The Centers for Medicare & Medicaid Services (CMS) is proposing to rescind the authority of states to make Medicaid payments to a third party on behalf of an individual provider, rather than directly to the provider, “for benefits such as health insurance, skills training, and other benefits customary for employees,” under certain circumstances. This authority, which was adopted in a 2014 rule, was originally intended to “enhance state options to provide practitioners with benefits that improve their ability to function as health care professionals.”

CMS now explains that after further review, it believes “the new exception created by the 2014 rule is not consistent with the statute, may have resulted in provider payments being diverted in ways that do not comport with the law, and, in some cases, may have occurred without the express knowledge of the provider.” While the agency does not have details on the amount of reimbursement currently being reassigned to third parties by states, CMS believe it is likely in excess of $100 million. For instance, CMS estimates that unions may currently collect as much as $71 million under arrangements in which states reassign homecare workers’ dues to unions – an arrangement that would not be permitted under the proposed rule scheduled to be published on July 12, 2018.

CMS seeks comments on how it could provide further clarification on the types of payment arrangements that would be permissible assignments of Medicaid payments, and whether additional flexibilities are needed to support self-directed service models. CMS will accept comments for 30 days after publication.