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The Importance Of The Medicaid Fiscal Accountability Rule

April 7, 2020

By Brian Blase

To help the country deal with the coronavirus epidemic and the negative ramifications from businesses closing and the associated surge in unemployed and furloughed workers, Congress has passed three relief bills. One concern Congress has sought to address is the enormous strain states will face from much lower income and sales tax revenue than expected. Congress has provided assistance to states by raising the percentage that the federal government reimburses state Medicaid expenditures by about 10 percent for the remainder of the emergency. Some are proposing that Congress build on this and send significantly more money to states through Medicaid. Therefore, proper program integrity—for policy makers to know where the Medicaid dollars are going and that they are being used for their intended purpose—has likely never been more important.

Fortunately for this and other reasons, in November 2019, the Centers for Medicare and Medicaid Services proposed the Medicaid fiscal accountability rule. This rule, which is a reminder of how complicated the program’s financing has become, will be needed more than ever given that federal Medicaid spending will likely grow significantly as a response to the coronavirus epidemic. This rule also shows the extent to which a welfare program is being used to enrich certain politically powerful institutions and providers and to divert federal money intended for the poor for other purposes. This proposed rule takes important and overdue steps to address long-standing problems and implement commonsense reforms. If finalized, this rule will help ensure that extra Medicaid money flowing to states as a reaction to the coronavirus epidemic will make it to the intended recipients and for the intended purposes.

If finalized, the rule would increase program transparency to promote better policy making and oversight, ensure that Medicaid funds benefit program enrollees, and better uphold the shared financing design of Medicaid, which stipulates how program costs are shared between the states and the federal government. The rule also would reduce cronyism by placing important constraints on arrangements that states and providers have developed that function as kickbacks.

For decades, government watchdogs such as the Government Accountability Office (GAO) and the Office of the Inspector General (OIG) at the Department of Health and Human Services (HHS), as well as the Medicaid and CHIP Payment and Access Commission (MACPAC), have documented how states divert federal Medicaid money—raising federal costs and harming patient care. A bipartisan report issued by the House Committee on Oversight and Government Reform in March 2013 detailed Congress’ deep concern in this area, stating, “CMS has struggled historically in protecting Federal tax dollars from being misspent through Medicaid.” The report also criticized financing techniques that “undermine the nature of joint Federal-state financial responsibility for the Medicaid program.” …

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