CMS Rule Strikes Obama-Era Regulation That Pays For Third-Party Fringe Benefits Instead Of Health Care

Julia Cohen | Reporter

The Centers for Medicare and Medicaid Services released a proposed rule Tuesday that banned payments to third parties for health care, instead requiring that Medicaid directly pays the providers.

The rule requires that Medicaid directly pay health care providers, instead of paying third parties who provide benefits, such as health insurance and job training, to providers.

This amends a rule finalized under the Obama administration in January 2014 that allowed for these third-party payments, which “may have occurred without the express knowledge of the provider,” according to the accompanying press release Tuesday. (RELATED: Trump Administration May Stop Risk-Adjustment Payments Under Obamacare)

“The law provides that Medicaid providers must be paid directly and cannot have part of their payments diverted to third parties outside of a few very specific exceptions,” Tim Hill, acting director for the Center for Medicaid and CHIP Services, stated in the press release Tuesday. “This proposed rule is intended to ensure that providers receive their complete payment, and any circumstances in which a state does divert part of a provider’s payment must be clearly allowed under the law.”

The changes to the rule may have stemmed from concerns about shrinking Medicaid reimbursement rates. Moody’s Investors Service predicted cash flows to Medicaid providers were growing slower than inflation, according to a December 2017 Modern Healthcare report.

The rule is scheduled to be officially published for comment on July 12, according to the Federal Register as of Tuesday.

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