Moving the HME Industry Forward


CMS Details State Medicaid Payment Cuts under 21st Century Cures Law

Cara C. Bachenheimer • December 3, 2017

WASHINGTON, DC – Last week, we obtained the first glimpse from the Centers for Medicare and Medicaid Services (CMS) about its implementation plans for the new law that will limit the local Medicare payment amount to the 2018 federal match for state Medicaid durable medical equipment (DME) fee-for-service payments. In a paperwork submission to the Office of Management and Budget (OMB), CMS stated it plans to require state Medicaid programs to demonstrate that the state is not spending (in total) more than what Medicare would have paid for the same DME items.

It’s important to note that the law only limits federal funding, it does not require states overall to pay less, and it only impacts Medicaid fee for service payments. Some disconcerting details emerged: CMS will use the state’s lowest Medicare payment amount, whether it is from a competitive bid area or not. Most alarming, CMS is suggesting that states “look at their Medicaid DME payment amounts and claims to determine if setting payment rates at or below the Medicare payment amount is a reasonable approach for compliance,” and that states that do so will be exempt from the administrative reporting requirements to CMS. States will therefore have a significant incentive to set payment amounts at the Medicare rate to avoid burdensome paperwork that demonstrate to CMS that the state is in compliance.

Mechanically, states will be required to add up all their DME fee for service payments, using total utilization, to arrive at a single total DME payment level. CMS will then calculate how much Medicare would have paid for the same volume of items, and then states will have to pay back the portion of the federal match that represents more than the Medicare paid amount. The states will be required to do these retroactive analyses for the 2018 calendar year by June 30, 2019.

The specific state impacts of this cannot yet be known because states have not yet begun to react, given that CMS has yet to provide them information. Importantly, the impact will vary by state based on how much fee-for-service payment methodology the state uses (versus managed care). Only the federal portion of the state’s fee for service payments will be impacted. Therefore, the impact will be most significant in states with the most amount of Medicaid fee for service-based payments, which includes the following states: Alabama, Alaska, Connecticut, Maine, North Carolina, Oklahoma, South Dakota, Vermont and Wyoming.

On the other hand, the states that will be least impacted will be those with more managed care. 33 states have 70 percent or more managed care, and will therefore not be significantly impacted: Arizona, California, Colorado, Delaware, Florida, Georgia, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, Ohio, Oregon, Pennsylvania, Tennessee, Rhode Island, Texas, Utah, Virginia, Washington, Washington, D.C., West Virginia, and Wisconsin. These states’ Medicaid programs are 80 percent or more based on managed care payments.  It will be important to work with your state/regional and national associations (AAHomecare & NCART) to minimize impacts in your state in the coming months.

Cara C. Bachenheimer is senior vice president, Government Relations, Invacare Corp.