Rule2022-10225
Medicaid Program; Reassignment of Medicaid Provider Claims
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 16, 2022
Effective
June 15, 2022
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This final rule reinterprets the scope of the general requirement that State payments for Medicaid services under a State plan must generally be made directly to the individual practitioner or institution providing services or to the beneficiary, in the case of a class of practitioners for which the Medicaid program is the primary source of revenue. Specifically, this final rule explicitly authorizes States to make payments to third parties on behalf of individual practitioners, for individual practitioners' health insurance and welfare benefits, skills training, and other benefits customary for employees, if the individual practitioner consents to such payments on their behalf.
Full Text
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<title>Federal Register, Volume 87 Issue 94 (Monday, May 16, 2022)</title>
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[Federal Register Volume 87, Number 94 (Monday, May 16, 2022)]
[Rules and Regulations]
[Pages 29675-29690]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10225]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 447
[CMS-2444-F]
RIN 0938-AU73
Medicaid Program; Reassignment of Medicaid Provider Claims
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule reinterprets the scope of the general
requirement that State payments for Medicaid services under a State
plan must generally be made directly to the individual practitioner or
institution providing services or to the beneficiary, in the case of a
class of practitioners for which the Medicaid program is the primary
source of revenue. Specifically, this final rule explicitly authorizes
States to make payments to third parties on behalf of individual
practitioners, for individual practitioners' health insurance and
welfare benefits, skills training, and other benefits customary for
employees, if the individual practitioner consents to such payments on
their behalf.
DATES: These regulations are effective June 15, 2022.
FOR FURTHER INFORMATION CONTACT: Christopher Thompson, (410) 786-4044.
SUPPLEMENTARY INFORMATION:
I. Background
A. Prohibition on Payment Reassignment
Congress established the Medicaid program in 1965 to provide health
care services for low-income beneficiaries and beneficiaries with
disabilities. Section 1902(a)(32) of the Social Security Act (the Act)
imposes certain requirements on how States may make payments for
services furnished to Medicaid beneficiaries. Section 1902(a)(32) of
the Act provides generally that ``no payment under the 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, under an assignment or power of attorney or otherwise.''
This prohibition is followed by four enumerated exceptions. On
September 29, 1978, we codified these exceptions under 42 CFR 447.10,
the regulation implementing section 1902(a)(32) of the Act, in the
``Payment for Services'' final rule (43 FR 45253) (hereinafter referred
to as the ``1978 final rule''). The 1978 final rule simply reorganized
and redesignated existing Medicaid regulations that previously appeared
at 42 CFR 449.31. Since the 1990s, we have mostly understood this
provision as governing only assignments and other similar Medicaid
payment arrangements.
Consistent with this understanding, from 2012 to 2014, we engaged
in rulemaking in the ``State Plan Home and Community-Based Services, 5-
Year Period for Waivers Provider Payment Reassignment, and Setting
Requirements for Community First Choice'' proposed rule published in
the May 3, 2012 Federal Register (77 FR 26362) (hereinafter referred to
as the ``2012 proposed rule'') to make it explicit that section
1902(a)(32) of the Act did not apply to certain payments made by the
State Medicaid program on behalf and for the benefit of individual
Medicaid practitioners whose primary source of revenue is the State
Medicaid program. We finalized this regulation in the ``State Plan Home
and Community Based Services, 5-Year for Waivers, Provider Payment
Reassignment, and Home and Community-Based Setting Requirements for
Community First Choice and Home and Community Based Services (HCBS)
Waivers'' final rule published in the January 16, 2014 Federal Register
(79 FR 2948) (hereinafter referred to as the ``2014 final rule''). In
that rulemaking, we reasoned that the statute permitted this policy
because the apparent purpose of section 1902(a)(32) of the Act was to
prohibit factoring arrangements, the practice by which providers sold
their claims for a percentage of their value to companies that would
then submit the claims to the State. The purpose was not to preclude a
Medicaid program that is functioning as the practitioner's primary
source of revenue from fulfilling the basic employer-like
responsibilities that are associated with that role, a scenario that
was not contemplated by section 1902(a)(32) of the Act and was outside
of the intended scope of the statutory prohibition.
We codified this policy as a regulatory exception under Sec.
447.10(g)(4) to permit withholding from the payment due to the
individual practitioner for amounts paid by the State directly to third
parties for health and welfare benefits, training costs, and other
benefits customary for employees. In an August 3, 2016 Center for
Medicaid and CHIP Services Informational Bulletin, we outlined
suggested approaches for strengthening and stabilizing the Medicaid
home care workforce, including by supporting home care worker training
and development. We noted that under Sec. 447.10(g)(4), State Medicaid
agencies could facilitate this goal by, with the consent of the
individual practitioner, making payment on behalf of the practitioner
to a third party that provides benefits to the workforce, such as
health insurance, skills training, and other benefits customary for
employees.\1\
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\1\ <a href="https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf">https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf</a>.
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[[Page 29676]]
B. Current Medicaid Payment Assignment Regulations
Medicaid regulations at Sec. 447.10 (``Prohibition against
reassignment of provider claims'') implement the requirements of
section 1902(a)(32) of the Act by providing that State plans may allow
payments to be made only to certain individuals or entities.
Specifically, payment may only be made to the individual practitioner
that provided the service (the ``provider''), the recipient (the
``beneficiary''), if he or she is a non-cash recipient eligible to
receive payment under Sec. 447.25, or under one of the limited
exceptions. The regulations specifically state that payment for any
service furnished to a recipient by a provider may not be made to or
through a factor, either directly or by power of attorney.
The exceptions to the general direct payment principle at Sec.
447.10 generally mirror those enumerated in the statute. They include
payment in accordance with a reassignment to a government agency or
reassignment under a court order. There are also exceptions permitting
payments to third parties for services furnished by individual
practitioners where certain employment or contractual conditions are
met. Additionally, there is another exception for payment to a business
agent, such as a billing service or accounting firm, that furnishes
statements and receives payments in the name of the individual
practitioner, if the business agent's compensation for this service is
related to the cost of processing the billing, and not dependent on the
collection of the payment.
In 2018 and 2019, in a departure from our prior interpretation of
this statute, we engaged in rulemaking to interpret the statutory
prohibition as applying more broadly to prohibit any type of Medicaid
payment to a third party other than the four exceptions enumerated in
the statute. In doing so, we interpreted the statutory phrase ``or
otherwise'' as encompassing any and all Medicaid payment arrangements
involving third parties. We proposed this broad interpretation of the
statutory language in the ``Reassignment of Medicaid Provider Claims''
proposed rule in the July 12, 2018 Federal Register (83 FR 32252)
(hereinafter referred to as the ``2018 proposed rule'') and finalized
it in the ``Reassignment of Medicaid Provider Claims'' final rule in
the May 6, 2019 Federal Register (84 FR 19718) (hereinafter referred to
as the ``2019 final rule''). This rulemaking eliminated the regulatory
exception added by the 2014 final rule.
C. California v. Azar
Six States and 11 intervenors challenged the 2019 final rule. In
California v. Azar, 501 F. Supp. 3d 830 (N.D. Cal. 2020), the district
court rejected the Department of Health and Human Services' (HHS')
arguments that section 1902(a)(32) of the Act expressly prohibited the
agency's pre-2018 interpretation and the States' related practices,
remanded the case to HHS for further proceedings, and vacated the 2019
final rule. Secretary Azar then appealed to the U.S. Court of Appeals
for the Ninth Circuit in a case that is currently in abeyance and
captioned California v. Becerra, No. 21-15091 (9th Cir.).
D. Individual Practitioner Workforce Stability and Development Concerns
Since the direct payment principle was originally enacted in
statute in 1972 and expanded in 1977, Congress changed the definition
of medical assistance under section 1905(a) of the Act to permit States
to offer coverage of categories of practitioner services in the
Medicaid program that are not offered in other health insurance
programs, such as personal care services and other HCBS. For these
practitioners, who often provide services independently, rather than as
employees of a service provider agency, the Medicaid program may be
their primary, or only, source of payment. Some States have sought
methods to improve and stabilize the workforce by offering health and
welfare benefits to such practitioners, and by requiring that such
practitioners pursue periodic training.
Within Medicaid, long-term services and supports (LTSS)
expenditures are shifting from institutional care (hospitals, nursing
facilities, etc.) to HCBS. In FY 2013, HCBS LTSS expenditures reached
51 percent of total Medicaid LTSS expenditures and increased to 58.6
percent in FY 2019.\2\ HCBS represented a majority of LTSS expenditures
in 28 States and the District of Columbia, and over 75 percent of
expenditures in five States in FY 2018.
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\2\ <a href="https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltssexpenditures2019.pdf">https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltssexpenditures2019.pdf</a>.
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Several States have requested that we adopt additional exceptions
to the direct payment policy to permit a State to withhold from a
payment due to the individual practitioner amounts that the
practitioner is obligated to pay for health and welfare benefits,
training costs, and other benefits customary for employees. These
amounts would not be retained by the State, but would be paid to third
parties on behalf of the practitioner for the stated purpose. We
recognize that HCBS workforce issues, such as workforce shortages and
staff turnover, have a direct and immediate impact on the quality of
and access to services available to beneficiaries. We believe that
State Medicaid agencies can play a key role in influencing the
stability of this workforce by determining payment rates and
facilitating greater access to benefits that support this class of
providers.\3\
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\3\ <a href="https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf">https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf</a>.
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II. Provisions of the Proposed Regulations
In the August 3, 2021 Federal Register, we published the ``Medicaid
Program; Reassignment of Medicaid Provider Claims'' proposed rule (86
FR 41803) (hereinafter referred to as the ``2021 proposed rule''). The
following is a summary of those proposed provisions.
A. Prohibition Against Reassignment of Provider Claims (Sec. 447.10)
Under title XIX of the Act, State Medicaid programs generally pay
for Medicaid-covered practitioner services through direct payments to
the treating practitioners. States may develop State plan payment rates
that account for costs related to health and welfare benefits,
training, and other benefits customary for employees. However, under
our previous interpretation of the statutory provision at section
1902(a)(32) of the Act, as reflected in regulations at Sec. 447.10
under the 2019 final rule, the entire rate was required to be paid to
the individual practitioner who provided the service, unless certain
exceptions applied. Under the 2019 final rule, none of the exceptions
applied to payments for health and welfare benefits, training, and
other benefits customary for employees when the practitioner is not in
a direct employment or contractual relationship with a third party that
submits claims on the practitioner's behalf. While the 2019 final rule
did not directly prevent practitioners from purchasing health
insurance, enrolling in trainings, or paying dues to a union or other
association, it did create an unnecessary administrative burden on
practitioners, and may have increased costs for those practitioners by
eliminating access to lower group rates.
Following the district court's decision and analysis in California
v. Azar, we re-examined the statutory language and legislative history,
and now conclude
[[Page 29677]]
that the prohibition in section 1902(a)(32) of the Act is better read
to be limited in its applicability to Medicaid payments to a third
party under an assignment, power of attorney, or other similar
arrangement. In other words, and consistent with the longstanding title
of the provision at Sec. 447.10 (``Prohibition against reassignment of
provider claims''), a title which the regulation has consistently had
since at least 1978, the statutory prohibition is better viewed as an
anti-reassignment provision that only governs assignment-like payment
arrangements.\4\ We do not believe this provision should be interpreted
as a broad prohibition on any and all types of Medicaid payment
arrangements beyond payments made directly to Medicaid beneficiaries
and providers or enumerated in the statutory exceptions. As such, we
proposed to amend Sec. 447.10 to add a new paragraph (i), which would
incorporate similar language from the previous paragraph (g)(4), as a
new provision clarifying that certain types of third-party payments on
behalf of a particular category of practitioners are outside the scope
of the statutory provision in section 1902(a)(32) of the Act, rather
than describing those payments as an exception to that prohibition.
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\4\ See, for example, Gorman v. Nat'l Transp. Safety Bd., 558
F.3d 580, 588 & n.5 (D.C. Cir. 2009) (holding that a regulatory
heading confirmed the reasonableness of an agency's reading of the
rule in that case, and observing that as a general matter ``a short
and simple, if ambiguous, subsection of a regulation'' may be
``clarified by the heading,'' and that headings ``may be of use'' ``
`when they shed light on some ambiguous word or phrase.' '')
(internal citations omitted).
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Specifically, Sec. 447.10(i) as proposed specified that the
payment prohibition in section 1902(a)(32) of the Act and Sec.
447.10(d) would not apply to payments to a third party on behalf of,
and with the consent of, an individual practitioner for benefits such
as health insurance, skills training, and other benefits customary for
employees, in the case of a class of practitioners for which the
Medicaid program is the primary source of revenue.
As discussed in the 2021 proposed rule, the text of the statute
addresses only assignments and related payment arrangements wherein a
provider's right to claim or receive full payment for services
furnished to Medicaid beneficiaries is transferred to a third party.
The statute includes examples of the types of payment arrangements
intended to be prohibited, ``under an assignment or power of attorney
or otherwise.'' The 2021 proposed rule included our reasoning that the
language ``or otherwise'' is best read as referencing payments made
under arrangements that are similar to an ``assignment'' and a ``power
of attorney'' such that the reach of the prohibition under section
1902(a)(32) of the Act does not extend to payment arrangements that are
wholly distinct from such types of arrangements. Consistent with this
interpretation, we also proposed to amend Sec. 447.10(a) to include
the phrase ``under an assignment or power of attorney or a similar
arrangement.'' We stated that this change would align the regulation
with the applicable statutory language and our reading of that language
and would create a consistent framework for the proposed new paragraph
(i).
The introductory language in section 1902(a)(32) of the Act
specifies that no payment under the plan for any care or service
furnished to an individual shall be made to anyone other than such
individual or the person or institution providing such care or service.
This prohibition applies only to payments ``for any care or service,''
which we interpret to prohibit full diversion of the right to claim and
receive such payments to third parties absent an exception, but not to
apply to partial deductions from payments at the request or with the
consent of the provider, to make payments to third parties on behalf of
the provider.
A re-examination of the statutory exceptions to the general
prohibition also supports the conclusion that the prohibition under
section 1902(a)(32) of the Act does not extend to payment arrangements
that are outside the category of payments with assignments or
assignment-like arrangements. The excepted arrangements or transactions
are all similar to assignments in that they involve third parties
submitting claims directly to the State Medicaid agency for payment or
having the right to receive the full amount of all payments due to the
provider for services furnished to Medicaid beneficiaries. More
specifically, section 1902(a)(32) of the Act contains several
enumerated exceptions to the general principle of direct payment to
individual practitioners. As described in the proposed rule, these
exceptions may appear to be largely unrelated; however, they all
involve payment arrangements where third parties are submitting claims
to the Medicaid agency or where the right to receive all of the
payments due to a provider for services furnished to Medicaid
beneficiaries is transferred to a third party.
The fact that the only types of transactions that are explicitly
excepted by the statute are assignment-like transactions that involve
the transfer to a third party of either a provider's right to submit
claims directly to the State or to receive all payments otherwise due a
provider for services furnished supports our interpretation that the
scope of the statutory prohibition extends only to payments to a third
party that involve similar types of arrangements. By contrast, partial
deductions from Medicaid payments requested by a provider to make
separate payment to a third party on behalf of the provider for
benefits customary for employees does not involve third parties
receiving direct payment from the State for care or services provided
to Medicaid beneficiaries. Nor does this arrangement allow such third
parties to pursue independent claims against the State for Medicaid
payment.
The legislative history of section 1902(a)(32) of the Act also
supports our conclusion that the statutory text is best read as an
anti-assignment prohibition. When Congress adopted the original version
of this statute in 1972, it was focused on the practice of factoring--a
practice which often led to the submission of inflated or false claims,
raising concerns that the factoring industry was a breeding ground for
Medicaid fraud.\5\ When Congress amended this provision in 1977, it
reiterated that it understood the provision simply as a response to and
an attempt to prevent factoring. Indeed, in 1977, Congress amended the
anti-reassignment provision to close what it perceived to be a loophole
that factoring companies were exploiting.\6\ This legislative history
supports our proposed interpretation of the statutory prohibition as
extending only to assignments and assignment-like arrangements that
involve a potential for the type of abuse that the statute was intended
to prevent.
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\5\ See, for example, H.R. REP. NO. 92-231, at 104 (1972),
reprinted in 1972 U.S.C.C.A.N. 4989, 5090; H.R. REP. NO. 92-231, at
205, reprinted in 1972 U.S.C.C.A.N. at 5090; S. REP. NO. 92-1230, at
204 S. REP. NO. 92-1230, at 204 (1972); Professional Factoring
Service Association v. Mathews, 422 F. Supp. 250, 251-52 (S.D.N.Y.
1976).
\6\ See, for example, H. REP. NO. 95-393(II), at 43, reprinted
in 1977 U.S.C.C.A.N. at 3045; H. REP. NO. 95-393(II), at 46,
reprinted in 1977 U.S.C.C.A.N. at 3048; H. REP. NO. 95-393(II), at
48-49 (1977), reprinted in 1977 U.S.C.C.A.N. 3039, 3051; S. REP. NO.
95-453, at 6-8 (1977).
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For classes of practitioners for whom the State's Medicaid program
is the only or primary payer, the ability of the State to ensure a
stable and qualified workforce may be enhanced by the ability to deduct
from Medicaid payments at the request or with the consent of a provider
to make separate payment to a third party on behalf of the provider.
Deductions for these purposes
[[Page 29678]]
are an efficient and effective method for ensuring that the workforce
has provisions for basic needs and is adequately trained for their
functions as health care professionals, thus ensuring that
beneficiaries have access to such practitioners and higher quality
services. Requiring practitioner consent for such deductions ensures
that Medicaid provider payments are treated appropriately, and in a
manner consistent with the wishes of the practitioner, for purposes of
receiving benefits such as health insurance, skills training, and other
benefits customary for employees.
Although we proposed that these deduction practices fall outside
the scope of what the statute prohibits, we stated in the 2021 proposed
rule that we consider it important to document the flexibility in
regulation to ensure confidence in the provider community, particularly
for front line workers during the Coronavirus Disease 2019 (COVID-19)
pandemic. Within broad Federal Medicaid law and regulation, we have
long sought to ensure maximum State flexibility to design State-
specific payment methodologies that help ensure a strong, committed,
and well-trained workforce. Currently, certain categories of Medicaid
covered services, for which Medicaid is a primary payer, such as home
and personal care services, suffer from especially high rates of
turnover and low levels of participation in Medicaid which negatively
impact access to and quality of providers available to Medicaid
beneficiaries.\7\ These issues often result in higher rates of
institutional stays for beneficiaries. We also noted that the proposed
rule would support our previous efforts to strengthen the home care
workforce by specifying what actions are permitted to help foster a
stable and high-performing workforce.\8\ As proposed, under the
amendment to Sec. 447.10, State Medicaid programs would be permitted,
as authorized under State law and with the consent of the individual
practitioner, to deduct from the practitioner's payment to pay third
parties for health and welfare benefit contributions, training costs,
and other benefits customary for employees.
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\7\ Kim J. (2020), Occupational Credentials and Job Qualities of
Direct Care Workers: Implications for Labor Shortages. Journal of
Labor Research, 1-18. Advance online publication. <a href="https://doi.org/10.1007/s12122-020-09312-5">https://doi.org/10.1007/s12122-020-09312-5</a>.
\8\ <a href="https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf">https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf</a>.
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For States, the third-party payment arrangements authorized by the
provisions in the proposed rule would be optional; States that choose
to implement them can use existing administrative processes to make
deductions for certain benefits on behalf of the individual
practitioner and with consent of the practitioner, from a
practitioner's Medicaid payment. For practitioners, we stated that the
proposed rule would enhance the ability of the practitioners,
regardless of their employment arrangement, to perform their functions
as health care professionals, and thus support beneficiary access to
quality home care. The Medicaid program, at both the State and Federal
levels, has a strong interest in ensuring the development and
maintenance of a committed, well-trained workforce.
With the majority of LTSS expenditures spent on HCBS, rather than
institutional services, the importance of a strong home care workforce
in Medicaid cannot be understated. HCBS provides critical services to
millions of individuals across the county, including people with
disabilities and older Americans. As the COVID-19 pandemic continues to
impact health care in the United States, it is crucial that Medicaid
beneficiaries are able to receive the home-based care they need in
their homes and communities. Section 9817 of the American Rescue Plan
Act of 2021 (Pub. L. 117-2) reinforces the importance of HCBS in
Medicaid and during the COVID-19 pandemic by providing a temporary 10
percentage point increase to the Federal medical assistance percentage
for certain HCBS, including those delivered by home care providers. As
we explained in the proposed rule, the flexibility permitted under the
rule would help protect the economic security for home care providers
as well as protect and strengthen the HCBS workforce and accelerate
LTSS reform and innovation. Facilitating access to benefits customary
for employees for home care providers is critically important to
improve workforce standards. Moreover, because the majority of home
care workers are women and people of color,\9\ permitting this type of
payment arrangement will directly benefit those populations and address
inequities.
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\9\ <a href="https://www.kff.org/coronavirus-covid-19/event/march-30-web-event-unsung-heroes-the-crucial-role-and-tenuous-circumstances-of-home-health-aides-during-the-pandemic/">https://www.kff.org/coronavirus-covid-19/event/march-30-web-event-unsung-heroes-the-crucial-role-and-tenuous-circumstances-of-home-health-aides-during-the-pandemic/</a>.
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Further, as discussed in the proposed rule, the increasing shortage
of home care providers due to high turnover, low participation in
Medicaid, low wages, and lack of benefits and training has
significantly reduced access to home care services for older adults and
people with disabilities. State Medicaid agencies can play a key role
in increasing such access by improving workforce stability of these
practitioners by addressing training, wages and benefits, and provider
payment.\10\ Under the rule as proposed, State Medicaid agencies would
be authorized to make deductions from a practitioner's Medicaid
payment, with the consent of the individual practitioner, to pay a
third party on behalf of the individual practitioner for benefits that
provide the workforce with freedom to advocate for higher wages and
career advancement, access to health insurance and necessary trainings,
and other customary employee benefits.
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\10\ <a href="https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf">https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf</a>.
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States typically have an established administrative process for
their own employees' deductions for benefits that can also be applied
to classes of practitioners for whom Medicaid is the only or primary
payer. Additionally, State Medicaid agencies often perform employer-
like responsibilities without a formal relationship to a certain class
of practitioners for whom Medicaid is the only or primary payer, such
as home care providers or personal care assistants. Using the State's
established administrative processes to deduct funds to pay third
parties on behalf of the practitioner, with the consent of the
individual practitioner, may simplify administrative functions and
program operations for the State and provide advantages to
practitioners. For example, a practitioner could receive continuous
health care coverage because the State automatically deducts funds for
health insurance premiums on behalf of the practitioner. Providing
State Medicaid agencies with the authority to make deductions from
Medicaid payments, with the consent of the individual practitioner, to
make payments to a third party on behalf of the individual practitioner
for benefits such as health insurance, skills training, and other
benefits customary for employees will ensure many of the country's most
vulnerable workers, who care for the country's most vulnerable
individuals, gain or retain benefits which help them support themselves
and their families, and subsequently benefit those individuals they
care for.
We noted in the 2021 proposed rule that these provisions would not
authorize a State to claim, as a separate expenditure under its
approved Medicaid State plan, amounts that are deducted from payments
to individual practitioners (that is, health and welfare
[[Page 29679]]
benefit contributions, training, and similar benefits customary for
employees). As explained in the proposed rule, should a State wish to
recognize such costs, they would need to be included as part of the
rate paid for the service to be eligible for Federal financial
participation. No Federal financial participation would be available
for such amounts apart from the Federal match available for a rate paid
by the State for the medical assistance service. These costs also could
not be claimed by the Medicaid agency separately as an administrative
expense. As a result, we noted that the rule would have little to no
impact on Federal Medicaid funding levels as the 2014 final rule is the
status quo in light of the district court's decision in California v.
Azar.
As discussed in the 2014 final rule, the similar policies proposed
in the 2021 proposed rule would not require any change in State funding
to the extent that practitioner rates have already factored in the cost
of benefits, skills training, and other benefits customary for
employees. As proposed, this rule would simply ensure flexibility for
States to pay for such costs directly on behalf of practitioners and
ensure access to benefits, such as health insurance, skills training,
and other benefits customary for employees. We noted that should the
rule be finalized as proposed, there may even be cost savings resulting
from the collective purchase of such benefits and greater workforce
stability.
We solicited public comments on the extent to which the payment
arrangements that would be permitted under the 2021 proposed rule would
benefit States and practitioners, particularly if and how a
practitioner's access to benefits would be impacted, as well as any
adverse impacts that may have not been anticipated. Additionally, we
sought comments on other permissible actions based on our proposed
statutory interpretation that might similarly simplify and streamline
States' operations of their Medicaid State plans and payment processes.
III. Analysis of and Responses to Public Comments
We received 32 public comments in response to 2021 proposed rule.
The following is a summary of the comments we received and our
responses.
A. General
Comment: Most commenters stated support for the 2021 proposed rule.
Commenters appreciated the flexibility provided by this rule, which
would be optional for States to avail themselves of, and view the rule
as a beneficial policy for States and providers. Commenters believe the
rule aligns with the previous 2014 final rule, and will enhance and
strengthen HCBS programs. One commenter noted that the ability of
States to process payroll and make deductions for taxes and other
workplace benefits for independent provider home care workers provides
parity between independent providers and agency-employed workers for
whom such deductions are a standard practice. Some commenters opposed
the rule and alleged that there is no or insufficient statutory
authority to create this regulation and raised concerns about the
inclusion of union dues in payments that may be made to third parties.
Response: We appreciate the support for the changes in the 2021
proposed rule. We wish to clarify an imprecise characterization of the
rule regarding who and what entities the rule affects and what the rule
authorizes. As clarified in a subsequent response, individual
practitioners affected by this rule are individual providers of
Medicaid services whose primary source of revenue is Medicaid. The rule
does not authorize States to process payroll or make tax deductions for
independent providers. This rule provides State Medicaid agencies with
the authority to make deductions from Medicaid payments, with the
consent of the individual practitioner, to make payment to a third
party on behalf of the individual practitioner for benefits such as
health insurance, skills training, and other benefits customary for
employees. We address concerns regarding statutory authority and unions
more specifically in subsequent responses.
Comment: One commenter supported the proposed revision to Sec.
447.10(a) as the provision aligns with the court's ruling in California
v. Azar and the interpretation of the statutory prohibition as
extending only to assignments and assignment-like arrangements that
involve a potential for factoring that the statute was intended to
prevent.
Response: We agree with the district court's decision and analysis
in California v. Azar. We appreciate the comment that expressed support
for the proposed revision to Sec. 447.10(a).
Comment: One commenter requested CMS define the term ``individual
practitioner'' used in the rule.
Response: In the context of Sec. 447.10, ``individual
practitioner'' simply refers to an individual as opposed to an entity
or institution providing Medicaid services. Individual practitioners
can include individuals that have a contractual employment relationship
with the State agency. This rule pertains specifically to a class of
practitioners who are not employees of the State, or a service agency
that is paid by the State, such as a home health agency, but whose
primary source of revenue is Medicaid. To make this determination,
States may look only at revenue related to Medicaid-covered services
furnished by the practitioner. Medicaid-covered service revenue does
not include revenue related to unallowable facility costs, such as room
and board or food. The proposed regulatory text, which we are
finalizing, provides the necessary latitude for a State to determine
whether it is acting in an employer-like role for a particular class of
practitioners.
Comment: One commenter requested CMS modify the regulatory language
in Sec. 447.10(i) to explicitly include all providers of home and
community-based services. Specifically, the commenter proposed using
the term ``providers of Home and Community Based Services'' rather than
``individual practitioner'' in Sec. 447.10(i).
Response: We are maintaining the term ``individual practitioner''
to prevent any unintentional exclusions of the types of providers
affected by this rule. As stated in the 2012 proposed rule, we included
the payment reassignment provisions in the HCBS proposed rule because
State Medicaid programs often operate as the only or primary payer for
a class of practitioners that includes HCBS providers. While the final
rule does apply to a large number of HCBS workers, there are other
provider types affected as well, such as personal care services and
home health workers.
Comment: Several commenters offered lists of the types of benefits
offered to practitioners affected by this rule: health insurance
premiums, life insurance premiums, retirement plan contributions, union
and association dues, job training (for example, CPR/first aid,
dementia care, stress management, fall prevention, nutrition, and
health) and education trusts. One commenter indicated that the health
insurance premium for individual practitioners affected by this final
rule in the State of Washington was $25, deducted monthly. A few
commenters provided single statistics regarding the number of providers
affected by this final rule in their area or State. One commenter
indicated there were 26,300 providers in Alameda County in California,
while another commenter indicated a quarter of a million providers in
California have elected voluntary deductions, and 24 percent of
Wyoming's small, independent
[[Page 29680]]
providers of developmental disabilities waiver services offer health
insurance to their employees.
Response: In the 2021 proposed rule, we sought public comments and
data on the type and amount of benefit deductions broken down by
benefit that may be included under Sec. 447.10(i). We appreciate the
commenter's submission of State-specific information about the types
and amounts of benefits available to providers. Based on the public
comments and data received, none of the information suggested a need to
further revise Sec. 447.10(i).
B. Statutory Authority
Comment: Several commenters agreed with the district court's
decision in California v. Azar, which rejected HHS's arguments in that
case that section 1902(a)(32) of the Act expressly and unambiguously
prohibited the agency's pre-2018 interpretation, an interpretation
which had been set forth in the 2014 final rule, and States' related
practices. Several commenters also agreed with CMS' analysis that the
statutory prohibition is better viewed as an anti-reassignment
provision that only governs assignment-like payment arrangements.
Commenters commended CMS' quick action to issue a proposed rule to
amend the relevant regulations under the new statutory interpretation
described in the 2021 proposed rule.
Response: We also agree with the district court's decision and
analysis in California v. Azar. We appreciate the commenters' support
of our statutory analysis described in the 2021 proposed rule and
recognition of the agency's swift action in response to the district
court's decision.
Comment: Nearly every commenter opposed to the rule cited a lack of
CMS authority to add the Sec. 447.10(i) language to the regulatory
text under part 447. Those commenters stated that the language in
section 1902(a)(32) of the Act both prohibited these types of
deductions from Medicaid payments, and did not have ambiguity to allow
us to interpret the statute differently than the way we interpreted it
in the 2019 final rule. Most asserted that the principle of direct
payments that begins section 1902(a)(32) of the Act does not leave room
for interpretations that permit payment deductions outside of the
subsequent enumerated exceptions. Some commenters stated that the 2021
proposed rule contradicted some of the agency's own prior
interpretations of the statute, with one citing correspondence with a
State seeking to formally permit such practices.
Response: Federal administrative agencies generally have authority
from Congress to regulate certain activities. An agency's authority
often derives from specific statutory directives, which the agency is
charged with interpreting. The Supreme Court has long noted Congress's
delegation of ``extremely broad regulatory authority to the Secretary
in the Medicaid area.'' \11\ Here, we are relying on our interpretation
that section 1902(a)(32) of the Act does not prohibit payments made by
the State Medicaid program for certain benefits on behalf of individual
Medicaid practitioners whose primary source of revenue is the State
Medicaid program, which we discuss in subsequent responses. From there,
we are utilizing our general rulemaking authority at section 1102 of
the Act, which authorizes the agency to publish regulations as
necessary for the efficient function of, in relevant part, the Medicaid
program. Ensuring that individual practitioners whose primary source of
revenue is the State Medicaid program have the training and benefits
necessary to remain in the workforce and to continue furnishing quality
services, particularly to some of Medicaid's most vulnerable
beneficiaries, is necessary for the Medicaid program's efficient
operation, especially as more and more needy beneficiaries choose to
receive care in their homes.\12\
---------------------------------------------------------------------------
\11\ See, for example, Wisconsin Dep't of Health and Family
Servs. v. Blumer, 534 U.S. 473, 496, n. 13 (2002) (collecting
authorities).
\12\ See, for example, Wisconsin Dept. of Health and Family
Servs., 534 U.S. at 496, n. 13.
---------------------------------------------------------------------------
Agencies are not bound by their prior interpretations of a
statutory provision and may change their minds. Indeed, the Supreme
Court has indicated that ``an initial agency interpretation is not
instantly carved in stone. On the contrary, the agency . . . must
consider varying interpretations and the wisdom of its policy on a
continuing basis,'' \13\ and ``an administrative agency is not
disqualified from changing its mind.'' \14\
---------------------------------------------------------------------------
\13\ Nat'l Cable & Telecomms. Ass'n v. Brand X internet Servs.,
545 U.S. 967, 981 (2005) (quoting Chevron U.S.A. Inc. v. Nat. Res.
Def. Council, Inc., 467 U.S. 837, 863-64 (1984)).
\14\ NLRB v. Local 103, Int'l Ass'n of Bridge Workers, 434 U.S.
335, 351 (1978).
---------------------------------------------------------------------------
In the 2021 proposed rule, and in adherence to the order of the
district court in California v. Azar to revisit the statutory question,
we reviewed the statute anew, focusing on the language of the statute
itself and the issues Congress sought to address as indicated by the
legislative history. From this analysis, we determined that the
payments to third parties addressed in this rulemaking fall outside of
what is covered by the statute. Notably, when we first enacted this
policy as an exception in 2014, some States were already making the
types of deductions and payments expressly authorized under that 2014
exception, based on a belief that it was permitted under the statute.
While we did initially raise concerns with a State about whether
deductions it was making from practitioner payments were in line with
the statute, it was not until the 2012 proposed and 2014 final rules
that we chose to use rulemaking to address these payment deductions
under the statute. We concluded that the statute did not seek to limit
administrative efficiency for a class of practitioners for which the
Medicaid program is the primary source of revenue. In the present rule,
we merely proposed, and are now finalizing, a different approach to the
foundational principle we discerned from the intent of the statute, and
from which our only deviation was in the 2019 final rule.
Comment: Some commenters suggested that this rulemaking is not the
result of new evidence, but rather political motivations, citing the
change in administration since CMS finalized the 2019 final rule.
Response: The cause of the change was our thorough statutory
analysis conducted in compliance with a court order, and not the result
of political interests. In California v. Azar, the court vacated the
2019 final rule and remanded to HHS for further consideration of the
appropriate interpretation of the statute. Upon our re-examination of
the statute, as well as consideration of the court's analysis that
resulted in the remand, we determined that a wholly new statutory
interpretation was appropriate and correct.
Comment: Many commenters agreed with CMS' conclusion that the
purpose of section 1902(a)(32) of the Act was to prohibit factoring and
that it extends only to assignments and assignment-like arrangements
that involve a potential for the type of abuse that the statute was
intended to prevent. One commenter stated that section 1902(a)(32) of
the Act is not an unbounded prohibition on all third-party payments.
Another commenter indicated that a provision of a statute should be
understood in the context of the whole statute, and not read in
isolation, citing King v. St. Vincent's Hosp., 502 U.S. 215, 221 (1991)
(referencing ``the cardinal rule that a statute is to be read as a
whole, since the meaning of statutory language, plain or not, depends
on context''). The commenter stated that, in reading the statute in its
entirety, the prohibition of ``payments'' prohibits assignments of
[[Page 29681]]
the right to payment and the words ``or otherwise'' refers to
assignments in which claims for payment from individuals other than
providers or agencies would occur. A third commenter stated that
statutory interpretation canons of noscitur a sociis (that is, ``a word
is known by the company it keeps'') and ejusdem generis (which limits
general terms that follow specific ones to matters similar to those
specified) supported CMS' conclusions; therefore, payment deductions,
including partial deductions, are not exceptions to the anti-assignment
provision and fall outside of the scope of what the statute prohibits.
Response: We agree that section 1902(a)(32) of the Act was intended
by Congress to prohibit factoring-type arrangements. For the reasons
explained in the 2021 proposed rule and in our response to the next set
of comments about the ``or otherwise'' language, we agree that the
provision is not an unbounded prohibition on all third-party payments,
but instead a prohibition that only extends to assignments and
assignment-like arrangements that involve a potential for the type of
abuse that the statute was intended to prevent. We also agree that both
looking at the statute as a whole and applying the ejusdem generis
canon of statutory construction support our conclusion that section
1902(a)(32) of the Act does not unambiguously prohibit all third-party
payment arrangements that are not explicitly excepted by the statute,
and that the canon noscitur a sociis may apply as well.
Comment: Some opposing commenters stated the statute was clearly
drafted in a way to end all payments to third parties, other than in
the specific exceptions, with one pointing to the comma before ``under
an assignment or power of attorney or otherwise,'' as evidence that
those terms are non-essential rather than limiting. Two commenters
closely scrutinized CMS' assessment of the meaning of ``or otherwise''
in the Act, disagreeing with our conclusion and the associated change
to Sec. 447.10(a). Both stated the phrase is broadly inclusive, as
supported by some cited case law, and therefore CMS' more narrow
interpretation was incorrect. One commenter noted CMS' use of the
principle of ejusdem generis did not apply because of the broad meaning
of the phrase in question. One commenter stated if a court were to
review our interpretation, the court would not find in our favor.
Response: We do not agree with these commenters. The Medicaid
statute at section 1902(a)(32) contains no clear prohibition on all
non-excepted third-party payments as some commenters suggest. Viewing
these commenters' statements in the most favorable light, the statutory
language is, at best, ambiguous about whether such payments are
authorized. When considering the language of the statute as a whole,
along with its legislative history and programmatic purpose, we have
concluded that the best interpretation of the statute is that it does
not bar payments to third parties for health and welfare benefits,
training, and other benefits customary for employees for certain
categories of individual practitioners who consent to such payments on
their behalf. We believe the best reading of the anti-assignment
statutory text suggests that the States' payment arrangements with home
care workers at issue in this rulemaking are authorized. While
consideration of the legislative history is not strictly necessary to
reach our conclusion, the legislative history further supports our
narrow reading of the anti-reassignment provision.\15\ More
specifically, the legislative history of section 1902(a)(32) of the Act
supports our conclusion that the statutory text is best read as an
anti-assignment prohibition and provides important context to show that
that the opposing comments misunderstand the scope of section
1902(a)(32) of the Act. The legislative history shows that Congress
acted specifically to address a problematic circumstance, factoring,
and then to close a loophole it had missed when first enacting section
1902(a)(32).
---------------------------------------------------------------------------
\15\ See Samantar v. Yousuf, 560 U.S. 305, 316 n.9, 130 S.Ct.
2278, 176 L.Ed.2d 1047 (2010).
---------------------------------------------------------------------------
The commenters' statement that ``or otherwise'' is broadly
inclusive would mean Congress had intended their statutory restriction
to apply almost unbounded, a position not supported by the legislative
history of the original statutory provision nor the reasons for the
expansion of the statutory language to include ``an assignment or power
of attorney or otherwise.'' Because ``or otherwise'' is non-specific,
it is by its very nature ambiguous. Where statutory language is
ambiguous, we must arrive at a reasonable interpretation of the statute
by applying general canons of statutory construction and examining the
legislative history of the provision. Under the canon of ejusdem
generis, when general words follow specific words in a statutory
enumeration, ``the general words are construed to embrace only objects
similar in nature to those objects enumerated by the preceding specific
words.'' \16\ We believe that approach is appropriately applied to the
list structure of this statutory language. Accordingly, the language
``or otherwise'' is best read as referencing payments made under
arrangements that are similar to an ``assignment'' and a ``power of
attorney'' such that the reach of the prohibition under section
1902(a)(32) of the Act does not extend to payment arrangements that are
wholly distinct from such types of arrangements. To interpret ``or
otherwise'' as an all-encompassing term would make meaningless the
illustrative examples Congress listed before it.
---------------------------------------------------------------------------
\16\ Sutherland Statutory Construction section 47:17 (1991);
Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001).
---------------------------------------------------------------------------
This interpretation is further supported by the legislative history
of section 1902(a)(32) of the Act discussed previously in this
response. As we explained in the 2021 proposed rule, when Congress
adopted the original version of this provision in 1972, it was focused
on the practice of factoring, based on concerns that the factoring
industry was a breeding ground for Medicaid fraud.\17\ Then in 1977,
when Congress amended the anti-reassignment provision, it did so
specifically to close what it perceived to be a loophole that factoring
companies were exploiting.\18\ The legislative history demonstrates
that the statutory language was tailored to address certain issues,
rather than the phrase ``under an assignment or power of attorney or
otherwise'' being added as a nonessential descriptor. To interpret the
scope of the statute as extending beyond that goal is to make it
overburdensome on the very providers whose payments Congress sought to
protect.
---------------------------------------------------------------------------
\17\ See, for example, H.R. REP. NO. 92-231, at 104 (1972),
reprinted in 1972 U.S.C.C.A.N. 4989, 5090; H.R. REP. NO. 92-231, at
205, reprinted in 1972 U.S.C.C.A.N. at 5090; S. REP. NO. 92-1230, at
204 S. REP. NO. 92-1230, at 204 (1972); Professional Factoring
Service Association v. Mathews, 422 F. Supp. 250, 251-52 (S.D.N.Y.
1976).
\18\ See, for example, H. REP. NO. 95-393(II), at 43, reprinted
in 1977 U.S.C.C.A.N. at 3045; H. REP. NO. 95-393(II), at 46,
reprinted in 1977 U.S.C.C.A.N. at 3048; H. REP. NO. 95-393(II), at
48-49 (1977), reprinted in 1977 U.S.C.C.A.N. 3039, 3051; S. REP. NO.
95-453, at 6-8 (1977).
---------------------------------------------------------------------------
Finally, we note that our interpretation is largely consistent with
the court's analysis in California v. Azar. No court has held
otherwise.
Comment: One commenter, citing a desire for environments where
practitioners can thrive, agreed with CMS' reinterpretation of the
scope of section 1902(a)(32) of the Act as long as a practitioner
voluntarily consented to such payments to third parties on the
practitioner's behalf, as described in the 2021 proposed rule under
Sec. 447.10.
[[Page 29682]]
Response: We acknowledge the importance of practitioner consent in
Sec. 447.10(i), which we are finalizing as proposed.
Comment: Several opposed commenters referred to the new language in
Sec. 447.10(i) as an additional exception to the direct payment
provision in the Act and its specific enumerated exceptions. They
pointed to those specific exceptions as evidence that there was not
room or authority to make an additional exception, a principle with
which CMS agreed in our 2019 final rule. One commenter acknowledged
that the new provision is not an exception, but functionally is the
same.
Response: The final rule does not create a new exception under
section 1902(a)(32) of the Act. In the 2021 proposed rule, we
reinterpreted the scope of the statute and concluded that these
deductions from Medicaid payments as authorized by the individual
practitioner fell outside of that scope. As discussed in Section II.A.,
the intent of the statutory provision was to prohibit factoring
arrangements. The purpose was not to preclude a Medicaid program that
is functioning as the practitioner's primary source of revenue from
fulfilling the basic employer-like responsibilities that are associated
with that role, a scenario that was not contemplated by section
1902(a)(32) of the Act and was outside of the intended scope of the
statutory prohibition. The statute refers to assignments of claims and
the exceptions describe permissible assignments of claims. The payment
arrangements authorized under this rule do not involve an assignment of
a claim to a third party, and are neither covered by the statute nor
are they sufficiently similar to the enumerated exceptions as to be
considered one as well.
Comment: A few of the commenters who disagreed with the 2021
proposed rule cited various court decisions to support the assertion
that the authorization by the provider to make third party payment
deductions is necessarily a form of assignment and therefore covered by
the anti-assignment language of the Act.
Response: It is true that some case law exists indicating some
payment deduction scenarios may constitute legal assignment. However,
the case law is varied and suggests that the wording and intent of
contracts is pertinent to the question of whether the ``assignment''
has transferred a right, the form of assignment relevant here.\19\ We
have found numerous decisions that make clear that, in many
circumstances, a person may consent to have an amount deducted from
their pay without conferring a right through an assignment.\20\
Furthermore, the statute specifically makes impermissible the
assignment of claims (and through such assignment, the right to collect
on those claims). Even if the deduction of benefit payments could, in
certain circumstances, be labeled an ``assignment'' under some case law
definitions, such an assignment would not confer the right to the claim
and therefore is outside the statute's scope. Our interpretation does
not create a new type of assignment or exception, but instead creates
an avenue for the same type of payment arrangements enjoyed by other
practitioners, but for those without a formal employment relationship.
When re-examining the statute and the problems Congress sought to
address when expanding the language of its direct payment provision, it
is clear that the focus was on instances where providers assigned
claims or created workarounds to do so. Assigning the right to collect
on a claim is not the same as granting an authorization to deduct for
benefits, and the statute was not intended to preclude State agencies
from providing their non-employee providers benefits of their
employment-like relationships. Therefore, it is reasonable to conclude
that in this context, assignment refers to the assignment of a claim
for a whole Medicaid payment.
---------------------------------------------------------------------------
\19\ See Restatement (Second) of Contracts section 324 (1981)
(``It is essential to an assignment of a right that the obligee
manifest an intention to transfer the right to another person
without further action or manifestation of intention by the
obligee.'').
\20\ See, for example, California v. Azar, 501 F. Supp. 3d 830,
840 n.8 (N.D. Cal. 2020) (the argument ``that authorizing deductions
for union dues is an `assignment' (or something very close to an
assignment) because of the way union dues are described in other
contexts--is barely worth mentioning. Unlike the types of
assignments involved in factoring and the statute's exceptions,
unions cannot step into the shoes of the worker and pursue
independent claims against the State for Medicaid reimbursement
based on the worker's decision to authorize deductions for union
dues. The fact that union dues are sometimes referred to as
`assignments' in a few judicial opinions and Federal statutes in
distinct contexts does not mean that they are `assignments' within
the meaning of the anti-reassignment provision and in the context of
assigning the right to submit a claim for reimbursement of health
services.''); see also, for example, United Broth. of Carpenters and
Joiners of Am. v. Ohio Carpenters Health and Welfare Fund, 926 F.2d
550, 553, 557 (6th Cir. 1991) (finding that a form that had
```authorized and directed [their employers] to pay and remit to [a
union]' dues deducted from the payroll'' when ``properly construed,
is the employee's consent to the employer's role as agent for the
union in the collection of dues,'' but ``is not a true common law
assignment, since it creates no rights in any assignee.''); Dialysis
Newco, Inc. v. Cmty. Health Sys. Group Plan, 938 F.3d 246, 253-255
(5th Cir. 2019) (explaining that ``a direct-payment authorization
and a prohibition against the assignment of benefits are distinct
concepts''); Brown v. Blue Cross Blue Shield of Tenn., Inc., No. No.
1:14-CV-00223, 2015 WL 3622338, at *3-*7 (E.D. Tenn. June 9, 2015)
(collecting cases and noting that ``[t]here is no consensus among
the Federal courts regarding whether language providing for direct
payment of benefits constitutes an assignment for purposes of
ERISA,'' but explaining that ``[t]he cases holding that forms
providing for direct payment do not constitute an assignment have
the better end of the argument.'')
---------------------------------------------------------------------------
Comment: Several commenters opposed to the rule pointed out the
distinction CMS drew between an assignment of a full payment claim and
a partial payment deduction. They indicated the distinction was
irrelevant, and a couple of commenters indicated that such a
distinction could give rise to scenarios in which Medicaid providers
would see their payments reduced by any amount regardless of
surrounding circumstances so long as it was a portion of the payment.
Response: As previously discussed, we concluded that the intent of
the statute is to address scenarios of claim assignment that had given
rise to fraud, particularly through factoring, and therefore the
distinction between partial payment deductions and assignment of the
right to the full payment is relevant. However, we clarify that the
true test is not whether the payment to the third party is partial or
full, but instead whether the arrangement is the transfer of the rights
to a claim versus the redirection of monies due to the practitioner to
directly cover costs that would otherwise be paid by the practitioner,
with the practitioner's consent. We also note that this rule very
narrowly applies only to individual practitioners for whom the Medicaid
program is the primary source of revenue and have provided consent for
such deductions. In developing this rule, we sought to both describe
and address a specific arrangement that we are confident was not
intended to be curtailed by the language of the Act. We reiterate that
this rule would simply ensure flexibility for States to pay for such
costs directly on behalf of practitioners and ensure access to
benefits, such as health insurance, skills training, and other benefits
customary for employees.
C. Consent Requirement
Comment: Several commenters opposed to the 2021 proposed rule did
not agree that the consent requirement included in the rule, which the
prior similar regulation did not make explicit, would be sufficient to
overcome the perceived risks of allowing for deductions for benefits
directly from a provider's payment. The risks cited by
[[Page 29683]]
commenters centered mainly around examples of unions that had engaged
in fraudulent or questionable practices, such as high-pressure
enrollment meetings, when obtaining or using dues. One commenter cited
a concern that an individual practitioner might not know what he or she
is consenting to, for example if English was not the practitioner's
first language. One commenter requested that the voluntary consent
requirement include a requirement that the consent be communicated
directly to the State agency.
Response: We make every effort to ensure we do not create avenues
for fraud, and to protect against instances where those might occur. In
the time between our 2014 final rule, which permitted these types of
payment deductions as an exception to the Act, and the 2021 proposed
rule, there have been two noteworthy cases regarding payment
deductions, specifically in the context of union dues. The First
Amendment principles regarding consent for the deduction of union dues
outlined by the Supreme Court in Harris v. Quinn, 573 U.S. 616 (2014),
and Janus v. Am. Fed'n of State, Cnty., & Mun. Emps., Council 31, 138
S. Ct. 2448 (2018), are binding on States regardless of any rules we
may issue, and we are mindful of the fact that these rules must be
consistent with those decisions. Furthermore, for clarity, and because
this rule applies to deductions for a variety of benefits, not simply
union dues, we believed it was important to include an explicit
voluntary consent requirement in the regulatory text (and not limited
to the context of union dues) to ensure that Medicaid payments are
handled in accordance with the wishes of the provider to which the
Medicaid payments are owed, both for public policy reasons and to
address any possible First Amendment concerns which may arise both
within and outside of the union dues context. The existence of bad
actors governed under other laws and regulated by other agencies should
not preclude the creation of our policy intended to benefit providers.
Many workplaces allow employees to deduct union dues from their
paychecks, and the union practices cited by some commenters do not
justify distinguishing this aspect of an employment-like relationship
from any other benefits deduction. In addition, while we appreciate the
desire to guard against erroneous or involuntary deductions, we
determined it is appropriate to defer to States regarding which methods
of obtaining and documenting consent are sufficient or suitable, and to
rely on States to ensure third parties are not furnishing fraudulent
practitioner consent for deductions. States and third parties are
expected to adhere to the applicable laws regarding contractual
capacity to ensure practitioners with limited English proficiency are
providing informed, voluntary consent.
Comment: Many commenters advised CMS against requiring explicit
written provider consent for deductions out of concern that codifying a
requirement for written consent could unintentionally result in a
conflict with State law and could be unduly burdensome on State
programs and workers within those programs. One commenter urged CMS not
to be too prescriptive about the format of consent to avoid conflicting
with existing laws and employment contracts. Another commenter
explained that some State laws and policies regarding consent for
deductions require a ministerial form while other States include
consent as a component to a contractual agreement among other methods
used to collect consent: Electronic, online, voice-recorded assent, or
traditional penned signatures. Commenters recommended that CMS defer to
State Medicaid agencies' determination on how to obtain consent from
providers affected by this rule. One commenter supported also deferring
to State Medicaid agencies' determinations on how to implement provider
payment deductions consistent with State law and regulations for State
employee benefit deductions, as indicated in the 2021 proposed rule. A
few commenters opposed to the rule overall requested that, should CMS
nevertheless proceed with its policy, the consent requirement include a
written requirement and also include CMS authorization.
Response: Based on some of the concerns raised by commenters as
well as our original concerns that codifying a requirement for written
consent could unintentionally result in a conflict with State law, we
have decided to not impose a Federal regulatory requirement for
explicit written provider consent for deductions or to insist that
States submit their proposed consent forms to us for review. While we
appreciate the desire of some commenters to have more rigorous
safeguards, we are confident the inclusion of a consent requirement,
while allowing States flexibility for compliance with that requirement,
creates the right balance between addressing problematic situations and
respecting the rights of State agencies to administer their State
Medicaid plans.
Comment: Two commenters advised CMS against requiring consent only
for specific types of deductions, rather than all types of benefits,
for which Medicaid payment amounts may be deducted and paid to a third
party, in the regulatory text. The commenters indicated this additional
requirement is unnecessary and already addressed by State law or
employee contracts.
Response: Based on the concerns raised by commenters, as well as
our original concerns that rulemaking may not accurately capture all of
the employee benefits practitioners believe should require consent, and
our interest in ensuring that Medicaid payments are handled in
accordance with the wishes of the provider to whom such payments are
owed, we have decided not to limit the practitioner consent requirement
to only specific types of deductions. Thus, we are finalizing the rule
as proposed, to require consent for all deductions for benefits that
may be deducted and paid to a third party under Sec. 447.10(i).
D. Impact to Stakeholders
Comment: The commenters opposed to the rule largely disagreed with
CMS about the benefits this rule would have for individual
practitioners. A couple of commenters cited the lack of availability of
varied trainings or benefits for which an individual practitioner may
wish to enroll. Some referenced the 2019 final rule which stated that
the lack of this flexibility did not preclude a practitioner from being
able to participate in such benefits, and instead just changed the
process. One commenter noted that the rule does not prescribe any sort
of standard for the benefits for which payment deductions may be made.
A few commenters also cited a lack of meaningful evidence that
providers in fact benefit from such practices.
Response: We reaffirm our belief that this final rule will enhance
the ability of the affected practitioners, regardless of their
employment arrangements, to perform their functions as health care
professionals and thus support beneficiary access to quality home care.
While the types and availability of trainings and benefits varies
across States, we want to encourage access to benefits for individuals
effectively acting as employees, such as health insurance, skills
training, and other benefits customary for employees. It is true that
this policy applies to a narrow class of providers for one specific
procedural step of enrolling in benefits. However, it addresses a
situation where individuals with an employment-like relationship with
the State agency cannot currently benefit from that
[[Page 29684]]
relationship in the same manner an actual employee can. While this
policy has evolved over time, the consistent theme remains that there
are States that wish to offer individual practitioners this type of
flexibility, enough to initiate litigation in the aforementioned
California v. Azar case in response to the rescission of the policy in
2019. Furthermore, some States had already implemented payment
deduction arrangements before we issued the 2014 final rule. With the
appropriate safeguards in place, despite commenters' assertions of only
a minimal benefit, the policy nevertheless responds to a known demand.
Comment: Some commenters expressed concern that this policy would
in fact harm individual practitioners. They stated that the benefits
paid by the State on behalf of the practitioner would result in a
reduced payment to that practitioner, and concluded this could take
money away from providing services to the needy. They also cited
concerns about Medicaid monies being taken from providers
inappropriately.
Response: We want to ensure that providers receive the monies they
are owed for the provision of Medicaid services to beneficiaries. That
is why we proposed, and are now finalizing, a voluntary consent
requirement, as we wanted to ensure that individual practitioners'
payments are handled in accordance with their wishes. As such, under
this rule, the only deductions that may be made from Medicaid payments
due an individual practitioner are those that are specifically
authorized by that practitioner to pay for certain benefits on their
behalf. Furthermore, permitting State Medicaid agencies to deduct from
the practitioner's payment, at the direction of that practitioner, does
not impact the services provided to a beneficiary any more than if the
practitioner was paying these third-party costs on their own. We note
that State Medicaid agencies have the option to develop State plan
payment rates that account for costs related to benefits customary for
employees. Moreover, we believe that this policy may in fact benefit
beneficiaries receiving services from practitioners by improving and
stabilizing the workforce.
Comment: Several commenters advised CMS against including a defined
list of allowable benefits or excluded benefits within the regulatory
text. Commenters indicated that providers have access to a wide variety
of benefits, depending on the State the provider works in. Commenters
also indicated that benefits continue to expand and regulatory text
that codifies the list of benefits could possibly conflict with
available benefits and interfere with the efficiency of State Medicaid
programs by creating barriers for States and providers. One commenter
indicated that a final rule could provide examples of certain purposes
and benefits for which payroll deductions may be utilized, but such a
list should be illustrative and neither definitive nor limiting.
Response: We share the concerns raised by commenters that such a
list may not accurately reflect all employee benefits available to
practitioners and would need frequent updates through the rulemaking
process to remain relevant. Thus, we have decided not to include a
defined list of allowable benefits or excluded benefits within the
regulatory text or for illustrative purposes in the final rule, and
States that choose to make deductions under this regulation will have
flexibility to determine the types of benefits that are eligible for
payment via such deductions.
E. Impact to States
Comment: Many commenters indicated that States and local
governments have been making third party payments for benefits (that
is, health, dental, and vision insurance, training, union dues) on
behalf of individual practitioners for decades. Many commenters stated
that California first began this process in the 1990s, Washington in
2002, Illinois in 2003, and Oregon in 2011. Many commenters emphasized
that the scope and form of third-party payments on behalf of individual
practitioners is a matter of State law or employee contracts and
advised CMS not to regulate this area in the final rule to avoid
conflicting with existing laws and contracts.
Response: We reiterate that this rule would simply reassure States
of the flexibility to pay for certain benefits directly on behalf of
certain practitioners, as our interpretation of the statute is that
these payment arrangements are outside the scope of the statutory
prohibition.
Comment: Two commenters raised concerns about a State's
administrative burden and additional administrative costs for
implementing the 2021 proposed rule. Specifically, one commenter urged
CMS to reconsider the existing requirements and administrative burden
faced by State Medicaid Agencies because CMS stated in the 2021
proposed rule that the time, effort, and financial resources necessary
for States to exercise this optional flexibility would be incurred by
the State during the normal course of their activities. Another
commenter indicated the 2021 proposed rule may have unintended
consequences by not allowing States to claim additional administrative
costs to implement this optional rule, such as reducing payment rates
to cover new State costs of implementation for the singular subset of
direct care workers.
Response: We wish to clarify our intent regarding State program
administrative costs incurred by the State when implementing the 2021
proposed rule. To expend Federal, State, and local resources in the
most cost-effective manner possible, States may not claim expenditures
for the costs of allowable administrative activities that should have
been reimbursed as direct medical services, as this would result in
duplicative claiming. States that wish to account for the cost of
benefits, skills training, and other benefits customary for employees
in their expenditures need to include these costs as part of the rate
paid for the service to be eligible for Federal financial
participation.
States that wish to account for any additional State program
administrative costs incurred by the State when implementing the 2021
proposed rule, such as the cost of payment system updates, must claim
such administrative costs in accordance with Federal requirements. In
accordance with section 1903(a)(7) of the Act and implementing
regulations at Sec. Sec. 430.1 and 431.15, activities must be found
necessary by the Secretary for the proper and efficient administration
of the plan. Administrative costs must also be reasonable, allowable,
and allocable in compliance with 2 CFR part 200 and 45 CFR 75.402
through 75.411. States are also required to maintain a Public
Assistance Cost Allocation Plan, as required by Sec. 433.34 and
subpart E of 45 CFR part 95.
Comment: One commenter requested CMS revise the rule to provide
clarity about a Financial Management Services (FMS) entity's authority
to make mandatory deductions from wages that are required by law to be
made by an employer, such as deductions for Federal and State taxes,
without requiring the provider's consent.
Response: This rule does not impact a State's ability to perform
FMS or secure FMS through a vendor arrangement provided under sections
1915(c), 1915(i), 1915(j), 1915(k), and 1115 of the Act. Rather, this
rule pertains to payments for State plan services under section 1905(a)
of the Act. Section 447.10(i), as finalized, explicitly authorizes
States to make payments to third parties to benefit individual
practitioners by ensuring
[[Page 29685]]
health and welfare benefits, training, and other benefits customary for
employees, if the practitioner consents to such payments to third
parties on the practitioner's behalf. These payment deductions are
distinct from mandatory payments under State and Federal law, which are
outside the scope of this rulemaking.
Comment: Two commenters requested CMS issue guidance on offering
employee benefits in participant direction programs that do not have a
union or other third party that offers benefits. Specifically, the
commenters requested Federal guidance about how the cost of employee
benefits should be built into an individual budget when a beneficiary
opts to self-direct their care under HCBS.
Response: To reiterate, this rule does not impact a State's ability
to perform FMS or secure FMS through a vendor arrangement provided
under sections 1915(c), 1915(i), 1915(j), 1915(k), and 1115 of the Act.
The question of how the cost of employee benefits should be built into
an individual budget when a beneficiary opts to self-direct their care
under HCBS is outside the scope of this rulemaking.
Comment: One commenter indicated that the 2021 proposed rule will
not support the stability of HCBS without significant investment in the
entire direct care workforce and necessary protections and oversight to
ensure there are no further funding shortfalls.
Response: This rulemaking is narrowly tailored to respond to recent
litigation and interest from States in the flexibility to enter into
the types of payment arrangements discussed in this rule. Stabilizing
HCBS with a significant investment in the entire direct care workforce
and providing necessary protections and oversight to ensure there are
no further funding shortfalls is outside the scope of this rulemaking.
We will evaluate the commenter's concerns and continue to partner with
States, consumers and advocates, providers, and other stakeholders to
create a sustainable, person-driven long-term support system in which
people with disabilities and chronic conditions have choice, control,
and access to a full array of quality services that assure optimal
outcomes, such as independence, health, and quality of life. We expect
that this final rule will contribute some stabilization of HCBS by
offering States the opportunity to pay for such costs directly on
behalf of practitioners and ensure access to benefits, such as health
insurance, skills training, and other benefits customary for employees.
Comment: One commenter requested CMS clarify the oversight process
it intends to implement after finalization of the 2021 proposed rule.
Specifically, the commenter sought clarification about if and how CMS
will request data from States about the individual practitioners
affected by this rule and the type and amount of third-party payments
made on behalf of individual practitioners, if third party payments
will be subject to Federal audit, and what documentation about these
third-party payments that States need to maintain. The commenter also
questioned if CMS consulted with the Internal Revenue Service regarding
how deductions should be reported on an individual practitioner's
income or earnings form. Lastly, the commenter questioned CMS about
States' ability to incorporate costs related to health and welfare
benefits, training, and other benefits customary for employees or other
costs which are not otherwise eligible for Federal financial
participation.
Response: We expect States to comply with applicable Federal
requirements. States are expected to maintain supporting documentation
for Medicaid expenditures reported on the quarterly Form CMS-64 to
claim Federal financial participation. In instances where the State is
making payments to a third party on behalf of an individual
practitioner, States are expected to maintain relevant documentation of
these transactions, including documentation demonstrating the
deductions are voluntary. We may conduct quarterly reviews of Medicaid
expenditures claimed on the Form CMS-64 and associated State
documentation to ensure State compliance with this final rule. While
the Form CMS-64 itself would not reflect changes as a result of this
rule, we may request documentation from a State to support its Form
CMS-64 claims, including evidence that the consent requirement is met
and the individual practitioner funds are being handled appropriately.
Additionally, we may initiate additional oversight activities to ensure
State compliance with the requirements in this final rule.
Requirements regarding how a practitioner should report deductions
on income and earnings forms relating to Federal and State tax
requirements are outside the scope of this rulemaking. We would like to
reiterate that should a State wish to recognize such costs, they would
need to be included as part of the rate paid for the service to be
eligible for Federal financial participation. No Federal financial
participation would be available for such amounts apart from the
Federal match available for a rate paid by the State for the medical
assistance service.
Comment: One commenter disagreed that this rule will be budget
neutral or have a minimal economic impact that is unlikely to have an
annual effect on the economy in excess of the $100 million threshold of
Executive Order 12866. The commenter went on to cite various figures
regarding the collection of union dues in some States that have
exercised the ability to make third party payment deductions, and
stated that the benefits to individual practitioners we cited in the
2021 proposed rule contradict the budget neutral assessment.
Response: The commenter's assessments assume that the 2019 rule
remains in effect, the 2014 rule is not in effect, or both. With this
premise, the commenter seems to suggest that the baseline for
determining the impact of this rulemaking should not reflect the 2014
final rule (that is, the existence of the authority previously codified
at Sec. 447.10(g)(4)). This reasoning is incorrect. In our current
circumstance, the court's vacatur of the 2019 rule, which the commenter
did not acknowledge, means that the 2014 rule is now back in effect by
operation of law, with no new round of rulemaking necessary to bring
about this result. It is a well settled principle that ``[t]he effect
of invalidating an agency rule is to reinstate the rule previously in
force.'' \21\ Therefore, relative to this analytic baseline, the
present rule, which closely mirrors the prior regulatory language under
the 2014 final rule, but under a more appropriate statutory analysis,
creates very little difference from the scenario where Sec.
447.10(g)(4) is in effect. The unique feature of the present rule is
the consent requirement, which as discussed previously, is already a
requirement for the deduction of union dues under the First Amendment.
As such, our proposed rule reflected our assessment that the effect,
when compared against the present regulatory and legal landscape, is
budget neutral.
---------------------------------------------------------------------------
\21\ Paulsen v. Daniels, 413 F.3d 999, 1008 (9th Cir. 2005)
(citing Action on Smoking & Health v. Civil Aeronautics Bd., 713
F.2d 795, 797 (D.C. Cir. 1983) (per curiam)). As the district court
noted in California v. Azar, ``vacating the agency's action simply
preserves a status quo that has existed since at least the early
1990[ ]s while the agency takes the time it needs to give proper
consideration to the matter.'' 501 F. Supp. 3d at 843.
---------------------------------------------------------------------------
However, we acknowledge that the appeal related to California v.
Azar is still outstanding, and as such, our present circumstance is not
guaranteed. Therefore, we have now included data in the Regulatory
Impact Analysis section examining the impact of this
[[Page 29686]]
policy against a potential alternate scenario where the 2019 final rule
is once again in effect.
F. Union Dues
Comment: Nearly all the commenters who were opposed to the rule
raised the fact that union dues are included among the benefits for
which payments may be deducted. Many commenters pointed to and
expressed concern about the potential for ``dues skimming,'' wherein a
State automatically deducts union dues from payments, a concern which
was raised in the 2019 final rule. They pointed to the cases of Harris
v. Quinn and Janus v. AFSCME as examples of the impermissibility and
First Amendment implications of the practice. In addition, some
commenters provided examples of questionable or improper actions taken
by unions in various States. Commenters indicated finalizing this rule
would roll back protections and permit States to divert Medicaid money
to unions and political campaigns. Some commenters identified coercive
practices that they claim unions use despite consent requirements, such
as ``captive audience'' pitches and a limited ability to disenroll.
Response: We proposed and are finalizing this policy with its
consent requirement to align with relevant case law surrounding union
dues and consent, and to address related concerns cited in the 2019
final rule. Even though this protection is already founded in the cited
case law, we believed it was important to include it as a regulatory
requirement as well to provide an additional layer of protection for
providers specifically. We also note that regardless of whether a State
is able to make third party payment deductions, a number of the
commenters' concerns could still exist. For example, ``captive
audience'' union pitches and limited disenrollment periods are outside
the scope of this rulemaking, and HHS is not the agency that would
address how unions use their dues once received. Facilitating a
transfer between consenting providers and third parties does not
affect, either positively or negatively, the practices of unions, and
therefore those concerns do not warrant a change in this policy. This
rule allows States to make deductions to pay for benefits such as
health insurance, skills training, and other benefits customary for
employees from an individual practitioner's payment, with their
consent. We reiterate that we want to ensure providers receive the
monies they are owed for the provision of Medicaid services to
beneficiaries by finalizing a voluntary consent requirement. None of
the concerns cited demonstrated a sufficient reason or evidence as to
why the practitioners impacted by this rule should have more limited
access to union dues deductions than those in formal employment
relationships.
Comment: One opposed commenter made several suggestions for how to
address union dues should CMS choose to proceed with finalizing this
policy. The suggestion included an opt-in requirement, multifactor
authorization, additional notice regarding the individual's rights, an
expiration of authorization for deductions, and open disenrollment.
Response: The suggestions are outside the scope of this rulemaking
or outside the authority of what HHS can regulate. To the extent we can
address the concerns raised by commenters, our regulatory consent
requirement appropriately balances the case law around the First
Amendment and union dues, the concerns about bad actors, and the
ability of States to exercise flexibility in their State Medicaid
programs. In section VI.D., we detail the alternatives we considered,
but did not adopt based on the feedback of commenters and our
assessment of the most effective approach.
IV. Provisions of the Final Regulation
After consideration of the public comments, we are finalizing as
proposed our additional language in Sec. 447.10(a) and the new
paragraph at Sec. 447.10(i).
V. Collection of Information Requirements
Our August 3, 2021 (86 FR 41803) proposed rule solicited public
comment on, among other things, the rule's ``collection of
information'' assumptions. For the purpose of this section of the
preamble, collection of information is defined under 5 CFR 1320.3(c) of
OMB's implementing regulations. We received one comment addressing this
section, urging CMS to reconsider the exempt classification should CMS
find the amount of necessary State effort to be understated. We stated
in the 2021 proposed rule that the time, effort, and financial
resources necessary for States to exercise this optional flexibility
are exempt from the requirements of the Paperwork Reduction Act of 1995
(PRA) (44 U.S.C. 3501 et seq.) as they would be incurred by the State
during the normal course of their activities, and therefore should be
deemed as a usual and customary business practice under 5 CFR
1320.3(b)(2). That assessment remains unchanged. This rule codifies a
policy option that exists regardless of this rule, both through our
interpretation that this policy is beyond the scope of the statute, and
due to the California v. Azar decision vacating the 2019 final rule.
The consent requirement is new to the present rule, but as we are not
establishing a specific method to obtain consent, and because consent
is already required for union dues deductions under the First
Amendment, our determination is that the consent requirement will
likely be met through usual and customary business practices, and does
not produce a measurable impact.
We also believe that the proposed and finalized requirements have
no impact on our currently approved State plan amendment (SPA)
requirements and burden estimates. While CMS-64 (OMB control number:
0938-1265) is mentioned elsewhere in this final rule, this rule has no
impact on the form's currently approved requirements and burden
estimates. Any effort to request documentation from a State to support
its CMS-64 claims, including evidence that the consent requirement is
met and the individual practitioner funds are being handled
appropriately, would be on a case-by-case basis using non-standardized
questions that are exempt from the PRA under 5 CFR 1320.3(h).
Consequently, this rule does not have any collection of information
implications that are subject to the PRA.
VI. Regulatory Impact Analysis
A. Statement of Need
In California v. Azar, the district court vacated the 2019 final
rule and remanded to HHS for further proceedings. Although this remand
left broad discretion for next steps, we chose to examine the relevant
statute anew, and determined that the prohibition in section
1902(a)(32) of the Act is better read to be limited in its
applicability to Medicaid payments to a third party under an
assignment, power of attorney, or other similar arrangement. Although
the court vacated the 2019 final rule, our current statutory
interpretation requires this rulemaking to reclassify the policy
previously codified as an exception at Sec. 447.10(g)(4) as instead
describing arrangements that are beyond the scope of prohibition in
section 1902(a)(32) of the Act. Furthermore, while we now believe these
arrangements are beyond the scope of the statute, we nevertheless
consider it important to document and ensure clarity and flexibility
for certain individual practitioners. Finally, this rule provides us an
opportunity to reinforce the important caveat that such
[[Page 29687]]
deductions may only be made with the consent of the individual
practitioner.
B. Overall Impact
We have examined the impacts of this final rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act,
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22,
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4,
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Section
3(f) of Executive Order 12866 defines a ``significant regulatory
action'' as an action that is likely to result in a rule that may: (1)
Have an annual effect on the economy of $100 million or more in any 1
year, or adversely and materially affecting a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local or tribal governments or communities (also
referred to as ``economically significant''); (2) create a serious
inconsistency or otherwise interfering with an action taken or planned
by another agency; (3) materially alter the budgetary impacts of
entitlement grants, user fees, or loan programs or the rights and
obligations of recipients thereof; or (4) raise novel legal or policy
issues arising out of legal mandates, the President's priorities, or
the principles set forth in the Executive Order.
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million or more in any 1
year). In the 2021 proposed rule, we estimated that this final rule
would be budget neutral, but could have broader economic impact that is
unlikely to have an annual effect on the economy more than the $100
million threshold of Executive Order 12866. We maintain that position
for the final rule, under the current regulatory landscape at the time
of finalization. However, we acknowledge that an appeal of the district
court decision that gave rise to this rulemaking is currently pending.
As such, it may be appropriate to provide an analysis for each of the
possible baseline scenarios: One where Sec. 447.10(g)(4) is in effect,
and one where the 2019 final rule is in effect.\22\ We will examine
each baseline analysis in turn.
---------------------------------------------------------------------------
\22\ See <a href="https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf">https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf</a>. (Circular A-4 (2003)
at 15 (``When more than one baseline is reasonable and the choice of
baseline will significantly affect estimated benefits and costs, you
should consider measuring benefits and costs against alternative
baselines.).
---------------------------------------------------------------------------
Presently, as a result of the district court decision, the 2019
final rule is nullified and the 2014 final rule implementing Sec.
447.10(g)(4) represents current policy. When the district court vacated
the 2019 final rule and remanded the case to HHS for further
proceedings, we had broad discretion as to how to address the remand.
Because the vacatur reestablished the policy from the 2014 rule, we
could have simply published a final rule in the Federal Register
waiving notice of proposed rulemaking and public comment and informing
the public that Sec. 447.10(g)(4) was in effect due to the district
court's decision, and instructing the Office of the Federal Register to
republish Sec. 447.10(g)(4), had we determined that was the best
approach. Our other potential options, which were not mutually
exclusive, included the option to appeal the court's decision, to issue
sub-regulatory guidance, or engage in rulemaking to either reinstate
the 2019 final rule relying on a legal basis different from that
rejected by the court, or to implement the same or similar policy as in
the previously codified Sec. 447.10(g)(4) pursuant to a different
legal analysis. As stated by the district court, ``vacating the
agency's action simply preserves a status quo that has existed since at
least the early 1990's while the agency takes the time it needs to give
proper consideration to the matter.'' \23\ We initially appealed, then
chose to review the statute anew, eventually determining that the
payments to third parties addressed in this rulemaking fall outside the
scope of the statute.
---------------------------------------------------------------------------
\23\ California v. Azar, 501 F. Supp. 3d at 843 (N.D. Cal.
2020).
---------------------------------------------------------------------------
For the economic analysis in the 2021 proposed rule, we believed
that this rule offered State Medicaid programs additional operational
flexibilities to ensure a strong provider workforce, which resulted in
a proposed rule that was preliminarily designated as not economically
significant.
With regard to the impact on State operations, we believe State
budgets will not likely be significantly affected because the
operational flexibilities in this final rule only facilitate the
transfer of funds between participating entities, rather than the
addition or subtraction of new funds. As noted by multiple commenters,
some States had implemented this flexibility decades before the 2014
final rule which is currently the status quo. To the extent that those
States may have continued or resumed exercising such flexibility
following the district court's decision, those States will experience
no change to their operations under this current rule. States that have
not already implemented this policy option are not required to
implement it under the current rule and their operations will remain
unchanged, unless the State takes specific actions to implement this
policy option. Therefore, using the established baseline assumption of
the 2019 final rule not occurring and defaulting to the 2014 final
rule, we anticipate the minimal impact on State budget and operations.
We believe the current rule may have an annual effect on the
economy in excess of the $100 million threshold of Executive Order
12866. While the effect may be similar in magnitude to the impact
analysis in the 2019 final rule, we believe the effect will be opposite
in sign where States are allowed to deduct payments from a provider's
payment with their consent under certain circumstances described in the
2021 proposed rule, thereby shifting portions of Medicaid payments from
home care workers to third parties. Since the 2014 and 2019 final
rules, we are not aware of any SPAs submitted by State Medicaid
agencies that intended to modify provider payments rates in response to
these previous regulatory changes. In addition, we do not track the
payment amounts that State Medicaid agencies pay to third parties as
affected by this regulatory provision, although we could obtain such
information through review of a State's Medicaid expenditures claimed
on the Form CMS-64. As such, the Department invited public comments to
help refine this analysis in the 2018 proposed rule, but no substantive
analysis of the economic impact of this rule was provided as noted in
the 2019 final rule. In the current rulemaking, we again sought
comments on this estimate, and particularly on types and amounts
deducted from individual providers for payment to third parties, broken
down by benefit that may be included under Sec. 447.10(i). We did not
receive comments with compelling data specific to the economic impact
of this policy, and we did not receive comprehensive data about the
types and amounts of deductions broken down by benefit.
[[Page 29688]]
Alternatively, due to the outstanding appeal of the district court
decision, it may be appropriate to consider a scenario in which the
2019 final rule is still in effect, as the district court decision may
not be the final outcome of California v. Azar. If the 2019 final rule
were in effect, then this current rulemaking would mark a significant
policy shift, with a measurable impact. We have added a discussion of
this alternate baseline in our regulatory impact analysis comment
response, and included estimates in Table 1 of section VI.E. of this
final rule.
Based on our estimates, OMB's OIRA has determined that this
rulemaking is ``economically significant'' under Executive Order 12866
and ``major'' under Subtitle E of the Small Business Regulatory
Enforcement Fairness Act of 1996 (also known as the Congressional
Review Act).
Comment: One commenter disagreed with our assessment in the
proposed rule that a regulatory impact analysis was unnecessary. That
commenter pointed to our language in the 2021 proposed rule that
included positive benefits associated with stabilizing the home care
workforce. The commenter also noted the fact the deductions are already
occurring should have no bearing on the estimated economic impact of
this rule. The commenter cited figures from a report that solely
focused on quantifying the amount of third-party payments made to
unions to demonstrate the economic significance.
Response: As stated in section III.E. of this final rule, the
effect of the vacatur in California v. Azar is that the 2014 final rule
is our current policy, and the commenter failed to acknowledge the
effect of the court decision. However, we acknowledge litigation is
still pending, and furthermore there is value in understanding the
effect of this policy under a possible alternate trajectory where the
2019 final rule is in effect. We lack direct information with which to
quantify those impacts, as the Department does not track the amount of
Medicaid payments that are being assigned to third parties. However, we
can surmise from the California v. Azar case that at least six States
\24\ are currently utilizing this policy. We also believe it is
reasonable to conclude some additional States have already or in the
future may adopt these practices to provide individual practitioners
administrative convenience, but as we do not have a means to assess
that amount, we have not included them in this exercise. As States are
the Medicaid program operators, enroll providers in their programs, and
determine economic and efficient payment rates for providers, we
believe States are better situated to quantify the amount of Medicaid
payments that may be transferred to third parties under the policy
discussed in this rule.
---------------------------------------------------------------------------
\24\ Named plaintiff States included California, Connecticut,
Oregon, Massachusetts, Washington, and Illinois.
---------------------------------------------------------------------------
We utilized example data provided in comments to the 2021 proposed
rule to extrapolate an approximate estimate for health insurance
transfers within the six plaintiff States. We estimate that individual
practitioners may be offered a $25 monthly premium for health insurance
\25\ and there may be approximately 270,000 individual practitioners
affected by this rule within those six States.\26\ We then estimated 88
percent,\27\ or 237,600 of eligible individual practitioners will
enroll in an offered health insurance plan; therefore, we expect
transfers of $71,280,000 annually from the 6 States who already adopted
this policy option to one or more third party health insurance plans on
behalf of individual practitioners. This estimate assumes all six
States have the same number of providers and offer health insurance
plans with the same monthly premium. We also acknowledge that a large
portion of home care workers obtain their health insurance through
publicly funded programs, such as Medicaid,\28\ and may or may not have
a health insurance premium, depending on the State's program, which
adds an additional caveat to this estimate. While we have not similarly
quantified the amount of other authorized deductions, such as for
skills training or other benefits, we estimate that the amount of
payments made to third parties on behalf of individual providers for
the variety of benefits addressed in this rulemaking could potentially
be in excess of $100 million. We have included some financial impact
estimates from the policy generally in Table 1 in section VI.E. of this
regulatory impact analysis.
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\25\ Heath insurance premium amount was sourced from Public
Comment CMS-2021-0130-0013 located at <a href="https://www.regulations.gov/comment/CMS-2021-0130-0013">https://www.regulations.gov/comment/CMS-2021-0130-0013</a>.
\26\ The number of individual practitioners in a single State
who has already adopted this policy option was sourced from Public
Comment CMS-2021-0130-0013 located at <a href="https://www.regulations.gov/comment/CMS-2021-0130-0015">https://www.regulations.gov/comment/CMS-2021-0130-0015</a>. This number was used to extrapolate an
estimate for the six States who has already adopted this policy
option.
\27\ <a href="https://www.bls.gov/news.release/pdf/ebs2.pdf">https://www.bls.gov/news.release/pdf/ebs2.pdf</a>.
\28\ <a href="https://www.nelp.org/publication/surveying-the-home-care-workforce/#_ednref2">https://www.nelp.org/publication/surveying-the-home-care-workforce/#_ednref2</a>; see also, for example, <a href="https://www.kff.org/medicaid/press-release/combined-federal-and-state-spending-on-medicaid-home-and-community-based-services-hcbs-totaled-116-billion-in-fy-2020-serving-millions-of-elderly-adults-and-people-with-disabilities/">https://www.kff.org/medicaid/press-release/combined-federal-and-state-spending-on-medicaid-home-and-community-based-services-hcbs-totaled-116-billion-in-fy-2020-serving-millions-of-elderly-adults-and-people-with-disabilities/</a>; <a href="https://www.kff.org/medicaid/issue-brief/state-policy-choices-about-medicaid-home-and-community-based-services-amid-the-pandemic/">https://www.kff.org/medicaid/issue-brief/state-policy-choices-about-medicaid-home-and-community-based-services-amid-the-pandemic/</a>.
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The potential direct financial impact on the individual
practitioners is similarly difficult to quantify due to the absence of
specific information about the types and amount of payments being
reassigned. The 2019 final rule acknowledged potential, but minor
negative financial impacts on practitioners related to mailing
payments, and we can conclude this policy, where available, avoids
those potential costs.
C. Anticipated Effects
The RFA requires agencies to analyze options for regulatory relief
of small entities. For purposes of the RFA, small entities include
small businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by nonprofit status or by having revenues of
less than $8.0 million to $41.5 million in any 1 year. Individuals and
States are not included in the definition of a small entity. We are not
preparing an analysis for the RFA because we have determined, and the
Secretary certifies that this final rule would not have a significant
economic impact on a substantial number of small entities.
In addition, section 1102(b) of the Act requires us to prepare an
RIA if a rule may have a significant impact on the operations of a
substantial number of small rural hospitals. This analysis must conform
to the provisions of section 604 of the RFA. For purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a metropolitan statistical area for Medicare
payment regulations and has fewer than 100 beds. We are not preparing
an analysis for section 1102(b) of the Act because we have determined,
and the Secretary certifies, that this final rule would not have a
significant impact on the operations of a substantial number of small
rural hospitals.
Section 202 of the Unfunded Mandates Reform Act of 1995 also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1 year of $100
million in 1995 dollars, updated annually for inflation. In 2022, that
threshold is approximately $165 million. This rule will have no
consequential effect on State, local, or tribal governments or on the
private sector.
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a proposed
[[Page 29689]]
rule (and subsequent final rule) that imposes substantial direct
requirement costs on State and local governments, preempts State law,
or otherwise has Federalism implications. Since this regulation does
not impose any costs on State or local governments, the requirements of
Executive Order 13132 are not applicable.
D. Alternatives Considered
We considered incorporating additional regulatory text under Sec.
447.10(i) requiring explicit written consent from a practitioner before
State Medicaid agencies may make a payment on behalf of the
practitioner to a third party that provides benefits to the workforce
such as health insurance, skills training, and other benefits customary
for employees. We also considered identifying specific employee
benefits for which payments may be deducted and paid to a third party
in the regulatory text under Sec. 447.10(i), such as Federal income
taxes, Federal Insurance Contributions Act taxes, State and local
taxes, retirement benefits (for example, 401k, profit-sharing), health
insurance, dental insurance, vision insurance, long-term care
insurance, disability insurance, life insurance, gym memberships,
health savings accounts, job-related expenses (for example, union dues
with affirmative consent, uniforms, tools, meals, and mileage), and
charitable contributions. Rather than listing the universe of benefits
for which payments may be deducted and paid by State Medicaid agencies
to third parties with consent of the provider, we also considered
whether to exclude certain benefit deductions from the scope of this
final rule. Finally, we considered requiring practitioner consent only
for specific types of deductions, rather than all types of benefits,
for which Medicaid payment amounts may be deducted and paid to a third
party in the regulatory text under Sec. 447.10(i). Based on additional
analysis and commenter feedback, we are not amending any proposals to
reflect these variations.
We also considered but did not propose or finalize requiring
explicit written provider consent for deductions out of concern that
codifying a requirement for written consent could unintentionally
result in a conflict with State law. We defer to State Medicaid
agencies to ensure consent is obtained and for further implementation
of provider payment deductions consistent with State law and regulation
for State employee benefit deductions. We requested public comments on
whether to include a CMS requirement for written provider consent or to
remain silent on the form such consent must take and to defer to
existing State law and regulation.
Specifically, we sought comments on what constitutes appropriate
consent (that is, letter, email, form), descriptions of State law that
require consent, and how we could minimize burden on State Medicaid
agencies and prevent conflict with State laws and regulations if
specific consent requirements were finalized within the regulatory
text. Thus, we provided in the 2021 proposed rule that a provider must
voluntarily consent to payments to third parties on the provider's
behalf, but decided to defer to each State to determine the best means
of confirming the provider's consent in each case.
We also considered but did not propose or finalize codifying a
defined list of allowable benefits or excluded benefits within the
regulatory text based on concerns that such a list may not accurately
reflect all employee benefits available to practitioners and would need
frequent updates through the rulemaking process to remain relevant. We
discussed in the 2021 proposed rule that the available benefits may
vary between States and we would, again, defer to specific State laws
and regulations as the basis for implementing the provisions of the
2021 proposed rule. We solicited public comments on whether to codify a
defined list of benefits that may be deducted from a provider's payment
and, on behalf of the provider, be made to third parties.
We also solicited public comments on whether there are additional
types of benefits that State Medicaid agencies make to third parties on
behalf of a provider receiving benefits that were not contemplated in
the examples described in this section. In particular, we sought
comments on whether the described list of benefits is generally
permissible and consistent with deductions or payments made by States
on behalf of State employees, as well as examples of potential
impermissible arrangements we may exclude from the final rule. Finally,
we requested that commenters further explain why the benefits they
provide as examples within their comments are permissible or
impermissible as we proposed at Sec. 447.10(i).
We considered but did not propose or finalize a consent requirement
only for specific types of deductions, rather than all types of
benefits, for which Medicaid payment amounts may be deducted and paid
to a third party in the regulatory text based on the concern that we
may not accurately capture all of the employee benefits practitioners
believe should require consent. Additionally, identifying certain types
of employee benefits for which payments may be deducted and paid to a
third party in the regulatory text would also need frequent updates
through the rulemaking process to remain relevant. We solicited public
comments on whether to codify that consent is only required for
deductions for certain types of employee benefits, which benefits, and
why those benefits should require consent from the practitioner. We
also solicited public comments on whether requiring consent for certain
types of employee benefits is advantageous or disadvantageous for the
State and practitioner rather than requiring consent for all types of
employee benefits.
E. Accounting Statement
As discussed previously, the outstanding appeal related to
California v. Azar means it may be appropriate to examine the impact of
the policy described in this final rule against two, alternate
baselines. The first baseline considers this final rule to reclassify a
current policy using a new statutory interpretation, due to the vacatur
of the 2019 final rule. In this case, we would not be required to
prepare an accounting statement as would otherwise be required by OMB
Circular A-4 under Executive Order 12866 (available at <a href="https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf">https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf</a>).
However, the second baseline considers an alternative scenario
where the 2019 final rule, or its relative impact, is in effect.
Therefore, we prepared an analysis of the impact of the policy
described in this final rule, to the extent we can estimate based on
contributions sourced from public commenters on the 2021 proposed rule
and reasonable estimates of policy adoption, in the absence of actual
data. Those impacts are discussed in a comment response in section
VI.B. of this final rule. In Table 1, we have prepared an accounting
statement showing the classification of transfers associated with the
provisions in this proposed rule. The accounting statement is based on
estimates provided in this regulatory impact analysis and omits
categories of impacts for which partial quantification has not been
possible.
[[Page 29690]]
Table 1--Accounting Statement
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Transfers
-----------------------------------------------------------------------------------------------------------------
Units
-----------------------------------------------
Category Low estimate High estimate Discount rate
Year dollars (%) Period covered
----------------------------------------------------------------------------------------------------------------
Annualized monetized $ millions/ 0 $71.3 2021 3 2022
year...........................
0 71.3 2021 7 2022
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From whom to whom?.............. From States to third parties on behalf of individual practitioners.
----------------------------------------------------------------------------------------------------------------
F. Conclusion
In accordance with the provisions of Executive Order 12866, this
final rule was reviewed by the Office of Management and Budget.
Chiquita Brooks-LaSure, Administrator of the Centers for Medicare &
Medicaid Services, approved this document on March 16, 2022.
List of Subjects in 42 CFR Part 447
Accounting, Administrative practice and procedure, Drugs, Grant
programs--health, Health facilities, Health professions, Medicaid,
Reporting and recordkeeping requirements, Rural areas.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 447--PAYMENTS FOR SERVICES
0
1. The authority citation for Part 447 continues to read as follows:
Authority: 42 U.S.C. 1302 and 1396r-8.
0
2. Amend Sec. 447.10 by revising paragraph (a) and adding paragraph
(i) to read as follows:
Sec. 447.10 Prohibition against reassignment of provider claims.
(a) Basis and purpose. This section implements section 1902(a)(32)
of the Act which prohibits State payments for Medicaid services to
anyone other than a provider or beneficiary, under an assignment, power
of attorney, or similar arrangement, except in specified circumstances.
* * * * *
(i) The payment prohibition in section 1902(a)(32) of the Act and
paragraph (d) of this section does not apply to payments to a third
party on behalf of an individual practitioner for benefits such as
health insurance, skills training, and other benefits customary for
employees, in the case of a class of practitioners for which the
Medicaid program is the primary source of revenue, if the practitioner
voluntarily consents to such payments to third parties on the
practitioner's behalf.
Dated: May 5, 2022.
Andrea Palm,
Deputy Secretary, Department of Health and Human Services.
[FR Doc. 2022-10225 Filed 5-12-22; 11:15 am]
BILLING CODE 4120-01-P
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