Governors and Medicaid Directors Continue to Press for Withdrawal of Damaging Medicaid Fiscal Accountability Rule

As I have previously written, a significant share of the inadequate fiscal relief that Congress has already provided to states facing huge budget shortfalls could be canceled out if the Trump Administration goes ahead and finalizes its highly damaging “Medicaid Fiscal Accountability” rule (known as MFAR).  The rule would adversely affect how states finance their share of the cost of Medicaid programs and how states provide supplemental payments to hospitals, nursing homes, physicians and other health care providers.  Governors and state Medicaid directors, on a bipartisan basis, continue to urge Congress to immediately block or delay the MFAR rule as part of COVID-19 response legislation.

  • National Governors Association, 4/21/20: “Additionally, governors continue to urge that the Medicaid Fiscal Accountability Rule be rescinded. We believe this rule will lead to unintended consequences that would negatively impact Medicaid beneficiaries across the country.”
  • National Association of Medicaid Directors, 4/13/20: “States need certainty that their current Medicaid financing arrangements will not be disrupted as the program faces significantly increased demands. As NAMD described in response to the MFAR proposed rule, the actions contemplated by the Administration in the rule would introduce significant instability to the majority of states’ current Medicaid financing mechanisms.  Such changes cannot be prepared for or implemented while in the midst of a pandemic and economic downturn.  We request a two-year moratorium on MFAR.”

As our CCF public comments, my Health Affairs blog post and public comments from state Medicaid agencies have explained, the rule would have the harmful effect of reducing the amount of state funding for Medicaid now available to draw down federal Medicaid matching funds.  (That would include the enhanced funding provided under the Families First COVID-19 response bill.)  This would make it more difficult to sustain states’ existing Medicaid programs, let alone address higher costs resulting from greater Medicaid enrollment and COVID-19 testing and treatment due to the current public health and economic crisis.  In addition, by reducing supplemental payments to providers and leading to overall provider reimbursement cuts, the rule would also financially destabilize hospitals and other health care providers facing higher COVID-19 related costs and/or sharply reduced revenues.  It would also further enlarge the overall budget deficits states are facing and curtail Medicaid’s ability to serve its critical countercyclical function in an economic downturn.  Finally, the rule would also prohibit or limit states’ ability to add new, or expand existing,  state financing sources to help support their Medicaid programs and address the budget shortfalls they are facing, as states did in the aftermath of the Great Recession.

Moreover, it’s not just the states that oppose the MFAR rule.  As the public comments to the proposed rule demonstrate, the rule is strongly opposed by a wide array of stakeholders including, among others, the U.S. Chamber of Commerce, hospitals, nursing homes, health plans, pediatric providers, the Medicaid and CHIP Payment and Access Commission, patient advocacy groups and children’s advocacy groups.

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.