The Most Important Health Care Regulation You’ve Never Heard Of
Late Friday afternoon, the Centers for Medicare and Medicaid Services released a seemingly obscure regulation that could have a profound impact both on state budgets and the health care overhaul – a proposed rule regarding Medicaid reimbursement levels. (The regulation is available temporarily here; it will be posted in the Federal Register this coming Friday.) Specifically, the regulations would require states, beginning in 2013, to undertake reviews at least every five years examining access issues for beneficiaries. The reviews would be based on a framework recommended by MACPAC (the new bureaucratic board created in the 2009 SCHIP reauthorization) requiring states to analyze enrollee needs, availability of care and providers, and utilization of services.
While the regulation attempts to portray the proposed rule as a moderate action, in reality the Administration is once again adding more regulations and mandates on to a fundamentally flawed program, without giving states the flexibility they need to design innovative solutions. In at least five areas, CMS’ actions undermine state flexibility by burdening states with requirements the Obama Administration has not kept itself:
Lack of Flexibility: The rule requires that states seeking to reduce or restructure provider payment rates must submit a special access review in advance of the reimbursement changes taking effect. This additional requirement, over and above the requirement to review provider rates at least every five years, will slow the pace of innovation within state Medicaid programs – and could prevent states from closing their budget gaps in a timely fashion, if they must submit reams of new paperwork to Washington before changes to reimbursement levels take effect. Moreover, it is highly questionable whether CMS can implement these regulatory requirements in a timely fashion. Some state legislatures only meet a few months every two years; will CMS be able to issue approvals rapidly when dozens of states are holding fast-paced legislative sessions simultaneously?
Hypocrisy on Public Comments: The rule “propose[s] to require a public process that states would conduct prior to submitting…changes in the provider payment structure” that would “provide a meaningful opportunity for beneficiaries, providers, and other interested parties to provide input and feedback.” Some may find these requirements for public comment and transparency a bit rich, given the notorious backroom deals that plagued the entire process surrounding the health care law. As a reminder, Congress adopted Medicare payment reductions that the Medicare actuary believes could affect beneficiary access WITHOUT hearing directly from the actuary, or holding hearings on the final bill prior to its passage. Moreover, a recent Congressional Research Service analysis found that of the health care rules released thus far – most of them propounded by CMS – more than 80 percent have NOT provided the opportunity for public comment prior to taking effect. Many may question why the Obama Administration is imposing public comment requirements on state Medicaid programs that it has yet to follow itself.
Private Right of Action: The rulemaking comes at a time when the Supreme Court next fall will consider a case from California in which several patient advocate and provider groups sued the state regarding what they viewed as improperly low Medicaid physician reimbursement levels. The Court in this case could give private parties the right to sue state Medicaid programs – an unprecedented step that could subject states to an onslaught of costly litigation. In an earlier filing with the Court dated December 2010, the Justice Department petitioned (unsuccessfully) for the Court NOT to hear the case, citing the Administration’s intent to pursue rulemaking this year. The Administration has yet to weigh in on whether it believes private entities should be allowed to sue Medicaid programs. However, the new processes outlined in the rule that states will have to undertake could provide ammunition for trial lawyers seeking to file lawsuits against state Medicaid programs.
Costs: The rule estimates that the administrative cost to states will be less than $100 million. However, imposing a new series of burdens on states beginning in 2013 will only add to the complex tasks states are already undertaking to prepare for the Exchanges and Medicaid expansion taking effect in January 2014. More importantly, CMS did not even attempt to estimate the cost to states that are found to have access difficulties. The regulation admits that “approximately 10 states will identify access issues and submit corrective action plans” – but doesn’t estimate what the costs of those “corrective action plans” will be.
Moreover, based on other information in the rule, the estimate that only 10 states will need to submit corrective action plans could be overly optimistic. For instance, page 24 of the rule states that “patterns of beneficiaries obtaining access to care through hospital emergency rooms may be an indication of the access problems for certain categories of services.” However, as we’ve previously noted, a report issued by the Centers for Disease Control last August found that more than 30% of Medicaid patients under 65 visited the ER at least once in 2007, compared to fewer than 20% of both uninsured patients and patients with private insurance. If CMS views high ER utilization by Medicaid beneficiaries as a sign of access problems, then far more than 10 states will likely have to submit corrective action plans, and the cost of these – which CMS refused to estimate – could be well into the billions.
Why Now? Some may question why CMS is releasing this regulation now, given that legal provisions on Medicaid provider reimbursement have been unchanged for well over two decades. At a time when the health care law is imposing unfunded mandates of at least $118 billion, the last thing fiscally strapped states need is a set of onerous new burdens from Washington – the full cost of which CMS refused to estimate. What is clear is that CMS’ actions impose yet another unfunded mandate on states. More importantly, many would argue that Congress should have considered beneficiary access issues BEFORE expanding Medicaid to as many as 25 million new individuals – rather than having unelected bureaucrats attempt to resolve them after the law passed by shoehorning yet another mandate on to already fiscally strapped states.