities.”158 So long as the transfer of public funds (for either covered services or administrative activities) is made by or through a general or special purpose unit of State or local government, the transfer is protected under the current regulation and under the moratorium on changes in that regulation, regardless of whether the unit of government is also a health care provider.159 For example, a hospital district may transfer or certify to the State Medicaid agency a portion of its revenues, which may be collected by the district's facilities as payment for services rendered, or through its special taxing authority. […] The transfer or certification may be made by the hospitals themselves, or by the district governing body.160 This demonstrates that Congress intended for other funds to be used for an IGT and not solely funds “derived from State or local taxes.” In addition, in other areas of the Act, when referring to the State financing of Medicaid expenditures, Congress only requires that State funds be used for not less than 40% of the non-federal share and does not otherwise place any limitation on the funds that can be used as the non-federal share.161 H.R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1426. (emphasis added). H.R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1428. (emphasis added). 159 H.R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1428. (emphasis added). 160 H.R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1428. (emphasis added). 161 Soc. Sec. Act 1902(a)(2). 157 158 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 68 Request: What is CMS’ authority to limit the types of funds to be used for an IGT, in light of the above comments regarding such limitation contradicting Congress’ intent to allow various public funds to be used for an IGT? iii. Proposed State Share Requirements Conflict with Statutory Authority Under the proposed revision to 42 CFR 433.51, CMS replaces the prior term “public funds” with a more specific list of the kinds of funds that may be used as the non-federal share, suggesting that it is aligning with Section 6(A),162 such as by including the exact phrase “funds derived from State or local taxes.” However, CMS also adds additional conditions that further narrow who is eligible to participate and what funds are eligible for consideration of the nonfederal share despite Section 6(A)’s broad prohibition and the House’s intent in the history of the 1991 Act to not so limit funds eligible for the non-federal share. For instance: • • • General Funds Requirements o CMS further specifies in the preamble that “State General Fund dollars” will not include funds appropriated to other units of government that “otherwise might be tangentially involved in financing Medicaid payments.”163 CPE Requirements o Proposed 42 CFR 433.51 limits the kinds of expenditures eligible for CPEs by a “unit of government” by adding strict requirements under a new provision (§447.206). o Proposed §447.206 requires providers to be SGP or NSGP, as defined in §447.286, and therefore makes the various SGP and NSGP requirements a condition on the ability to CPE the non-federal share, which is inconsistent with Section 6(A). IGT Requirements o While CMS suggests it is using the exact terminology in Section 6(A), i.e., funds “derived from State or local taxes,” CMS uses much narrower terms like “comes from”164 or “obtained from”165 in the preamble suggesting an impermissible and unreasonable interpretation of Section 6(A)’s scope. While an exact meaning of the term “derived from” State or local taxes has not been legislated and is not See 84 Fed. Reg. at 63737 stating “We are proposing these revisions to specifically align the allowable sources of the non-federal share with the statute.” 162 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 69 clarified in the text of the Proposed Rule, the Webster’s definition of the word “derive” does not include “comes from” or “related to.”166 Therefore, via its commentary to the Proposed Rule, CMS complicates and expands the phrase “derived from” to also mean “comes from” and “related to,” which is incongruent with the statute and lacks clarity. o The Proposed Rule adds that permissible IGTs must be derived from State or local taxes under that agency’s “administrative control,” adding an “administrative control” requirement that is not included in Section 6(A) or contemplated by Congress when it enacted Section 6(A). o Proposed 42 CFR 433.51(d) disallows, as the non-federal share, State funds provided as an IGT from a unit of government within a State that are contingent upon the receipt of funds by, or are actually replaced in the accounts of, the transferring unit of government from funds from “unallowable source,” which term is not defined, and which limitation goes beyond the limitation permitted by Section 6(A). As demonstrated above, federal law does not make, or allow for, such distinctions, and Congress never intended for such distinctions to be made. Indeed, if Congress intended to limit IGTs to funds derived from State or local taxes, CPEs to meet the various requirements proposed at §447.206, and providers that could make IGTs or CPEs to those that have access to, administrative control over, and the ability to dispense tax revenues, it would have done so in Section 6(A). But Congress did not and instead defined “unit of local government” as “a city, county, special purpose district, or other government unit in the State,” leaving open the ability of such unit of local government to include units that may not have the ability to assess, have access to, have control over, or have the ability to dispense State or local tax revenue. In addition, Section 6(A) prohibits the Secretary from restricting use of IGTs derived from State or local taxes, which inherently permits the use of IGTs derived from other sources. If Congress intended to limit IGTs to funds derived from State or local taxes, Congress would have not included language at Section 6(A) clarifying that where IGTs are derived from donations or taxes that would not otherwise be recognized as the non-federal share, such IGTs are impermissible for purposes of the non-federal share.167 Moreover, Congress easily could have said that State or local taxes are the only permissible sources of IGTs, if that is what Congress had intended. If Section 6(A) was only intended to allow permissible IGT be derived from a 166Webster’s online dictionary defines “derive” as “to take, receive, or obtain especially from a specified source.” See Webster’s online dictionary at https://www.merriam-webster.com/dictionary. 167 See Soc. Sec. Act 1903(w)(6)(A) stating “the Secretary may not restrict States’ use of funds where such funds are derived from State or local taxes […] transferred from or certified by units of government within a State as the nonFederal share of expenditures […] unless the transferred funds are derived by the unit of government from donations or taxes that would not otherwise be recognized as the non-Federal share under this section.” Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 70 State or local tax, as CMS suggests in the Proposed Rule,168 the reference to the ability for IGTs (albeit impermissible) to be derived from donations or taxes would be irrelevant and contradictory. In short, whereas Congress clearly intended the statutory provision to mean that State or local taxes may be a source of IGTs, CMS is now proposing to turn that language on its head by saying that State or local taxes must be the source of IGTs. Request: HHC requests CMS address whether the Proposed Rule’s additional conditions narrowing who is eligible to participate and what funds are eligible for consideration of the non-federal share, is in violation of Section 6(A)’s broad prohibition and the Congressional history of the 1991 Act supporting that CMS should not limit funds eligible for the non-federal share. Based on the above comments, HHC requests CMS remove such conditions. iv. Proposed Linkage between Non-Federal Share and NSGP Conflicts with Statutory Authority Because of CMS’ limited authority to restrict the types of funds that may be used for an IGT and/or CPE under Section 6(A), CMS appears to instead be restricting the funds that may be used for the non-federal share, such as an IGT or CPE, through the proposed definition of NSGP, by limiting the providers that qualify as an NSGP to those providers that have access to, exercise administrative control over, and have the ability to dispense local tax revenue and then bootstrapping the providers’ categorization as NSGPs to the ability to supply the non-federal share.169 This bootstrapping is formalized in the CPE provisions, wherein CMS expressly requires CPEs to meet the requirements of §447.206 and then §447.206 requires the provider to be an SGP or NSGP. In support of these additional requirements, CMS suggests its authority for defining NSGP is under Section 30(A), which broadly states that “[a] State plan for medical assistance must […] assure that payments are consistent with efficiency, economy, and quality of care […].” However, the more proper authority and restriction of such authority, due to the ultimate limitation of the proposed provisions on the funds that may be used for the non-federal share, is Section 6(A). In the preamble, CMS states “[…] created confusion among states, and has led to state requests to derive IGTs from sources other than state or local tax revenue (or funds appropriated to state university teaching hospitals), which is not permitted under the statute in section 1903(w)(6)(A) of the Act.” 84 Fed. Reg. at 63737. 169 84 Fed. Reg. at 63780. CMS makes clear in the preamble its desire to link a provider’s ability to make an IGT, or otherwise provide the non-federal share of federal financial participation, to the provider’s status as a non-state government provider, stating “[w]e propose to consider the entity’s access to and administrative control over stateappropriated funds from the legislature or local tax revenue in this definition to link the provider category to the ability of the provider to supply the nonfederal share funds in a manner consistent with section 1903(w)(6)(A) of the Act.” (84 Fed. Reg. at 63752). 168 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 71 CMS appears to be attempting to use its broader authority under Section 30(A) to regulate IGTs and CPEs, since it is not permitted to do so under Section 6(A). Such approach to limit IGTs and CPEs through the definition of NSGP is improper, particularly when a more narrow and specific statute, Section 6(A), prohibits such limitation. Request: HHC requests CMS reconsider its authority under Section 6(A) to so regulate IGTs and CPEs and eliminate its attempted use of Section 30(A) and the definition of NSGP to regulate IGTs and CPEs. B. Health Care-Related Taxes – Undue Burden (42 CFR 433.68(e)(3)) In the Proposed Rule, CMS proposes new language at §433.68(e)(3) that prohibits taxes from imposing undue burden on health care items or services paid for by Medicaid or on providers of such items and services that are reimbursed by Medicaid. 170 CMS then proposes to “define” what constitutes an undue burden but leaves a catch-all provision that gives CMS the discretion to look at the totality of circumstances in CMS’ reasonable determination. Such discretion is in violation of CMS’ authority under the Act and eludes any sort of “standard” for CMS, States, and providers to apply in determining whether any current or proposed tax places an “undue burden” on Medicaid items or services. Section 1903(w)(3)(E) of the Act describes the process for the Secretary to approve a State’s application for a waiver of the broad-based and/or uniformity requirements for a health care-related tax, requiring that the net impact of the tax and associated expenditures be generally redistributive in nature.171 The statute does not at all impose a requirement that the tax avoid imposing undue burden on health care items or services reimbursed by Medicaid in order to be considered “generally redistributive.” However, regardless of such lack of statutory authority, CMS is endeavoring to impose the additional “undue burden” requirement under the guise of the “generally redistributive” requirement.172 This new undue burden requirement in no way relates to or is in furtherance of the statutory requirement that a health care-related tax be “generally redistributive in nature,”173 and therefore, CMS is proposing to impose requirements beyond its statutory authority. CMS’ attempt to rationalize the undue burden requirement and its interpretation that taxes that pose an 84 Fed. Reg. at 63778. See Soc. Sec. Act 1903(w)(3)(E)(ii)(I) stating: “[t]he Secretary shall approve such an application if the State establishes to the satisfaction of the Secretary that—(I) the net impact of the tax and associated expenditures under this title as proposed by the State is generally redistributive in nature […]” 172 The “generally redistributive” requirement is set forth in 42 CFR 433.68(e), and the Proposed Rule proposes to add the new “undue burden” requirement at 42 CFR 433.68(e)(3). 173 Soc. Sec. Act 1903(w)(3)(E)(ii)(I). 170 171 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 72 undue burden on the Medicaid program are inherently not generally redistributive, by citing preambles to past regulations, reinforces CMS’ lack of actual statutory authority.174 Request: In light of the above comments and concerns: 1. What is CMS’ authority for the proposed undue burden requirement, since it does not appear to relate to the statutory requirement that health care-related taxes be “generally redistributive”? 2. What is CMS’ statutory authority to implement the catch-all provision that gives CMS unfettered discretion, and fails to give an adequate standard for CMS, States and providers to apply to assure compliance? 3. HHC requests CMS remove the proposed undue burden requirement. C. Health Care-Related Taxes – Direct Guarantee (42 CFR 433.68(f)(3)) The Proposed Rule expands the hold harmless prohibition for health care-related taxes by stating that a “direct guarantee,” constituting a hold harmless arrangement: will be found to exist where, considering the totality of the circumstances, the net effect of an arrangement between the State (or other unit of government) and the taxpayer results in a reasonable expectation that the taxpayer will receive a return of all or any portion of the tax amount. The net effect of such an arrangement may result in the return of all or any portion of the tax amount, regardless of whether the arrangement is reduced to writing or is legally enforceable by any party to the arrangement.175 First, this limitation undercuts the entire purpose of health care-related taxes. Health carerelated taxes are a permissible way to fund the non-federal share of Medicaid expenditures, when the statutory requirements (and any properly promulgated regulatory requirements) are met. The Act affirms this stating “[t]he provisions of this paragraph shall not prevent use of the tax to reimburse health care providers in a class for expenditures under this title nor preclude States from relying on such reimbursement to justify or explain the tax in the legislative process.”176 In Stating: ‘‘‘we attempted to balance our desire to give states some degree of flexibility in designing tax programs with our need to preclude use of revenues derived from taxes imposed primarily on Medicaid providers and activities’ (57 FR 55128). In the preamble of August 1993 final rule, we interpreted ‘generally redistributive’ to mean ‘the tendency of a state’s tax and payment program to derive revenues from taxes imposed on non-Medicaid services in a class and to use these revenues as the state’s share of Medicaid payments’ (57 FR 55128).” 84 Fed. Reg. at 63731. See also, “CMS considers taxes that pose an undue burden on the Medicaid program to be inherently not generally redistributive because they impose a higher tax burden on health care items or services, or providers of such items and services, that are financed by Medicaid than those not financed by Medicaid, as explained in the preamble to the August 1993 final rule, discussed above.” 84 Fed. Reg. at 63742. 175 84 Fed. Reg. at 63778. (emphasis added) 176 Soc. Sec. Act 1903(w)(4). (emphasis added) 174 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 73 addition, the Act states “[n]othing in this title (including sections 1903(a) and 1905(a)) shall be construed as authorizing the Secretary to deny or limit payments to a State for expenditures, for medical assistance for items or services, attributable to taxes of general applicability imposed with respect to the provision of such items or services.”177 A 1991 hearing by the House Committee on Energy and Commerce interpreted this language to allow States to use revenues from provider-specific taxes to finance their share of Medicaid program spending.178 While the preamble to the Proposed Rule also recognizes such use of health care-related taxes as “a way to finance the non-federal share of Medicaid payments,”179 the proposed language describing “direct guarantees” that constitute impermissible hold harmless arrangements is preventing the use of taxes to reimburse providers in violation of the statute. This language, which may result, either intentionally or unintentionally, in the elimination of health care-related taxes, is in direct contradiction with the House Committee on Energy and Commerce’s intent of the 1991 Act: “[t]he Federal government should not take unilateral administrative actions that have the practical effect of prohibiting States from using State and local taxes to pay for covered services on behalf of eligible individuals under the Medicaid program.”180 There is a difference between when a hold-harmless exists and when a provider is being reimbursed based on Medicaid utilization with such reimbursement being funded by a health care-related tax. However, CMS blurs these concepts, seemingly making any reimbursement based on Medicaid utilization that may be funded by a health care-related tax a hold harmless arrangement that is impermissible. By stating that a direct guarantee exists where the taxpayer reasonably expects to receive, or the net effect of the arrangement results in a taxpayer receiving, a return of all or any portion of the tax amount, the Proposed Rule is preventing the use of health care-related taxes to reimburse providers for Medicaid expenditures. While CMS indicates its desire to comply with §1903(w)(4) of the Act by stating “[i]t is important to note that nothing in this proposed rule would interfere with states’ permissible use of tax revenues to fund provider payments or reliance on such use of tax revenues to justify or explain the tax in the legislative process, as Soc. Sec. Act 1902(t). H.R. Rep. No. 102-310, (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1416. 179 84 Fed. Reg. at 63730. Note, in an October 31, 1991, interim final rule with comment (56 Fed. Reg. 56132), HCFA similarly tried to eliminate the use of all provider-specific taxes. The House Committee on Energy and Commerce responded stating “In short, it appears that the Secretary has attempted by regulation to convert the statutory provision enacted in OBRA 90 from a general authorization for States to use the revenues from provider-specific taxes into a broad prohibition against the use of provider-tax revenues […] There is nothing in the statutory language enacted in OBRA '90 or elsewhere in the Title XIX of the Social Security Act which contemplates, much less authorizes, such an illogical and patently impractical result. Nor is this result in any way related to what is stated in the statute: a general rule authorizing provider-specific taxes, and a narrow exception for institutional providers paid on a cost basis.” H.R. Rep. 102-310, (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1422. 180 H.R. Rep. 102-310, (1991) as reprinted in U.S.C.C.A.N., 1413 (1991) at 1425. 177 178 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 74 provided in section 1903(w)(4) of the Act,”181 it fails to further document how its new requirements on health care-related taxes, including the direct guarantee language, support such compliance. Request: In light of the above comments, HHC requests CMS address the concern that the proposed undue burden requirement effectively eliminates health care-related taxes as a way to fund the non-federal share of Medicaid expenditures, in violation of §1903(w)(4) of the Act and Congressional intent, and remove the proposed undue burden requirement. D. Requiring Health Care-Related Tax Waivers to Expire (42 CFR 433.72(c)) The Proposed Rule requires that health care-related tax waivers cease being effective three (3) years from the final rule effective date for current waivers or the date the waiver is approved by CMS for waivers approved after the final rule effective date.182 The statutory authority for health care-related tax waivers is §1903(w)(3)(E) of the Act, which does not expressly state or even imply that a waiver may automatically cease. Therefore, CMS appears to be proposing to implement a three (3) year waiver termination provision that it is not authorized to implement. It seems that CMS is likening these tax waivers to a Section 1115 demonstration waiver, which is reviewed and reapproved by CMS every three (3) years. However, the waiver expiration, review, and renewal timelines of demonstration waivers are authorized via statute and directly set forth in Section 1115 of the Act. The waiver expiration provisions and general restrictions on a State’s taxing ability proposed by CMS in this Proposed Rule have no such similar underlying statutory authority. Request: What is CMS’ authority to require health care-related tax waivers to cease being effective after three (3) years? Based on the above described concerns regarding the lack of statutory authority, HHC requests CMS remove such expiration. E. Requiring State Plans to Expire (42 CFR 447.252(d) and (e) and 447.302(c) and (d)) The Proposed Rule terminates all existing State plans for supplemental payments approved prior to the final rule’s effective date either two (2) or three (3) years following such effective date (depending on when the SPA in each case was approved) and then permits States 181 182 84 Fed. Reg. at 63742. 84 Fed. Reg. at 63778. Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 75 to submit new SPAs subject to CMS’ new requirements and a three (3) year limited duration.183 After such three (3) year period, the State will be required to renew the supplemental payment (or State plan authorizing the supplemental payment).184 Nowhere in statute does Congress give CMS the ability to limit the duration of State plans or SPAs. Federal law states “[t]he sums made available under [§1901 of the Act] shall be used for making payments to States which have submitted, and had approved by the Secretary, State plans for medical assistance.”185 This does not authorize the Secretary to terminate a previously approved SPA. In addition, in the limited circumstance that the Secretary is authorized to withhold payments to the State, the Secretary must have found that the State plan had been so changed that it no longer complied with §1902 of the Act or that in the administration of the plan there was a failure to comply substantially with any provision and have given the State reasonable notice and opportunity for hearing (and note that even in such a circumstance the Secretary is not explicitly authorized to terminate the SPA).186 Therefore, in order for the Secretary to withhold supplemental payments to the State under an existing State plan, the Secretary must find the State plan setting forth the supplemental payment does not comply with law and give proper notice and hearing rights. The proposed language limiting the duration of State plans at proposed §§447.252(d) and (e) and 447.302(c) and (d) does not comply with these statutory requirements, as it calls for automatic termination of a SPA, rather than a withholding of payments, and does not require any determination of non-compliance or a notice and hearing process. Request: What is CMS’ authority to require existing State plans authorizing supplemental payments to expire after two (2) or three (3) year periods, and then for future State plans to be limited to a three (3) year duration? Based on the above described concerns regarding the lack of statutory authority, HHC requests CMS remove the proposed provisions regarding expiration and renewal of State plans authorizing supplemental payments. F. Authority Related to Reporting (42 CFR 447.288 and 447.290) The Proposed Rule adds quarterly and annual reporting requirements for UPL demonstrations and supplemental payments at §447.288 and provides that where a State fails to comply with UPL demonstration and supplemental payment reporting requirements, CMS may reduce future grant awards through deferral by the amount of FFP CMS estimates is attributable to payments made to the provider or providers as to which the State has not reported properly. 187 However, CMS does not have the authority to implement such reporting requirements nor the 84 Fed. Reg. at 63780, 63784. 84 Fed. Reg. at 63780, 63784. 185 Soc. Sec. Act 1901. (emphasis added) 186 See Soc. Sec. Act 1904. 187 84 Fed. Reg. at 63783. 183 184 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 76 authority to withhold FFP for failure to comply. In the preamble, CMS attempts to liken the proposed reporting for UPL demonstrations and supplemental payments with DSH reporting required under §447.299.188 However, this is not a proper comparison. CMS is clearly authorized to require DSH reporting and to enforce such reporting requirement, pursuant to the explicit statutory authority set forth in §1923(j) of the Act.189 However, such enforcement mechanism for reporting UPL demonstrations and supplemental payments is not authorized by statute and therefore likely beyond CMS’ authority. Request: What is CMS’ authority to implement the proposed quarterly and annual reporting requirements and defer FFP where a State fails to comply with such reporting requirement? Due to the above described concerns that CMS is not authorized to require such reporting and implement an enforcement mechanism for such reporting (i.e. explicit statutory authority similar to §1923(j) of the Act permitting reporting and enforcement for DSH), HHC requests CMS eliminate such requirement. II. Interfering with State Sovereignty A. States and their Political Subdivisions In the Proposed Rule, CMS sets forth the definition of NSGP,190 specifically requiring CMS to make the determination of whether a provider is considered an NSGP.191 By assigning the determination process to CMS, stripping States of their right to make determinations regarding whether States’ units of local government are NSGP, CMS is in violation of State sovereignty. Case law supports this violation with one Court previously finding that interference with the powers a State gives a unit of government violates State sovereignty, stating: [I]nterfering with the relationship between a State and its political subdivisions strikes near the heart of State sovereignty. Local governmental units within a State have long been treated as mere “convenient agencies” for exercising State powers. . . . And the relationship between a State and its municipalities, including what limits a State places on the powers it delegates, has been described as within the State’s “absolute discretion.”192 84 Fed. Reg. at 63751. See Soc. Sec. Act 1923(j) stating “With respect to fiscal year 2004 and each fiscal year thereafter, the Secretary shall require a State, as a condition of receiving a payment under section 1903(a)(1) with respect to a payment adjustment made under this section, to do the following: (1) Report.—The State shall submit an annual report […]” 190 And SGP, in a similar fashion as the NSGP definition. The focus of HHC’s concern is with the NSGP definition, and therefore, only NSGP is addressed here, with all discussion of NSGP likely also applying to the SGP definition. 191 See 84 Fed. Reg. at 63780, 63781 stating “In determining whether an entity is a non-State government provider, CMS will consider […]” and “[i]n determining whether a relevant entity is a unit of a non-State government, we would consider […]” 192 City of Abilene, Texas v. Federal Communications Comm’n, 164 F.3d 49, 52 (D.C. App. 1999). 188 189 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 77 Therefore, the determination of whether an entity is an NSGP should be left up to States to determine and should not be determined by CMS. CMS certainly should not be permitted to make such a determination based on one potential characteristic of an entity’s non-state government status and CMS’ perception of relationships between the entity and other parties, which determination does not recognize that each State may authorize different forms of nonstate governmental entities with different attributes. Request: Based on the concerns described above, HHC requests CMS address whether its removal of a State’s right to make the determination of whether an entity is an NSGP, interferes with State sovereignty and States relationships with their political subdivisions, and remove the CMS determination process for NSGPs. B. State Participation in Medicaid When discussing the proposed definition of NSGP in the preamble, CMS refers to States that purportedly attempted to re-characterize facilities as non-state government owned or operated for the purpose of the UPL calculation, making IGTs, and receiving supplemental payments.193 CMS expresses concern about the “manipulation” within these examples stating: [W]e are troubled by instances we have observed in which some states have attempted to re-characterize facilities as non-state government owned or operated, where such characterization was not supported by the actual structure and operation of the facility, in an ultimate effort to generate more federal Medicaid revenue without corresponding financial participation from the state.194 This suggestion, that any increase in supplemental payments without a corresponding increase in State spending, is also reflected in the discussion of IGT, in which CMS states: We believe this shift in designation has facilitated higher supplemental payments to certain providers, without the state incurring additional cost to fund the nonfederal share of payment […] We are concerned that this type of arrangement is not consistent with the basic construct of the Medicaid program as a cooperative federal-state partnership where each party shares in the cost of providing medical assistance to beneficiaries.195 84 Fed. Reg. at 63752. 84 Fed. Reg. at 63752. (emphasis added) 195 84 Fed. Reg. at 63750. (emphasis added) 193 194 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 78 This interpretation is inconsistent with federal statutory requirements that set no such strict limitations upon State participation in the non-federal share of Medicaid funds. i. Statutory Requirement for State Participation Requirements and Use of Local Sources Pursuant to statutory authority, Medicaid is a cooperative federal-state partnership; however, CMS has taken the federal-state partnership beyond that intended and provided for in statute. Section 1902(a) of the Act requires “[a] State plan for medical assistance must— […] (2) provide for financial participation by the State equal to not less than 40 per centum of the nonFederal share of the expenditures under the plan[.]” Pursuant to this language, State participation is required at a level of 40% of the total non-federal share for all State plan expenditures, not 40% of the non-federal share for each State plan expenditure. There may be instances where the non-federal share for one expenditure is 100% funded by the State but another expenditure is 0% funded by the State, neither of which matters as long as the State funds at least 40% of the nonfederal share for all expenditures. For CMS to imply that a new Medicaid program is manipulative, because the non-federal share of the payments is entirely funded with local funds and not funded with State funds, is erroneous and without basis. Congress recognizes the use of local funds in numerous areas of the Act. First, Congress allows 60% of the non-federal share of total expenditures under the plan to be provided by nonState sources, such as local sources.196 Second, Congress recognizes local sources of the nonfederal share by simply requiring the State plan to assure that the lack of adequate funds from local sources will not result in lowering the amount, duration, scope or quality of care and services available under the plan.197 Lastly, Congress provides that IGTs from units of government may serve as the non-federal share, as long as such funds are not derived by the unit of government from impermissible donations or taxes that will not otherwise be recognized as the non-federal share.198 For CMS to suggest that the State must share in the cost of every Medicaid expense ignores the statutory intent to allow local units to assist in the funding of Medicaid expenditures. Request: HHC requests CMS withdraw its postulation that a Medicaid program is manipulative simply because the non-federal share of the payments is entirely funded with local funds and not funded with State funds, as federal law permits the use of local funds for the non-federal share and does not require a State to share in the cost of every Medicaid expense. This flawed logic underlies many of the provisions of the Proposed Rule, therefore, Soc. Sec. Act 1902(a)(2). Soc. Sec. Act 1902(a)(2). 198 Soc. Sec. Act 1903(w)(6)(A). 196 197 Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 79 HHC requests that CMS review any final rule to ensure all new policies based in this faulty assumption are similarly removed. ii. State Participation via Administrative Participation Financial Participation versus While CMS emphasizes the need for State participation, CMS eliminates States’ participation by eradicating States’ ability to make the determination of whether the State’s unit of local government qualifies as an NSGP and make other discretionary decisions, such as regarding the implementation and ongoing operation of State plans authorizing supplemental payments and health care-related taxes. CMS calls for State participation, via cost, but ignores the value of participation via other mechanisms such as administration, determinations, and oversight. “Participation” cannot and should not be solely measured in dollars and to exclusively focus on States’ participation in cost is ignoring that States better understand the State-specific organizational and programmatic structure and therefore are in a better position to administer States’ Medicaid program and make decisions regarding the same. Request: HHC requests CMS continue to support State participation in the Medicaid program by relying on States to administer and make determinations related to the Medicaid program, rather than only permitting States to participate only in the cost of the Medicaid program (and improperly suggesting that States must participate in every Medicaid cost, rather than 40% of the total cost). III. Spending Clause Concerns HHC believes that by terminating Medicaid SPAs authorizing existing supplemental payment programs and penalizing late reporting by withholding funds, CMS may be violating appropriations and spending laws. Proposed §§447.252(e) and 447.302(d) terminate all existing SPAs for supplemental payments approved prior to the final rule’s effective date at either three (3) or two (2) year periods depending on the circumstances. Sections 447.252(d) and 447.302(c) then permit States to submit new SPAs subject to CMS’ new requirements and a three (3) year limited duration. Similar termination and renewal requirements are established for health carerelated tax waivers at §433.72(c)(3). The practical effect of these provisions is that States must either accept the new conditions of participation or forego substantial federal funds currently provided under the program. First, CMS’ withholding of federal funds based on conditions not established under federal law may be invalid under a Constitutional Spending Clause analysis since §1902(a)(2) of the Act, and other similar provisions, as they do not place any limitation on State funds that can be used as the non-federal share, other than to require that State funds be used for not less than 40% of the non-federal share. Rather, CMS appears to be unilaterally imposing conditions on a Centers for Medicare & Medicaid Services Department of Health and Human Services Attn: CMS-2393-P January 31, 2020 Page 80 State’s receipt of that money that are not supported by federal law and appear to be in direct contradiction of federal law, such as Section 6(A) as described above. Second, under §447.290, CMS proposes to penalize States by withholding federal funds due to noncompliance. Congress disfavored such administrative mechanisms to enforce State compliance with IGT requirements. As noted below, in the promulgation of the 1991 Act, the House Committee on Energy and Commerce made clear its intent not to allow CMS to rely on administrative sanctions as a mechanism for enforcing State cooperation: The purpose of the Committee bill is to protect the flexibility that States have under current law to use revenues from voluntary contributions, provider-specific taxes, and intergovernmental transfers as the State share of Medicaid spending. The moratorium on implementation of any regulation changing the current treatment of these financing methods should accomplish that purpose. However, to ensure that the Secretary does not do indirectly what he is prohibited from doing by regulation, the Committee bill would also prohibit the Secretary from using administrative mechanisms, such as the estimation and disallowance processes, to effectively prevent the States from using revenues from voluntary contributions, provider-specific taxes, and intergovernmental transfers to help pay for their Medicaid programs.199 Therefore, CMS’ attempted use of administrative mechanisms, such as disallowances in order to prevent the use of local funds as non-federal share for supplemental payments, may be a violation of Spending claims laws, as well as Congress’ intent. Request: HHC requests CMS eliminate the use of administrative mechanisms such as automatic termination of State Plans authorizing supplemental payments and health carerelated tax waivers and late reporting penalties, as such provisions appear to be in violation of appropriations, spending laws, and Congressional intent. 199 H. R. Rep. No. 102-310 (1991) as reprinted in U.S.C.C.A.N. at 1427. (emphasis added)