CMS Medicaid Rules Update

Updated May 27, 2008

Congressional Legislation
Actions by the Administration

Litigation

In recent months the Centers for Medicare and Medicaid Services (CMS) have promulgated multiple rules which could potentially adversely affect state Medicaid programs. The rules which have prompted congressional legislative activity as well as litigation by several states are as follows:

Health Care-Related Taxes (Effective April 22, 2008)
Elimination of Reimbursement Under Medicaid for School Administration Expenditures and Costs Related to Transportation of School-Age Children Between Home and School (Effective February 26, 2008. A moratorium was imposed in the Medicare, Medicaid, and SCHIP Extension Act prohibiting Secretary Leavitt from taking any action to implement the provisions of the rule prior to June 30, 2008)
Optional State Plan Case Management Services (Effective March 4, 2008. Four states, including New Jersey, have filed suit to delay the implementation of this rule.)
Clarification of Outpatient Clinic and Hospital Facility Services Definition and Upper Payment Limit
Coverage of Rehabilitative Services (Effective October 12, 2007. A moratorium was imposed in the Medicare, Medicaid, and SCHIP Extension Act prohibiting Secretary Leavitt from taking any action to implement the provisions of the rule prior to June 30, 2008)
Cost Limit for Providers Operated by Units of Government and Provisions to Ensure the Integrity of Federal-State Financial Partnership. (The U.S. Troop Readiness, Veteran's Care, Katrina Recovery and Iraq Accountability Appropriations Act imposed a one-year moratorium on the implementation of this rule that will expire May 25, 2008)
Graduate Medical Education. (The U.S. Troop Readiness, Veteran's Care, Katrina Recovery and Iraq Accountability Appropriations Act imposed a one-year moratorium on the implementation of this rule that will expire May 25, 2008)

In order to examine the rules in greater detail, congress directed the Congressional Research Service (CRS) to answer certain questions concerning the issues of focus in the rules. The following reports provide answers to these questions based on existing statute and regulation, and assuming that a moratorium goes into effect preventing implementation of the rules.

CRS Memo - Response to Senate Finance Committee Staff Questions Regarding Certain Medicaid Regulation- March 2008 Adobe PDF
CRS Memo - Medicaid and Graduate Medical Education
CRS Memo - Medicaid Financing-March 2008
CRS Memo - Medicaid Provider Taxes-March 2008
CRS Memo - Medicaid Regulation of Governmental Providers-March 2008
CRS Memo - Medicaid and Outpatient Hospital Services
CRS Memo - Medicaid and Targeted Case Management
CRS Memo - Medicaid Rehabilitative Services

Congressional Legislation

Congressional legislation has been introduced in both chambers of congress which would place a one-year moratorium on the implementation of these actions. On April 16th H.R. 5613, Protecting the Medicaid Safety Net Act of 2008, was reported out of the House Committee on Energy and Commerce. In response Health and Human Services (HHS) Secretary Michael O. Leavitt, has written a letter Adobe PDF expressing the Bush Administration's opposition to this legislation and the assurance of a veto if presented to the president in it's current form. NCSL policy opposes regulatory actions which seek to make significant policy changes within the Medicaid program and circumvent the legislative process. For this reason and concerns over CMS's regulatory agenda over recent months, NCSL submitted a letter of support to committee members to encourage the adoption of this measure.

H.R. 5613 passed in the House April 23 in a roll call vote 349 yeas-62 nays, giving the measure a 2/3 majority affirmative vote. An NCSL letter of support was sent to the Senate April 29th. The Administration has published a Statement of Administrative Policy Adobe PDF strongly opposing the measure claiming it would hamper CMS in their efforts to protect the fiscal integrity of the Medicaid program and promising a veto. CBO Cost Estimate of H.R. 5613

In the Senate, Senator John D. Rockefeller (D-WV) has introduced a similar measure which also includes some fiscal relief to states during this economic downturn.
S. 2819, the Economic Recovery Health Care Act of 2008, in addition to the regulatory moratorium would provide states with a temporary increase in their Medicaid federal medical assistance percentage (FMAP).

Summaries of H.R. 5613 and S. 2819 are available on the NCSL Legislative Update.

On May 14th, Representative David Obey (D-WI) introduced a floor amendment to H.R. 2642, the Iraq/Afghanistan Supplemental Appropriations bill, which added the provisions of H.R. 5613 contained in a domestic spending package to the Senate amendments and was adopted in the House on May 15th by a vote of 256 yeas--166 nays. The Senate Appropriations Committee included provisions in their FY 08 War Supplemental markup May 15th which impose a delay on the seven Medicaid rules. The Senate plans to begin consideration of the measure sometime next week. The President released a Statement of Administrative Policy on May 20th opposing the bill for reasons which include his objections to the Medicaid provisions, which he feels would jeopardize the integrity of the Medicaid program.

New item Senate Majority Leader Harry Reid (D-NV), proposed an amendment (S. Amdt. 4803) on May 21st which included the Medicaid rule moratorium provisions as well a provision placing a delay on implementation of the CMS August 17, 2007 directive concerning SCHIP enrollment. The Senate adopted the amended version of the measure, 70 yeas-26 nays, on May 22nd. .

Actions by the Administration

Congress placed a moratorium on the implementation of two of the rules in contention last year which was set to expire May 25, 2008. In response to requests concerning these rules , Secretary Michael O. Leavitt released the following statement May 22nd:

“I reiterate the Administration’s willingness to work with Congress and Governors to discuss their concerns before the rules go into effect,” Secretary Leavitt said. “We will voluntarily refrain from making these rules effective until August 1, 2008, more than 60 days after the moratorium expires. I invite interested parties to sit down with me and my staff in the coming weeks to ensure that we meet our mutual commitments to protect health care for low-income individuals.”

This delay will only impact on the following rules:

Cost Limit for Providers Operated by Units of Government and Provisions to Ensure the Integrity of Federal-State Financial Partnership. (The U.S. Troop Readiness, Veteran's Care, Katrina Recovery and Iraq Accountability Appropriations Act imposed a one-year moratorium on the implementation of this rule that will expire May 25, 2008)
Graduate Medical Education. (The U.S. Troop Readiness, Veteran's Care, Katrina Recovery and Iraq Accountability Appropriations Act imposed a one-year moratorium on the implementation of this rule that will expire May 25, 2008)Statement by Mike Leavitt Secretary of Health and Human Services On Two Medicaid Rules

Litigation

New item A coalition of organizations led by the Naional Association of Public Hospitals and Health Systems (NAPH), the Amercian Hospital Association (AHA), and the Association of American Medical Colleges (AAMC) filed suit in the United States District Court for the District of Columbia asking for a preliminary injunction to prohibit CMS from implementing the rule entitled Cost Limit for Providers Operated by Units of Government and Provisions to Ensure the Integrity of Federal-State Financial Partnership. CMS issued the final rule on May 29, 2007 intending to establish greater control over the use and misuse of intergovernmental transfers (IGTs) in financing the states’ shares of Medicaid costs. Certain IGTs are specifically allowed for funding the state share of program costs and are used by some states to finance the non-federal share of Medicaid costs. The rule modified the definition of government to include:

Any state or local government entity (including Indian tribes) that can demonstrate it has generally applicable taxing authority, and
Any state-operated, city-operated, county-operated, or tribally-operated health care provider.

The suit which was filed March 11, 2007 based on the proposed language, asked the court to reject the CMS regulation on three grounds: (1) CMS has overstepped its authority in dictating to states the governmental status of entities within their jurisdiction; (2) Congress has barred the agency from imposing a cost limit on Medicaid payments to governmental providers; and (3) CMS improperly issued the rule on the very day (May 25, 2007) that a Congressional moratorium blocking the rule took effect. The congressional moratorium was set to expire May 25, 2008, but on May 23rd Judge James Robertson of the U.S. District Court ordered that the plaintiffs motion be granted and that the rule be withdrawn and for CMS to refrain from any activities to implement the rule.

Preliminary Injunction (Published May 23, 2008)

Memoradum from Judge James Robertson (Published May 23, 2008)

NCSL comments on the proposed rule from March 19, 2007.

In response to the rules affecting NationalAmericanMemorandumOptional State Plan Case Management Services, four-states, Maine, Maryland, New Jersey, and Oklahoma, have filed suite in federal court seeking injunctive and declaratory relief against the provisions of the rule. The states claim that implementation of this rule would jeopardize the health and safety of Medicaid beneficiaries, limit state flexibility to provide case management in the most effective manner, and result in a substantial reduction in federal funds for the provision of Medicaid case management services. The claim also contends that the administrative action is outside the authority of the secretary and does not express congressional intent as it was written in the Deficit Reduction Act of 2005, in which congress clarified the scope of targeted case management.

Complaint for Injunctive and Declaratory Relief

Contacts:
Joy Johnson Wilson, Federal Affairs Counsel and Senior Committee Director--Health Cmte, (202) 624-8689
Rachel Morgan RN, BSN, Senior Policy Specialist, State-Federal Affairs, (202) 624-3569