NACo submits comments on proposal to alter Medicaid financing

Key Takeaways

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On February 1, NACo submitted comments on the Centers for Medicare and Medicaid Services’ (CMS) proposed rule to reshape the federal, state and local partnership in financing Medicaid. If enacted, the Medicaid Fiscal Accountability Regulation (MFAR), would make technical changes to Medicaid’s supplemental payments and state financing structure.

As drafted, the proposed changes to Medicaid’s supplemental payments include new reporting requirements for disproportionate share hospital (DSH) payments, limitations on supplemental payments to certain health care providers and an extensive review process for the addition or renewal of supplemental funding sources. The rule would also require reviews of supplemental funding to be conducted every three years.

In terms of the proposed changes to Medicaid’s financing structure, the rule would cap two flexible funding mechanisms used by state and local governments to finance their non-federal shares of Medicaid payments: intergovernmental transfers (IGTs) and certified public expenditures (CPEs). An IGT is a transfer of funds from a government entity (such as a county) to the state Medicaid agency that, when used to meet the non-federal share of a Medicaid payment, is eligible to receive federal matching funds. Meanwhile, CPEs are used by government entities (including health care providers) to receive federal matching funds for health care services approved under a state’s Medicaid state plan. In FY 2018, supplemental funding sources such as IGTs and CPEs, as well as other local funding sources, made up 37.5 percent of all Medicaid spending.

NACo’s comments emphasized the potentially burdensome impacts of these proposed provisions on counties. The creation of new reporting requirements, for instance, would require additional time and resources without providing additional federal funding to meet this obligation. Furthermore, the proposed changes to Medicaid’s financing structure could challenge counties’ ability to provide essential health services to vulnerable populations and plan our budgets strategically. Counties support the current rules permitting maximum flexibility for states and counties in meeting the non-federal share of Medicaid payments. We urge CMS to reconsider this rule, and work with local governments to improve state Medicaid operations without decreasing flexibility and limiting access to services.

For additional information on the proposed rule and counties’ role in the Medicaid program, please see the following links:

• NACo comments on MFAR proposed rule (NACo comments)
• Full text of the Medicaid Fiscal Accountability Regulation (Federal Register document)
• Medicaid and Counties: Understanding the Program and Why It Matters to Counties (NACo presentation)