News | Medicaid Payment and Reimbursement

CMS drops MFAR, launches Medicaid value-based payment push

News | Medicaid Payment and Reimbursement

CMS drops MFAR, launches Medicaid value-based payment push

A controversial overhaul of federal Medicaid rules was dropped this week, and officials instead doubled down on value-based payment (VBP) approaches in the program.

Proposed in November 2019, the Medicaid Fiscal Accountability Regulation (MFAR) targeted states’ “Medicaid financing schemes” and “inappropriate payments” used to boost the share of federal funding they received, according to CMS.

But after hundreds of providers objected to the proposal, CMS decided to withdraw the rule this week.

“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,” CMS Administrator Seema Verma wrote Sept. 14 on Twitter. ”Therefore, CMS is withdrawing the rule from the regulatory agenda.”

An Aug. 11 letter from national associations of governors, providers, health plans and businesses urged CMS to reconsider the rule in light of COVID-19 pandemic disruptions and increased Medicaid rolls.

“COVID-19 has left states, hospitals and other providers in a precarious financial position, with these financial pressures expected to remain for the foreseeable future,” the groups wrote.

Providers celebrated the policy reversal.

Bruce Siegel, MD, MPH, president and CEO of America’s Essential Hospitals, said the withdrawal of MFAR was timely, “especially as state budgets and providers strain under the heavy financial burden and economic fallout of COVID-19.”

“We thank CMS Administrator Seema Verma for hearing our concerns and recognizing the potential for this rule to undermine Medicaid and harm access to care,” Siegel said in a written statement.

The value-based payment push

The day after withdrawing MFAR, CMS instead offered states a chance to expedite VBP models within their Medicaid programs.

The CMS guidance allows states to quickly implement VBP models through a state plan or managed authority instead of through time-consuming and complex demonstrations or waivers that require CMS approval.

CMS urged states to learn from the agency’s past experiences with VBP and to adopt “multiple models to achieve their desired goals.” Options include:

  • Models built on fee-for-service architecture
  • Payments for “episodes of care”
  • Models involving total-cost-of-care accountability

“CMS will now consider state plan payment methodologies (for payments to providers for covered services) that include downside risk for providers through advanced payment strategies outside of the context of managed care plan payments,” a fact sheet states.

CMS doesn’t plan to require states to establish or adhere to specific approaches or payment methodologies. 

The agency encouraged states to expand their value-based Medicaid models to meet the goals of the Health Care Payment Learning & Action Network (HCP-LAN). HCP-LAN has laid out steps for public and private health plans to increase their shares of payments made through VBP models. For Medicaid, HCP-LAN is targeting an increase in VBP from 15% in 2020 to 50% in 2025.

“CMS understands that states face unique circumstances in their healthcare landscapes, and what works for one state may not necessarily work for another state,” CMS stated. “The administration supports flexible approaches for states and does not expect a ‘one-size-fits-all’ approach as states reform their delivery systems” and move to VBP.

CMS underscored the importance of using multi-payer models to drive care delivery changes.

If additional authority is needed, CMS encouraged states to seek more section 1115 demonstration proposals “that take into account their unique needs and capabilities.”

The Trump administration already has approved 16 Medicaid “delivery system reform” 1115 waivers, as of Sept. 1, according to a tracker by the Kaiser Family Foundation. Three more are pending.

Medicaid enrollments increasing

Medicaid enrollment increases during the pandemic have accelerated, early data indicates.

An analysis of state data by Families USA found enrollments in 28 states increased from February through May by between 3% and 10%. In a subset of eight states that reported February through August enrollments, increases ranged from 6% to 17%.

About the Author

Rich Daly, HFMA Senior Writer and Editor,

is based in the Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

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