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Federal Register / Vol. 86, No. 146 / Tuesday, August 3, 2021 / Proposed Rules
of their value to companies that would then submit the claims to the state. The purpose was not to preclude a Medicaid program that is functioning as the practitioners primary source of revenue from fulfilling the basic employer-like responsibilities that are associated with that role, a scenario that was not contemplated by section 1902a32 of the Act and was outside of the intended scope of the statutory prohibition.
This policy was codified as a regulatory exception under 447.10g4 to permit withholding from the payment due to the individual practitioner for amounts paid by the state directly to third parties for health and welfare benefits, training costs and other benefits customary for employees.
In an August 3, 2016 Center for Medicaid and CHIP Services CMCS
Informational Bulletin CIB, we outlined suggested approaches for strengthening and stabilizing the Medicaid home care workforce, including by supporting home care worker training and development. We noted that under 447.10g4, state Medicaid agencies could facilitate this goal by, with the consent of the individual practitioner, making payment on behalf of the practitioner to a third party that provides benefits to the workforce such as health insurance, skills training, and other benefits customary for employees.1

contractual conditions are met.
Additionally, there is another exception for payment to a business agent, such as a billing service or accounting firm, that furnishes statements and receives payments in the name of the individual practitioner, if the business agents compensation for this service is related to the cost of processing the billing, and not dependent on the collection of the payment.
In 2018 and 2019, in a departure from our prior interpretation of this statute, we engaged in rulemaking to interpret the statutory prohibition as applying more broadly to prohibit any type of Medicaid payment to a third party other than the four exceptions enumerated in the statute. In so doing, we interpreted the statutory phrase or otherwise as encompassing any and all Medicaid reimbursement payment arrangements involving third parties. We proposed this broad interpretation of the statutory language in the Reassignment of Medicaid Provider Claims proposed rule in the July 12, 2018 Federal Register 83 FR 32252 through 32255
and finalized in Reassignment of Medicaid Provider Claims final rule in the May 6, 2019 Federal Register 84 FR
19718 through 19728 hereinafter referred to as the 2019 final rule.
This rulemaking eliminated the regulatory exception added by the 2014
final rule.

B. Current Medicaid Payment Assignment Regulations Medicaid regulations at 447.10
implement the requirements of section 1902a32 of the Act by providing that state plans can allow payments to be made only to certain individuals or entities. Specifically, payment may only be made to the individual practitioner that provided the service provider or the recipient beneficiary, if he or she is a non-cash recipient eligible to receive payment under 447.25, or under one of the limited exceptions.
The regulations specifically state that payment for any service furnished to a recipient by a provider may not be made to or through a factor, either directly or by power of attorney.
The exceptions to the general direct payment principle at 447.10 generally mirror those enumerated in the statute.
They include payment in accordance with a reassignment to a government agency, or pursuant to a court order.
There are also exceptions permitting payments to third parties for services furnished by individual practitioners where certain employment or
C. California v. Azar Six states and 11 intervenors challenged the 2019 final rule. In California v. Azar, 501 F. Supp. 3d 830
N.D. Cal. 2020, the district court rejected the Department of Health and Human Services HHS arguments that section 1902a32 of the Act expressly prohibited the agencys previous interpretation of section 1902a32 and states related practices, remanded the case to HHS for further proceedings, and vacated the 2019 final rule. Secretary Azar then appealed to the U.S. Court of Appeals for the Ninth Circuit in California v. Becerra, No. 2115091 9th Cir..

1 https www.medicaid.gov/federal-policy-

guidance/downloads/cib080316.pdf.

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D. Individual Practitioner Workforce Stability and Development Concerns Since the direct payment principle was originally enacted in statute in 1972
and expanded in 1977, the definition of medical assistance under section 1905a of the Act has been changed to permit states to offer coverage of categories of practitioner services, such as personal care services, that may be viewed as unique to the Medicaid program. For these practitioners, who often provide services independently, rather than as employees of a service
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provider, the Medicaid program may be their primary, or only, source of payment. Some states have sought methods to improve and stabilize the workforce by offering health and welfare benefits to such practitioners, and by requiring that such practitioners pursue periodic training.
Within Medicaid, long-term support services LTSS expenditures are shifting from institutional care hospitals, nursing facilities, etc. to HCBS. In FY 2013, HCBS LTSS
expenditures reached 51 percent of total Medicaid LTSS expenditures and have generally increased to 56.1 percent in FY 2018. HCBS represented a majority of LTSS expenditures in 29 states, including the District of Columbia, and over 75 percent of expenditures in five states in FY 2018.
Several states have requested that CMS adopt additional exceptions to the direct payment policy to permit a state to withhold from a payment due to the individual practitioner for amounts that the practitioner is obligated to pay for health and welfare benefits, training costs, and other benefits customary for employees. These amounts would not be retained by the state, but would be paid to third parties on behalf of the practitioner for the stated purpose. We recognize that HCBS workforce issues, such as workforce shortages and staff turnover, have a direct and immediate impact on the quality of and access to services available to beneficiaries, and believe that state Medicaid agencies play a key role in influencing the stability of the workforce by determining wages and benefits, and provider reimbursement.2
II. Provisions of the Proposed Rule A. Prohibition Against Reassignment of Provider Claims 447.10
Under title XIX of the Act, state Medicaid programs generally pay for Medicaid-covered practitioner services through direct payments to the treating practitioners. States may develop state plan payment rates that include considerations for costs related to health and welfare benefits, training, and other benefits customary for employees.
However, consistent with our previous interpretation of the statutory provision at section 1902a32 of the Act, and reflected in regulations at 447.10
under the 2019 final rule, the entire rate must be paid to the individual practitioner who provided the service, unless certain exceptions apply.
2 https www.medicaid.gov/medicaid/long-termservices-supports/downloads/ltss-rebalancingtoolkit.pdf.

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