[Federal Register Volume 86, Number 146 (Tuesday, August 3, 2021)]
[Proposed Rules]
[Pages 41803-41809]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-16430]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 447

[CMS-2444-P]
RIN 0938-AU73


Medicaid Program; Reassignment of Medicaid Provider Claims

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would reinterpret the scope of the general 
requirement that state payments for Medicaid services under a state 
plan must be made directly to the individual practitioner providing 
services, in the case of a class of practitioners for which the 
Medicaid program is the primary source of revenue. Specifically, this 
proposal, if finalized, would explicitly authorize states to make 
payments to third parties to benefit individual practitioners by 
ensuring 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.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, by September 28, 2021.

ADDRESSES: In commenting, please refer to file code CMS-2444-P. 
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-2444-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-2444-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

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. CMS will not post on Regulations.gov public 
comments that make threats to individuals or institutions or suggest 
that the individual will take actions to harm the individual. CMS 
continues to encourage individuals not to submit duplicative comments. 
We will post acceptable comments from multiple unique commenters even 
if the content is identical or nearly identical to other comments.

I. Background

A. Prohibition on Payment Reassignment

    The Medicaid program was established by Congress in 1965 to provide 
health care services for low-income and disabled beneficiaries. 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 that 
generally 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, power of attorney, or otherwise. This prohibition is 
followed by four enumerated exceptions. On September 29, 1978, CMS 
codified these exceptions under 42 CFR 447.10, the regulations 
implementing section 1902(a)(32) of the Act, in the ``Payment for 
Services'' final rule (43 FR 45253). The 1978 final rule simply 
reorganized and redesignated existing Medicaid regulations at Sec.  
449.31. Since the 1990s, we have mostly understood this provision as 
governing only assignments and other similar Medicaid reimbursement 
arrangements.
    Consistent with this understanding, from 2012 to 2014, we engaged 
in rulemaking 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 through 2949, 3001 
through 3003, and 3039) (hereinafter referred to as the ``2014 final 
rule''). In that rulemaking, we reasoned that this policy was permitted 
by the statute because the apparent purpose of section 1902(a)(32) of 
the Act was to prohibit factoring arrangements, the practice by which 
providers sold reimbursement claims for a percentage

[[Page 41804]]

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.
    This policy was codified 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 (CMCS) Informational Bulletin (CIB), 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\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf.
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B. Current Medicaid Payment Assignment Regulations

    Medicaid regulations at Sec.  447.10 implement the requirements of 
section 1902(a)(32) of the Act by providing that state plans can 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 (provider) or the recipient (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 
pursuant to 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 so doing, we interpreted the statutory phrase ``or 
otherwise'' as encompassing any and all Medicaid reimbursement 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 through 32255) and finalized in ``Reassignment of 
Medicaid Provider Claims'' final rule in the May 6, 2019 Federal 
Register (84 FR 19718 through 19728) (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 previous interpretation of section 1902(a)(32) and 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 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, the definition of medical 
assistance under section 1905(a) of the Act has been changed to permit 
states to offer coverage of categories of practitioner services, such 
as personal care services, that may be viewed as unique to the Medicaid 
program. For these practitioners, who often provide services 
independently, rather than as employees of a service provider, 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 support services (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 have generally increased to 56.1 percent 
in FY 2018. HCBS represented a majority of LTSS expenditures in 29 
states, including the District of Columbia, and over 75 percent of 
expenditures in five states in FY 2018.
    Several states have requested that CMS adopt additional exceptions 
to the direct payment policy to permit a state to withhold from a 
payment due to the individual practitioner for 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, and believe that 
state Medicaid agencies play a key role in influencing the stability of 
the workforce by determining wages and benefits, and provider 
reimbursement.\2\
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    \2\ https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf.
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II. Provisions of the Proposed Rule

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 include considerations for costs related to health and welfare 
benefits, training, and other benefits customary for employees. 
However, consistent with our previous interpretation of the statutory 
provision at section 1902(a)(32) of the Act, and reflected in 
regulations at Sec.  447.10 under the 2019 final rule, the entire rate 
must be paid to the individual practitioner who provided the service, 
unless certain exceptions apply.

[[Page 41805]]

    Following the district court's decision in California v. Azar, we 
examined the statutory language and legislative history, and now 
conclude 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 pursuant to an assignment, power of attorney, or other 
similar arrangement. In other words, the statutory prohibition is 
better viewed as an anti-reassignment provision that only governs 
assignment-like payment arrangements. We do not believe this provision 
should be interpreted as a broad prohibition on any and all types of 
Medicaid payment arrangements beyond those provided directly to 
Medicaid beneficiaries and providers or enumerated in the statutory 
exceptions. As such, we propose to amend Sec.  447.10 to add a new 
paragraph (i), which would incorporate similar language from paragraph 
(g)(4) as a new provision describing who may receive payment, rather 
than as an exception to the statutory prohibition in section 
1902(a)(32) of the Act.
    Specifically, Sec.  447.10(i) would specify that the payment 
prohibition in section 1902(a)(32) of the Act and Sec.  447.10(d) 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.\3\
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    \3\ We note that, to the extent state agencies utilize this 
option to deduct union dues, union dues may only be deducted from 
Medicaid payments with the affirmative consent of the practitioner; 
to do otherwise would be in violation of the First Amendment. See 
Janus v. Am. Fed'n of State, Cty., and Mun. Emps., Council 31, 138 
S.Ct. 2448, 2486 (2018) (``Neither an agency fee nor any other 
payment to the union may be deducted from a nonmember's wages, nor 
may any other attempt be made to collect such a payment, unless the 
employee affirmatively consents to pay.'').
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    The text of the statute addresses only assignments and related 
payment arrangements wherein a provider's right to claim and/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 general term ``or 
otherwise'' is listed following two specific and related phases. 
Statutory interpretation principles suggest that 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.'' Sutherland 
Statutory Construction Sec.  47:17; Circuit City Stores, Inc. v. Adams, 
532 U.S. 105 (2001). 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. Consistent with this interpretation, we are also 
proposing to amend Sec.  447.10(a) to include the phrase ``under an 
assignment or power of attorney or a similar arrangement.'' This change 
aligns the regulation with the applicable statutory language and our 
reading of that language, and creates a consistent framework for 
proposed new paragraph (i).
    Black's Law Dictionary defines ``assignment'' in relevant part as 
``[t]he transfer of rights or property,'' and ``power of attorney'' as 
``[a]n instrument granting someone authority to act as agent or 
attorney-in-fact for the grantor.'' \4\ Thus, the inclusion of these 
examples of the types of arrangements intended to be prohibited under 
section 1902(a)(32) of the Act supports the conclusion that the statute 
was intended to address scenarios where the right to a provider's 
Medicaid receivables or the right to submit claims on behalf of the 
provider are transferred to a third party.
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    \4\ See Black's Law Dictionary (11th ed. 2019); see also Merriam 
Webster, available at https://www.merriam-webster.com/dictionary/assignment (defining the term ``assignment'' in the ``law'' as ``the 
transfer of property''); Merriam Webster, available at https://www.merriam-webster.com/dictionary/power%20of%20attorney (defining 
the term ``power of attorney'' as ``a legal instrument authorizing 
one to act as the attorney or agent of the grantor'').
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    Moreover, 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/or 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, in order to make payments to third parties 
on behalf of the provider.
    An 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 
reimbursement 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 specific exceptions to the general principle of direct 
payment to individual practitioners. There are exceptions for payments 
for practitioner services where payment is made to the employer of the 
practitioner, and the practitioner is required as a condition of 
employment to turn over fees to the employer; payments for practitioner 
services furnished in a facility when there is a contractual 
arrangement under which the facility bills on behalf of the 
practitioner; reassignments to a governmental agency, through a court 
order, or to a billing agent; payments to a practitioner whose patients 
were temporarily served by another identified practitioner; and 
payments for a childhood vaccine administered before October 1, 1994. 
While these exceptions may appear to be largely unrelated, they all 
involve payment arrangements where third parties are submitting claims 
to the Medicaid agency and/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 and/or to receive all payments otherwise 
due a provider for services furnished supports our proposed 
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 in order 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 reimbursement.
    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.

[[Page 41806]]

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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    With respect to 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 adversely affected by 
the inability to deduct from Medicaid payments at the request or with 
the consent of a provider in order to make separate payment to a third 
party on behalf of the provider. Deductions for these purposes are an 
efficient and effective method for ensuring that the workforce has 
provisions for basic needs and is adequately trained for their 
functions, thus ensuring that beneficiaries have greater access to such 
practitioners and higher quality services. Requiring practitioner 
consent for such deductions ensures 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 propose that these deduction practices fall outside the 
scope of what the statute prohibits, 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, CMS has long sought to ensure maximum 
state flexibility to design state-specific payment methodologies that 
help ensure a strong, committed, and well-trained work force. 
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. This 
proposed rule would support previous CMS efforts to strengthen the home 
care workforce by specifying what actions are permitted, to help foster 
a stable and high-performing workforce.\8\ Under our proposed 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 reimbursement in order 
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. https://doi.org/10.1007/s12122-020-09312-5.
    \8\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf.
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    In late 2017, we requested input from states indicating whether 
they had implemented the types of payment arrangements permitted under 
Sec.  447.10(g)(4) after publication of the 2014 final rule. Of the 
states that voluntarily responded to CMS, we found that some states had 
entered into third party payment arrangements on behalf of individual 
practitioners, while others had not. This input is the most current 
state stakeholder feedback we have; therefore, we anticipate the impact 
of such payment arrangements to be positive for both states and 
practitioners. For states, the third-party payment arrangements 
authorized by this proposed rule would be optional and if a state 
chooses to implement them, then states can use existing administrative 
processes to make deductions, with consent of the individual 
practitioner, from a practitioner's Medicaid reimbursement for 
benefits. For practitioners, this proposed rule will 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 health 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. Under section 9817 of the American 
Rescue Plan, we continue to reinforce 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 delivered by home care providers, as these services 
are crucial to some of the most vulnerable individuals in our country. 
The proposed rule would help protect the economic security for home 
care providers. The ability of home care providers to choose how 
deductions are made is critically important to improvements in 
workforce standards. Moreover, since the majority of home health 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\ 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/.
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    Further, 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 health 
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 reimbursement.\10\ Under 
this proposed rule, state Medicaid agencies would be authorized to 
deduct from a practitioner's Medicaid payment, with the consent of the 
individual practitioner, in order 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 
necessary trainings, and options for other customary employee benefits.
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    \10\ https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf.
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    States typically have an established administrative process for 
their own employees' deductions for benefits that

[[Page 41807]]

can also be applied to classes of practitioners for whom Medicaid is 
the only or primary payer. Additionally, state Medicaid agencies often 
act as employers without a formal relationship to classes 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 reimbursements, with the consent of the individual 
practitioner, in order 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, retain benefits which help them 
support themselves and their families.
    We note that this proposed rule 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 benefit contributions, training, and 
similar benefits customary for employees). Under 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 in order 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, 
this proposed rule would have little to no impact on federal Medicaid 
funding levels.
    As discussed in the January 16, 2014 final rule (79 FR 2947, 3039), 
the policies proposed within this 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. This rule would simply ensure flexibility for 
states to pay for such costs directly on behalf of practitioners and 
ensure uniform access to benefits, such as health insurance, skills 
training and other benefits customary for employees. Indeed, should 
this proposed rule be finalized, there may be cost savings resulting 
from the collective purchase of such benefits and greater workforce 
stability.
    We are specifically soliciting public comments on the extent to 
which the proposed payment arrangements would benefit states and 
practitioners, particularly if and how practitioner's access to 
benefits would be impacted, as well as any adverse impacts that may 
have not been anticipated. Additionally, we are seeking 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. Collection of Information Requirements

    To the extent a state changes its payment as a result of finalizing 
this proposed rule, the state would be required to obtain practitioner 
consent 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 exercise this flexibility 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 would 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 would respond to 
the comments in the preamble to that document.

V. Regulatory Impact Analysis

A. Statement of Need

    In California v. Azar, the district court vacated the 2019 rule and 
remanded to HHS for further proceedings. Accordingly, we examined the 
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 pursuant to an 
assignment, power of attorney, or other similar arrangement. Although 
the court vacated the 2019 rule, our current statutory interpretation 
requires this rulemaking in order to reclassify the exception in 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 individual practitioners. Finally, this 
rule provides us an opportunity to reinforce the important caveat that 
such deductions may only be made with the consent of the individual 
practitioner.

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 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

[[Page 41808]]

million or more in any 1 year). We estimate that this proposed 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. Based on our estimates, the 
Office of Management and Budget's Office of Information and Regulatory 
Affairs has determined that this rulemaking is ``significant'' and 
``not major'' under Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (also known as the Congressional 
Review Act).
    Although we are establishing a new regulatory provision, the change 
is merely in the statutory approach, while the effect is largely the 
same as under Sec.  447.10(g)(4). As such, as discussed in the January 
16, 2014 final rule (79 FR 2947, 3039) that initially established the 
authority for these arrangements, we believe that this proposed rule 
ensures Medicaid funding additional operational flexibilities for 
states to ensure a strong provider workforce. There is also no impact 
on individual practitioners, even though the proposed rule would allow 
states to deduct payments from provider's payment with their consent 
under the specific circumstances described in the proposed rule. State 
budgets will not likely be significantly affected because the 
operational flexibilities in the proposed rule would only facilitate 
the transfer of funds between participating entities, rather than the 
addition or subtraction of new funds.
    Since the 2014 and 2019 final rules, we are not aware of any state 
plan amendments submitted by state Medicaid agencies that intended to 
modify provider payments rates in response to these previous regulatory 
changes. In addition, we do not formally track the payment amounts that 
state Medicaid agencies pay to third parties as affected by the 
proposed regulatory provision. 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. Again, we are seeking comment 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).

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 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 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 2021, that 
threshold is approximately $158 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 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 (FICA) 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 (HSA), 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 proposed 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).
    We considered but did not propose to require 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. As proposed, we would 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 are requesting public comment 
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 are seeking 
comments on what constitutes appropriate consent (that is, letter, 
email, form), descriptions of state law that require consent, and how 
CMS 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 are 
providing in this proposed rule that a provider must voluntarily 
consent to payments to third parties on the provider's behalf, but 
propose to leave to each state to determine the best means of 
confirming the provider's consent in each case.
    We also considered but did not propose to codify a defined list of 
allowable benefits or excluded benefits within the regulatory text 
based on

[[Page 41809]]

concerns that such a list may not accurately reflect all employee 
benefits available to practitioners and would need frequent updates 
through the rulemaking process in order to remain relevant. The 
available benefits may vary between states and we would, again, defer 
to specific state laws and regulations as the basis for implementing 
the proposed rule. We are soliciting 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 are also soliciting 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 are seeking 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 are requesting that commenters further explain why 
the benefits they provide as examples within their comments are 
permissible or impermissible under the proposed Sec.  447.10(i). As 
noted in the Overall Impact section, we are also seeking public 
comments, as well as data on the type and amount of benefit deductions 
broken down by benefit that may be included under Sec.  447.10(i).
    We considered but did not propose to require 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 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 in order to remain relevant. We are 
soliciting 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 are also soliciting 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. Conclusion

    In accordance with the provisions of Executive Order 12866, this 
proposed 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 July 21, 2021.

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: 42 U.S.C. 1302 and 1396r-8.

0
2. Amend Sec.  447.10 by revising paragraph (a) and adding new 
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) Payment prohibition. 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: July 28, 2021.
Andrea Palm,
Deputy Secretary, Department of Health and Human Services.
[FR Doc. 2021-16430 Filed 7-30-21; 4:15 pm]
BILLING CODE 4120-01-P