Sellers Dorsey Digest

Federal Updates

NEWS

House E&C Committee Drops Budget Reconciliation Proposals

• On May 11, the House Committee on Energy and Commerce (E&C) released bill text for its portion of the budget reconciliation bill, detailing the committee’s policy choices aimed at reducing $880B in federal spending. Key proposals in the draft bill include implementing Medicaid work requirements for certain able-bodied adults; imposing more frequent eligibility checks on the Medicaid expansion population; placing additional restrictions on states’ use of provider taxes and state-directed payments; limiting FMAP for states that provide services for undocumented immigrants; rescinding Biden-era regulations on eligibility, enrollment, and long-term care facilities; and reforming requirements for pharmacy benefit managers. The Congressional Budget Office (CBO) estimated proposals included in the reconciliation language could reduce spending by approximately $912B over the next decade, according to emails released by Democrats on the committee. Republicans on the committee released a separate CBO estimate projecting $625B in savings. A final CBO estimate has not yet been made public.

Stakeholders have already voiced concerns that the proposals presented in this bill would result in reduced access to care for Medicaid recipients.

During the markup, which took place over 26+ hours on May 13 and 14, Republicans expressed support for the bill and characterized Democrats’ concerns as misplaced and misleading. Ultimately, the bill passed the committee as written on a 30-24 vote. The bill now goes to the House Budget Committee for future action (Fierce Healthcare, May 12; Inside Health Policy, May 8; Politico Pro, May 14).

⇒ From Our Viewpoint^[i]

The proposals included in the draft reconciliation bill language have potential to significantly impact states, health plans, providers, and beneficiaries. As noted above, one CBO estimate projects more than $900B in savings to the federal government from the proposals, much of which would come from individuals losing Medicaid coverage. According to the CBO’s estimate, the proposals around expiration of premium tax credits, finalization of the Marketplace Integrity and Affordability Rule, and the Medicaid provisions in the E&C reconciliation bill taken together could result in about 13.7 million people losing coverage by 2034. 7.6 million could potentially remain uninsured due to the E&C bill proposals.

New restrictions around provider taxes and state-directed payments have potential to significantly reduce the amount of federal funding state Medicaid programs receive. Likewise, the proposed FMAP reduction for states providing coverage to undocumented immigrants could reduce federal funding for the states, such as California, that have elected to provide this coverage. Even before considering potential federal reductions, many states find themselves in a tight budgetary spot in the coming fiscal year, with governors in several states proposing reductions to achieve balanced budgets. If there are significant reductions in federal spending, states may respond by either increasing state allocations to make up the difference, or implementing measures to contain state costs, including reducing eligibility and enrollment through various methods; reducing or eliminating optional benefits; eliminating coverage of optional groups; or reducing Medicaid provider reimbursement rates.

These actions could also place additional pressure on Medicaid health plans. Reduced enrollment will directly reduce revenues, while reduced provider rates may impact capitation rates. Plans may also have additional incentives to contain costs by focusing on engaging and managing the medical care of their enrollees to reduce high costs. Community engagement requirements would create pressure for plans, which have an interest in keeping their members enrolled. Such requirements would also create opportunities for plans to engage with members to assist them in meeting work requirements by connecting them to community resources and assisting with tracking.

Sellers Dorsey has published a full summary of this regulation, available on our website here.

_{[i] E&C Reconciliation Recommendations| democrats-energycommerce.house.gov; What is a Medicaid work requirement? | healthinsurance.org}

Congress May Codify ACA Proposed Rule to Leverage Cost Savings in Reconciliation

• According to Inside Health Policy’s sources, Congress is looking to codify the recent proposed rule on ACA Marketplace Integrity and Affordability to leverage as cost savings in the budget reconciliation process. However, Democratic lawmakers and other stakeholders who support the ACA Marketplace oppose this option, citing concerns over reduced enrollment and increased costs to individuals. The Marketplace proposed rule is currently at the White House Office of Management and Budget for review. The proposed regulation has been scored by the Congressional Budget Office, with an estimated savings of $210B over ten years, higher than CMS’ estimate of $150B in savings. The CBO also estimates that the number of uninsured individuals would increase by 1.9 million and premiums would increase by 2.6% each year. If enhanced premium tax credits expire, estimates place the number of uninsured at 5.7 million. If the proposed rule is codified into law, state-based exchanges may be limited in their ability to shape their own policies, and it would be more difficult to overturn these changes. Stakeholders are also raising concerns about the negative impact of these policies on the Marketplace as the administration pursues significant Medicaid cuts. The Ways & Means Committee in the House has jurisdiction over this change. The Committee held their markup session on Tuesday, May 13, with proposed amendments being voted down along party lines. The Committee Print was adopted with no amendments 26-19 (Inside Health Policy, May 9).

CMMI Director Details New Direction for the Innovation Center

• Abe Sutton is the new Director of the Center for Medicare and Medicaid Innovation (the Innovation Center) and Deputy Administrator for CMS. He recently released a letter detailing how the Innovation Center will shift its focus to support the Make America Healthy Again movement. Leveraging the foundation of alternative payment models catalyzed by the Innovation Center, Sutton aims to create a health system that empowers individual health to align with the Trump Administration’s Make America Healthy Again goals. With this, he details three foundational principles for the Innovation Center at this point in time: promoting evidence-based prevention, empowering people to achieve their health goals, and driving choice and competition for people. The statement reiterates that these principles are underscored by the administration’s priorities of safeguarding taxpayer dollars as well as an emphasizing on preventive services. Notably, Sutton explicitly details the Innovation Center’s interest in testing advancements in Medicare Advantage’s prescription drug pricing, new devices and technology, and the potential for multi-payer approaches to state-level delivery systems (CMS.gov, May 13).

CMS Rescinds Guidance on Beneficiary Fraud

• On May 1, CMS rescinded a December 4, 2024, State Medicaid Director Letter. The letter directed states not to recoup funds, impose lock-outs, or terminate eligibility for beneficiaries suspected of fraud. The letter emphasized that states must provide due process for beneficiaries accused of fraud and abuse. The recission signals the CMS’ renewed focus on fraud, waste, and abuse, and would allow states to pursue administrative actions against beneficiaries accused of fraud, including recouping the cost of benefits already received (Inside Health Policy, May 8).

Federal Legislation

20 Democratic State AGs Team Up to Sue the HHS & Trump Administration

• On May 5, 20 state attorneys general (from AZ, CA, CO, CT, DE, HI, IL, ME, MD, MI, MN, NJ, NY, OR, RI, VT, WA, WI, and DC) filed suit in the US District Court of Rhode Island against HHS Secretary Robert F. Kennedy Jr, seeking to overturn the agency’s layoff of over 10,000 federal employees and cut public health programs. The lawsuit argues that HHS’s mission over the past 72 years has been to both protect and better the health and well-being of Americans, which they believe recent actions by the agency contradict. On May 9, US District Judge Susan Illston granted a temporary restraining order, pausing the Trump Administration’s impending reorganization for two weeks. The Trump Administration filed an appeal, for which both sides have been asked to submit additional filings for a preliminary injunction this week (Healthcare Dive, May 6; Fierce Healthcare, May 12).

Federal Regulation/Guidance

CMS Provides Guidance to States and Insurers as Marketplace Cost Sharing Tools are Debated in Congress

• States and insurers have received new CMS guidance to prepare for all potential cost sharing options in the ACA Marketplace. Currently, the guidance suggests that payers should be prepared for all potential options: Congressional funding of cost-sharing reduction (CSR) payments, an extension of ACA premium tax credit subsidies, some combination of the two, or no cost-sharing payments. In a reversal from Trump’s 2017 decision, Congress could allocate funds for CSR payments to reduce the deficit and fund other healthcare priorities during the budget reconciliation process. Senate Republicans have indicated their potential preference for this option ahead of committee markups. Any reductions to CSRs could result in higher costs being passed down to consumers, as happened previously. When CSR payments were halted by Trump, insurers increased premiums for certain plans known as “silver loading” where policy holders for silver plans on the Marketplace had significantly higher premiums than other healthcare plan options. The future of the ACA Marketplace and cost sharing options are in upheaval as different policies are considered in Congress and by the administration (Fierce Healthcare, May 7).

CMS Releases Proposed Rule to Ensure Provider Taxes are Generally Redistributive

• On May 12, CMS released a proposed rule titled “Preserving Medicaid Funding for Vulnerable Populations – Closing a Health Care-Related Tax Loophole.” The rule would prohibit states from taxing Medicaid related businesses at higher rates, disallow what it terms “vague” language for Medicaid-specific taxes, ensure that the integrity of statistical tests is sound, and that states provide a transition timeline for waivers. CMS will accept public comment on the rule, which is published in the Federal Register, through July 14 (Medicaid, May 12; CMS, May 12).

Sellers Dorsey has published a full summary of this regulation, available on our website here.

State Updates

NEWS

Alabama Allows Farm Bureau to Offer Health Plans in the State

• Alabama Governor Kay Ivey has signed the bipartisan Senate Bill 84 into law, allowing nonprofit agricultural groups to create self-funded health plans. These plans are not to be considered health insurance and are not subject to federal requirements that otherwise mandate coverage for preexisting conditions or prevent lifetime caps on benefits. The Alabama Farmers Federation was the driving force supporting the bill and explained that this would offer a pathway to affordable care for farmers and self-employed individuals who are members of the Federation but cannot afford coverage in the ACA Marketplace. Alabama’s major health insurer, Blue Cross Blue Shield, was a strong opponent of its passage, claiming that the plans would be harmful to patients and the highly regulated insurance industry, potentially expanding beyond farm families. Alabama joins 11 other states that have farm bureau health plans in place (AL.com, May 7; AL.com, February 20).

Bill Expanding Florida’s IDD Managed Care Pilot Moves Forward

• In 2024, Florida received approval to deliver IDD waiver services through managed care under a pilot program currently serving about 350 people in the state. A bill under consideration in the current legislative session, Florida House Bill 1103, aims to remove the enrollment cap and expand the program statewide. The bill would expand services to individuals on the interest list for the state’s iBudget waiver, which serves individuals with IDD, while making managed care enrollment optional for existing iBudget recipients. Additionally, the bill would impose new transparency requirements on the Agency for Persons with Disabilities (APD), which operates the iBudget waiver. Although disability advocates generally support the bill, some have expressed concern that Governor DeSantis will veto the bill, as lawmakers in the House adopted significant amendments to the bill that remove some of the agency’s priority items and instead focus on additional transparency. The bill is awaiting the Governor’s final review (Florida Phoenix, May 9).

SPA and Waiver Approvals

SPAs

• Administrative
  • Delaware (DE-24-0016, effective July 1, 2024): Establishes a Recovery Audit Contractor (RAC) exemption for two years.
  • Iowa (IA-25-0009, effective July 1, 2025): Establishes a Recovery Audit Contractor (RAC) exemption for two years, beginning July 1, 2024, due to the state’s insufficient claims volumes to engage with a RAC vendor.
• Payment
  • Colorado (CO-25-0011, effective January 1, 2025): Disallows third-party payers from denying reimbursement of a Medicaid service or item based on lack of prior authorization, ensuring that eligible services are paid for by the member’s commercial health plans.
  • New Jersey (NJ-25-0001, effective January 1, 2025): Implements the state’s annual across-the-board rate increase across all benefit categories.
  • Pennsylvania (PA-25-0011, effective March 2, 2025): Creates an additional class of supplemental payments to qualifying Medical Assistance (MA) enrolled acute general hospitals providing inpatient care to MA beneficiaries.

State Directed Payment Preprints

• Michigan (Effective October 1, 2021): Amends a uniform dollar increase for psychiatric inpatient days for the rating period covering October 1, 2021, through September 30, 2022, and incorporated in the capitation rates through a separate payment term.
• Michigan (Effective October 1, 2022): Amends a uniform dollar increase established by the state for professional services provided by practitioners employed or under contract with approved public entities for the rating period covering October 1, 2022, through September 30, 2023, and incorporated in the capitation rates through a separate payment term.
• Nevada (Effective January 1, 2025): Renews a uniform increase for eligible inpatient and outpatient services at eligible private hospitals for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a separate payment term.
• New Hampshire (Effective July 1, 2025): Renews the minimum fee schedule established by the state for durable medical equipment for the rating period covering July 1, 2025, through June 30, 2026, incorporated into the capitation rates through a risk-based rate adjustment.
• New Jersey (Effective July 1, 2025): Renews a pay-for-performance initiative focused on maternal health performance improvement among acute care hospitals licensed to provide Labor and Delivery Services for the rating period covering July 1, 2025, through June 30, 2026, incorporated into the capitation rates through a separate payment term.
• New Jersey (Effective July 1, 2025): Renews a pay-for-performance initiative focused on improvement of behavioral health performance among acute care hospitals for the rating period covering July 1, 2025, through June 30, 2026, incorporated into the capitation rates through a separate payment term.
• New York (Effective April 1, 2025): Renews a population-based payment that was established by the state for Medicaid managed care enrollees attributed to eligible primary care providers who have active New York State Patient Centered Medical Home (PCMH) recognition for the rating period covering April 1, 2025, through March 31, 2026, incorporated into the capitation rates through a separate payment term.
• New York (Effective April 1, 2025): Renews a population-based payment that was established by the state for Medicaid managed care enrollees attributed to eligible primary care providers who have active New York State Patient Centered Medical Home (PCMH) recognition and have attested to developing a referral workflow with regional Social Care Networks for the rating period covering April 1, 2025 through March 31, 2026, incorporated into the capitation rates through a separate payment term.
• Pennsylvania (Effective January 1, 2025): Establishes a uniform percent increase for dental services for the rating period covering January 1, 2025, through December 31, 2025, incorporated in the capitation rates through a risk-based rate adjustment.
• Puerto Rico (Effective October 1, 2024): Renews the minimum fee schedule established by the state for specialty physician services and behavioral health outpatient services for the rating period, October 1, 2024, through September 30, 2025, incorporated into the capitation rates through a risk-based rate adjustment.
• Puerto Rico (Effective October 1, 2024): Renews a uniform dollar increase established by the state for inpatient hospital services for the rating period, October 1, 2024, through September 30, 2025, incorporated into the capitation rates through a separate payment term.
• Tennessee (Effective January 1, 2025): Renews a uniform percentage increase established by the state for inpatient and outpatient hospital services for the rating period, January 1, 2025, through December 31, 2025, incorporated into the capitation rates through a separate payment term.
• Washington (Effective January 1, 2023): Amends a uniform increase established by the state for qualified licensed professionals employed by the University of Washington and/or a member of its affiliated physician practice plans or employed by a public hospital or other public entity for the rating period covering January 1, 2023, through December 31, 2023, incorporated in the capitation rates through a separate payment term.
• Wisconsin (Effective January 1, 2025): Renews the minimum and maximum fee schedules established by the state for Sub-Acute Psychiatric Community-Based Psychiatric and Recovery Center services for the rating period, January 1, 2025, through December 31, 2025, incorporated into the capitation rates through a risk-based rate adjustment.
• Wisconsin (Effective January 1, 2025): Renews a uniform percentage increase established by the state for eligible home and community-based services (HCBS) for the rating period, January 1, 2025, through December 31, 2025, incorporated into the capitation rates through a risk-based rate adjustment.
• Wisconsin (Effective January 1, 2025): Renews a uniform percentage increase established by the state for eligible home and community-based services for the rating period, January 1, 2025, through December 31, 2025, incorporated into the capitation rates through a risk-based rate adjustment.
• Wisconsin (Effective January 1, 2025): Renews a uniform percentage increase established by the state for eligible home and community-based services for the rating period, January 1, 2025, through December 31, 2025, incorporated into the capitation rates through a risk-based rate adjustment.

Sellers Dorsey Updates

NEWS

Summary of Medicaid-Related Provisions in House E&C Committee Budget Reconciliation Bill

• Sellers Dorsey has compiled a detailed summary of the Medicaid-related provisions in the House Energy & Commerce Committee’s reconciliation bill. This includes updates on eligibility redeterminations, provider taxes, PBM transparency, community engagement requirements, and more.

Read the Summary

Summary of CMS Proposed Rule: Methodology to Determine Provider Taxes as Generally Redistributive

• CMS has proposed a rule to address concerns about how states determine whether a provider tax is “generally redistributive.” Our team of healthcare policy experts has reviewed and summarized the rule to help stakeholders quickly understand its implications and prepare for potential changes.

Read the Summary

Medicaid and Child Welfare: How State Agencies Can Bridge Gaps to Improve Outcomes

• Children and youth in foster care deserve seamless, coordinated care that meets their full range of needs. In our latest blog, Katie Renner Olse explores how Medicaid and state agencies can join forces to deliver trauma-informed, coordinated care—and why that collaboration is more critical than ever. Discover actionable strategies to bridge gaps and improve outcomes.

Read Katie’s Blog