On September 14, 2020, CMS Administrator Seema Verma announced that CMS will withdraw its proposed Medical Fiscal Accountability Rule (MFAR), originally published on November 18, 2019. Ms. Verma stated:

“The proposed Medicaid Fiscal Accountability Rule (MFAR) was designed to increase transparency in Medicaid financing and ensure that taxpayer resources support the health care needs of our beneficiaries. We’ve listened closely to concerns that have been raised by our state and provider partners about potential unintended consequences of the proposed rule, which require further study. Therefore, CMS is withdrawing the rule from the regulatory agenda.” (Twitter, 9/14)

Providers and other state stakeholders strenuously opposed the proposed rule from the outset, as the rule would have significantly impacted Medicaid by upending the way states are able to finance their share of Medicaid.  Specifically targeting provider taxes and inter-governmental transfers (IGTs), the rule would have created new unspecified methodology requirements without providing a clear regulatory impact analysis on the non-federal share of Medicaid funding.

During the extended notice and comment period, CMS received over 4,200 comments from a range of stakeholders including Governors, state Medicaid agencies (and Medicaid directors), safety net hospitals, community health plans, and provider associations. While generally supporting CMS’ stated interest in transparency, stakeholders expressed concern with the practical consequences of MFAR as proposed. The American Hospital Association and American Health Care Association noted “the bleak reality is that Medicaid funding is already inadequate” and warned against significant loss to the Medicaid program nationally and especially severe reduction to hospital funding.[1]

Even after the comment period closed, stakeholders continued to express opposition to the proposed rule, especially as they began to feel the impacts of the COVID-19 pandemic. In April 2020, national industry groups including the National Association of Medicaid Directors, America’s Essential Hospitals, and the National Governors Association all requested that CMS delay MFAR by a minimum of two years or completely withdraw the rule. At the time, CMS had recently adjusted its regulatory agenda to maintain Medicaid enrollment stability based on its concerns about how the rule (and potentially others like MFAR) would affect the nation’s pandemic response, but at the time did not remove the rule from the agenda.

Following Ms. Verma’s tweet, stakeholders responded positively to the announcement that MFAR would be withdrawn through their own tweets and press releases. MACPAC, the American Hospital Association, and the Medicaid Health Plans Association expressed their support of CMS’ decision.

[1] Manatt’s analysis of MFAR predicted the Medicaid program could lose between $37 billion and $49 billion annually and hospitals could see Medicaid pay reduction of $23 billion to $31 billion annually.

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