5 States Challenge Medicaid Payment Diversion Rule in Court
A lawsuit filed by California’s Attorney General seeks to stop a rule that bans states from diverting Medicaid payments to third parties on behalf of providers.
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By - California Attorney General Xavier Becerra is leading a multi-state effort to upend a new final rule from CMS that bars states from diverting Medicaid payments to third parties on behalf of providers, including home healthcare unions.
On May 13, Becerra filed a lawsuit challenging the rule finalized on May 6 in the northern district of California. The plaintiffs also include the attorney generals from Connecticut, Massachusetts, Oregon, and Washington, as well as the Oregon’s Governor Kate Brown.
“With this rule, the Trump Administration is not only harming Medicaid skilled homecare workers who have joined unions, but the millions of seniors and people with disabilities who depend on these indispensable workers,” Becerra states in the announcement. “This rule jeopardizes the health of vulnerable Californians who are currently able to live at home thanks to Medi-Cal’s IHSS program. The California Department of Justice will continue to fight to protect our workers and the families they serve.”
In their complaint, the state leaders argue that prohibiting states from using Medicaid payments to pay union dues for home health providers would “undermine laws and agreement that have improved the provision of homecare to the States’ residents.”
Each of the five states involved in the lawsuit have included consumer-directed home and community-based personal care services as part of their Medicaid programs. Research shows home healthcare can significantly reduce complications while cutting costs by 30 percent or more.
The states have sought to advance the quality and stability of Medicaid home healthcare by extending state laws that allow public-sector bargaining to the home healthcare workforce and voluntary payroll deductions and/or benefit contributions.
“Historically, homecare workers have engaged in difficult, often physically demanding work and faced low wages, few benefits, frequent injuries, and unpredictable hours, with no means to collectively address working conditions,” the lawsuit states. “Since States’ authorization of collective bargaining, homecare workers have collectively chosen union representation.”
But the final rule will “disrupt well-established collective bargaining relationships and weaken an organized workforce infrastructure that the States have authorized as a result of provider self-organization and in order to channel labor relations in a productive and cooperative manner that contributes to the building, training, and mobilization of Medicaid homecare workforces,” the state leaders argue in the complaint.
CMS finalized the rule banning the diversion of Medicaid payments after determining a 2014 rule that allowed states to pay third parties on behalf of providers violated Medicaid payment rules in the Social Security Act.
“State Medicaid programs are responsible for ensuring that taxpayer dollars are dedicated to providing healthcare services for low-income, vulnerable Americans and are not diverted in ways that do not comply with federal law,” CMS Administrator Seema Verma stated in the rule’s announcement. “This final rule is intended to ensure that providers receive their complete payment, and that any circumstance where a state redirects part of a provider’s payment is clearly allowed under the law.”
However, state leaders from the five states contend that CMS provided no evidence to suggest that states were inappropriately diverting Medicaid payments.
Critics of the rule also fear that the new interpretation of Medicaid state payment rules will worsen the provider shortage.
“The Trump administration’s rule change to disallow union payments made by disabled Personal Care Attendants employers through a third-party fiscal intermediary is reckless and misguided,” Charlie Carr, former head of the Massachusetts Rehabilitation Commission, states in support of the lawsuit.
“It will destabilize an already fragile workforce and most likely result in hobbling the unions ability to engage in collective bargaining for better wages and benefits for workers. In turn, disabled employers will lose PCAs to higher paying jobs in this robust economy. It’s a recipe for disaster and will certainly result in worker shortages that will force us back into nursing homes and other institutions.”
The rule will also disproportionately affect women and people of color, who make up a majority of the home healthcare workforce, Oregon Governor Kate Brown states in a press release.
CMS anticipates enforcing the new final rule starting July 5, 2019.
