[Federal Register Volume 83, Number 134 (Thursday, July 12, 2018)]
[Proposed Rules]
[Pages 32252-32255]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14786]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 447

[CMS-2413-P]
RIN 0938-AT61


Medicaid Program; Reassignment of Medicaid Provider Claims

AGENCIES:  Centers for Medicare & Medicaid Services, Department of 
Health and Human Services.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would remove the regulatory text that 
allows a state to make payments to third parties on behalf of an 
individual provider for benefits such as health insurance, skills 
training, and other benefits customary for employees. We are concerned 
that these provisions are overbroad, and insufficiently linked to the 
exceptions expressly permitted by the statute. As we noted in our prior 
rulemaking, section 1902(a)(32) of the Act provides for a number of 
exceptions to the direct payment requirement, but it does not authorize 
the agency to create new exceptions.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on August 13, 2018.

ADDRESSES: In commenting, please refer to file code CMS-2413-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    Comments, including mass comment submissions, must be submitted in 
one of the following three ways (please choose only one of the ways 
listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2413-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2413-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

FOR FURTHER INFORMATION CONTACT: Christopher Thompson, (410) 786-4044.

SUPPLEMENTARY INFORMATION: Inspection of Public Comments: All comments 
received before the close of the comment period are available for 
viewing by the public, including any personally identifiable or 
confidential business information that is included in a comment. We 
post all comments received before the close of the comment period on 
the following website as soon as possible after they have been 
received: http://www.regulations.gov. Follow the search instructions on 
that website to view public comments.

I. Background

    The Medicaid program was established by the Congress in 1965 to

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provide health care services for low-income and disabled beneficiaries. 
Section 1902(a)(32) of the Social Security Act (the Act) requires 
direct payment to providers who render services to Medicaid 
beneficiaries. It states that no payment under the plan for care and 
services 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.
    We codified Sec.  447.10 implementing section 1902(a)(32) of the 
Act in the ``Payment for Services'' final rule published on September 
29, 1978 (43 FR 45253). The statute provides several specific 
exceptions to the general principle of requiring that direct payment be 
made to the individual provider. The regulations implementing section 
1902(a)(32) of the Act have generally tracked the plain statutory 
language and required direct payments absent a statutory exception.
    In 2012, we proposed a new regulatory exception in the ``Provider 
Payment Reassignment, and Setting Requirements for Community First 
Choice'' proposed rule published on May 3, 2012 (77 FR 26361, 26406) 
for ``a class of practitioners for which the Medicaid program is the 
primary source of service revenue'' such as home health care providers. 
We recognized in the preamble to the proposed rule that section 
1902(a)(32) of the Act does not authorize additional exceptions to the 
direct payment requirement (See 77 FR 26382).
    We received a total of 7 comments on the proposed regulatory 
exception, all generally supportive of the proposed rule. This 
provision was finalized in the ``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 on January 16, 2014 (79 FR 2947, 3001) and authorized a 
state to make payments to third parties on behalf of the individual 
provider ``for benefits such as health insurance, skills training, and 
other benefits customary for employees.''
    We are concerned that Sec.  447.10(g)(4) is overbroad, and 
insufficiently linked to the exceptions expressly permitted by the 
statute. As we noted in our prior rulemaking, section 1902(a)(32) of 
the Act provides for a number of exceptions to the direct payment 
requirement, but it does not authorize the agency to create new 
exceptions. Therefore, the regulatory provision grants permissions that 
Congress has foreclosed, so we are proposing to remove the regulatory 
exception at Sec.  447.10(g)(4).

II. Provisions of the Proposed Regulations

    This proposal would remove Sec.  447.10(g)(4), but leave in place 
the other provisions in Sec.  447.10 including the exceptions at Sec.  
447.10(e), (f) and (g)(1) through (3). We seek comments regarding how 
we might provide further clarification on the types of payment 
arrangements that would be permissible assignments of Medicaid 
payments, such as arrangements where a state government withholds 
payments under a valid assignment. Specifically, we invite comments 
with examples of payment withholding arrangements between states and 
providers that we should address.
    With regard to section 1915(c), 1915(i), 1915(j), and 1915(k) 
authority, this proposed rule will not impact a state's ability to 
perform Financial Management Services (FMS) or secure FMS through a 
vendor arrangement. However, we also request comments on whether and 
how the proposed removal of Sec.  447.10(g)(4) would impact self-
directed service models, where the Medicaid beneficiary takes 
responsibility for retaining and managing his or her own services, and, 
in some cases, may be performing payroll and other employer-related 
duties. We are especially interested in comments that describe the 
additional flexibilities needed to support beneficiaries opting for 
self-directed service models, which may ensure stable, high-quality 
care for those beneficiaries.

III. Collection of Information Requirements

    To the extent a state changes its payment as a result of this rule, 
the state would be required to notify entities of the pending change in 
payment and update its payment system. We believe the associated burden 
is exempt from the Paperwork Reduction Act (PRA) in accordance with 5 
CFR 1320.3(b)(2). We believe that the time, effort, and financial 
resources necessary to comply with the aforementioned requirement would 
be incurred by the state during the normal course of their activities 
and, therefore, should be considered usual and customary business 
practices.

IV. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

    We are concerned that Sec.  447.10(g)(4) is overbroad, and 
insufficiently linked to the exceptions expressly permitted by the 
statute. Therefore, the regulatory provision grants permissions that 
Congress has foreclosed. As we noted in our prior rulemaking published 
on January 16, 2014 (79 FR 2947, 3001), section 1902(a)(32) of the Act 
provides for a number of exceptions to the direct payment requirement, 
but the language does not explicitly authorize the agency to create new 
exceptions. Therefore, we are proposing to remove the regulatory 
exception at Sec.  447.10(g)(4). To the extent a state increased 
reimbursement levels to reassign portions of a provider's reimbursement 
to a third party, implementation of this rule may affect the rates that 
are set by the state in the future.

B. Overall Impact

    We have examined the impacts of this proposed 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 directs 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

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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). We estimate that this proposed rule could be ``economically 
significant'' as it may have an annual effect on the economy in excess 
of the $100 million threshold of Executive Order 12866, and hence that 
this proposed rule is also a major rule under the Congressional Review 
Act. However there is considerable uncertainty around this estimate and 
the Department invites public comments to help refine this analysis.
    As discussed above, in the ``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 on January 16, 2014 (79 FR 2947, 3001), we authorized a 
state to make payments to third parties on behalf of the individual 
provider ``for benefits such as health insurance, skills training, and 
other benefits customary for employees.'' We lack information with 
which to quantify the potential impacts of this policy on these types 
of payments as the Department does not formally track the amount of 
reimbursement that is being reassigned to third parties by states. To 
offer one example, one such potential impact of the proposed rulemaking 
would be that states stop reassigning homecare workers' dues to unions. 
We estimate that unions may currently collect as much as $71 million 
from such assignments.\1\ While we have not similarly quantified the 
amount of other authorized reassignments, such as health insurance, 
skills training, or other benefits, we believe that the amount of 
payments made to third parties on behalf of individual providers for 
the variety of benefits within the scope of this rulemaking is likely 
in excess of $100 million. We seek comment on this estimate, and 
particularly on the type and amount of payments currently being 
reassigned under the exceptions in Sec.  447.10(g).
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    \1\ Dues payments potentially associated with policies of the 
type being proposed for revision have been reported to be $8 million 
in Pennsylvania and $10 million in Illinois (https://www.fairnesscenter.org/cases/detail/protecting-the-vulnerable and 
https://www.washingtonexaminer.com/illinois-politicians-forced-home-care-workers-into-union-that-donates-heavily-to-them/article/2547368). The total population is approximately 26 million in these 
two states and 102 million across the states that have been reported 
by the State Policy Network to have relevant third-party payment 
policies (California, Connecticut, Illinois, Maryland, 
Massachusetts, Minnesota, Missouri, New Jersey, Oregon, Vermont and 
Washington) (https://www2.census.gov/programs-surveys/popest/tables/2010-2017/state/totals/nst-est2017-01.xlsx and https://spn.org/dues-skimming-faqs/). Factoring the $18 million (= $8 million + $10 
million) proportionately by population yields a nationwide total of 
approximately $71 million in union dues payments potentially 
affected by this proposed rule. This transfer estimate could be 
over- or understated if other states pay home care workers different 
average wages than Pennsylvania and Illinois, if dues payments are 
collected at different rates, or if participation in Medicaid home 
care programs is not proportionate to total population.
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    The potential direct financial impact to providers of this policy 
change could be affected by many factors, such as the nature and 
amounts of the types of payments currently being reassigned and 
decisions made by homecare providers after a final policy takes effect 
about whether or not to resume payments to third parties for these 
types of benefits. The Department is unable to quantify these direct 
financial impacts in the absence of specific information about the 
types and amount of payments being reassigned. Even where it may be 
possible to derive such estimates, such as with the example of union 
dues, the Department lacks information to reliably estimate the 
proportion of homecare providers likely to stop making payments versus 
those likely to continue making payments through alternative means. We 
request comments on the factors that might influence the direct 
financial impacts to providers and recipients of reassignments of this 
policy change for the varied types and amount of payments currently 
being reassigned under the exceptions in Sec.  447.10(g).
    Although states will no longer be able to withhold portions of a 
provider's payment, states may elect to maintain the same level of 
payment, thus affording the provider the opportunity to purchase the 
items that were previously funded through the reassignment of 
reimbursement. Conversely, states may elect to decrease payment levels 
because rescission of Sec.  447.10(g)(4) will limit their ability to 
reassign payment to third parties. In other words, states may have 
previously factored their ability to reassign provider payments into 
their payment rates and might choose to revise their rates in response 
to this regulatory change. We request comments, particularly from 
states, on potential state behavior under the proposed policy.
    If a state elected to maintain the same level of payment, and if 
homecare providers opt to continue all voluntary payments presently 
being reassigned, then the rule may have no impacts. However, if a 
state elected to reduce payment levels and/or if homecare providers opt 
to discontinue all voluntary payments, then the impacts of the rule may 
be close to the full amount of current reassignments, thus making the 
rule economically significant.
    While it is difficult for us to conduct a detailed quantitative 
analysis given this considerable uncertainty and lack of data, we 
believe that without this proposed rulemaking, states may apply the 
exceptions at Sec.  447.10(g) in ways that do not comport with section 
1902(a)(32) of the Act and we welcome comment with regard to the 
quantitative impact of the elimination of states' ability to reassign 
Medicaid payment for items such as health insurance, skills training 
and other benefits customary for employees. We also seek comments 
identifying impacts to states and the federal government as a result of 
this proposed rule, including on the assumption that the time, effort 
and financial resources necessary to comply with the proposed 
requirement would be incurred by states during the normal course of 
their activities and, therefore, does not impose incremental 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 $7.5 million to $38.5 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 proposes to certify, that this proposed 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 603 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

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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 proposes to certify, that this proposed 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 2018, that 
threshold is approximately $150 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 promulgates a proposed 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 issuing guidance to require states to formally 
document consent to reassign portions of a provider's payment. We also 
considered limiting the items for which provider reassignment could be 
made. However, we are concerned that Sec.  447.10(g)(4)) is overbroad, 
and insufficiently linked to the exceptions expressly permitted by the 
statute. Therefore, we believe removing the regulatory exception is the 
best course of action.

E. Accounting Statement

    As required by OMB Circular A-4 under Executive Order 12866 
(available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf) 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.

                                          Table 1--Accounting Statement
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                                                                                       Units
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            Category               Low estimate    High estimate                   Discount rate      Period
                                                                   Year dollars         (%)           covered
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Transfers:
    Annualized Monetized $                     0             $71            2017               3            2019
     millions/year..............
                                               0              71            2017               7            2019
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    From whom to whom?..........                   From third parties to home health providers.
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F. Regulatory Reform Analysis Under E.O. 13771

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017 and 
requires that the costs associated with significant new regulations 
``shall, to the extent permitted by law, be offset by the elimination 
of existing costs associated with at least two prior regulations.'' 
This proposed rule is not expected to be subject to the requirements of 
E.O. 13771 because this proposed rule is expected to result in no more 
than de minimis costs.

G. Conclusion

    In accordance with the provisions of Executive Order 12866, this 
proposed rule was reviewed by the Office of Management and Budget.

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 proposes to amend 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: Sec. 1102 of the Social Security Act (42 U.S.C. 
1302).


Sec.  447.10  [Amended]

0
2. Section 447.10 is amended by removing paragraph (g)(4).

    Dated: May 3, 2018.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: May 7, 2018.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2018-14786 Filed 7-10-18; 11:15 am]
BILLING CODE 4120-01-P