Notice of Hearing: Reconsideration of Disapproval of Minnesota's Medicaid State Plan Amendment 03-06

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Notice of hearing.

SUMMARY:

This notice announces an administrative hearing on October 21, 2004, at 10 a.m., 233 North Michigan Avenue,Suite 600; RE-6E Board Room; Chicago, Illinois 60601 to reconsider our decision to disapprove Minnesota State Plan Amendment (SPA) 03-06.

DATES:

Requests to participate in the hearing as a party must be received by the presiding officer by September 13, 2004.

FOR FURTHER INFORMATION CONTACT:

Kathleen Scully-Hayes; Presiding Officer,CMS,Lord Baltimore Drive,Mail Stop: LB-23-20,Baltimore, Maryland 21244,Telephone: 410-786-2055.

SUPPLEMENTARY INFORMATION:

This notice announces an administrative hearing to reconsider our decision to disapprove Minnesota's Medicaid State Plan Amendment (SPA) 03-06. This SPA was submitted on March 31, 2003, with a proposed effective date of January 1, 2003. This amendment would modify the State's reimbursement methodology for nursing facility services. Specifically, it would increase a disproportionate share nursing facility add-on made to 14 of the State's county-owned nursing facilities. The Centers for Medicare & Medicaid Services (CMS) was unable to approve SPA 03-06 because the State did not document that the proposed payment methodology, in combination with funding requirements under section 4.19 D of the State's plan, meet the conditions specified in sections 1902(a)(2), 1902(a)(30)(A), and 1902(a)(19) of the Social Security Act (the Act) and are consistent with the overall Federal-state financial partnership under title XIX of the Act.

In formal requests for additional information and several subsequent discussions, CMS asked that the State describe any transfers of funds between providers and State or local governments, and indicate whether the providers kept 100 percent of the total computable funds given as Medicaid payments. The State did not provide the requested information on transfers of funds between providers and local governments, nor did it indicate that the providers keep 100 percent of the total computable funds given as Medicaid payments.

The State provided information about the flow of funds between the State and local governments and from the State to providers. However, the State did not provide information about the flow of funds from providers to the State or to local governments. This information is necessary in order to validate the funding sources of the non-Federal share of Medicaid payments and to determine the appropriateness of the payment levels. If providers refund part or all of the Medicaid payments to the State or its political subdivisions, the proposed payment rate would not reflect the net expenditure by the State, and the net non-Federal share would not meet the requirements of section 1902(a)(2) of the Act. Moreover, if such refunds are made by providers, it is an indication that the full payment amount is not required to ensure Medicaid beneficiaries access to the providers' services. The result is that payments under this section of the plan would not be in compliance with the requirement under section 1902(a)(30)(A) of the Act that payment rates must be consistent with “efficiency, economy, and quality of care.”

Since the State has not provided the necessary information regarding provider payment retention, CMS could not find that SPA 03-06 is consistent with the requirement of section 1902(a)(19) of the Act that requires that care and services will be provided consistent with “simplicity of administration and the best interests of the recipients.” The best interest of recipients is not served by a proposed payment structure that would divert Medicaid payments from the providers to the State and shift financial burdens from the State to the Federal Government. The best interest of recipients requires that the full amount of Medicaid payments should be available to support access to quality care and services. Furthermore, SPA 03-06 was not consistent with the requirements for a State plan that are set forth in the regulations implementing section 1902(a) of the Act. Under 42 CFR 430.10, the State plan must contain all the information necessary for CMS to determine whether the plan can serve as a basis for Federal financial participation (FFP) availability under section 1903(a)(1) of the Act. CMS could not determine whether the proposed plan amendment sets forth a payment methodology that could be a basis for FFP without information about whether providers refund payments and, if so, whether these refunds are offset against expenditures as an applicable credit.

Moreover, absent the requested information, the State did not document whether the proposed payment methodology set forth under SPA 03-06 is consistent with the basic Federal and State financial partnership of the Medicaid program set forth by the Congress. Section 1905(b) of the Act specifies how the Federal medical assistance percentage will be calculated for states. This section clearly sets forth how the financial partnership of the Medicaid program should operate, including a definition of the required non-Federal expenditure. The requested information is necessary to determine whether the proposed payments under SPA 03-06 would accurately reflect net expenditures with a sufficient non-Federal share consistent with the Federal and State financial partnership set forth in section 1905(b) of the Act.

For these reasons, and after consultation with the Secretary as required by Federal regulations at 42 CFR 430.15, CMS disapproved this SPA.

Section 1116 of the Act and 42 CFR, part 430 establish Departmental procedures that provide an administrative hearing for reconsideration of a disapproval of a State plan or plan amendment. CMS is required to publish a copy of the notice to a state Medicaid agency that informs the agency of the time and place of the hearing and the issues to be considered. If we subsequently notify the agency of additional issues that will be considered at the hearing, we will also publish that notice.

Any individual or group that wants to participate in the hearing as a party must petition the presiding officer within 15 days after publication of this notice, in accordance with the requirements contained at 42 CFR 430.76(b)(2). Any interested person or organization that wants to participate as amicus curiae must petition the presiding officer before the hearing begins in accordance with the requirements contained at 42 CFR 430.76(c). If the hearing is later rescheduled, the presiding officer will notify all participants. Therefore, based on the reasoning set forth above, and after consultation with the Secretary as required under 42 CFR 430.15(c)(2), CMS disapproved Minnesota SPA 03-06.

The notice to Minnesota announcing an administrative hearing to reconsider the disapproval of its SPA reads as follows:

Ms. Mary Kennedy, Medical Director, Department of Human Services, 444 Lafayette Road, St. Paul, MN 55155-3852.

Dear Ms. Kennedy: Minnesota submitted State Plan Amendment (SPA) 03-06 on March 31, 2003, with a proposed effective date of January 1, 2003. This amendment proposes to modify the State's reimbursement methodology for nursing facility services. Specifically, this amendment increases a disproportionate share nursing facility add-on made to 14 of the State's county-owned nursing facilities. The Centers for Medicare & Medicaid Services (CMS) was unable to approve SPA 03-06 because the State did not document that the proposed payment methodology, in combination with funding requirements under section 4.19 D of the State's plan, meet the conditions specified in sections 1902(a)(2), 1902(a)(30)(A), and 1902(a)(19) of the Social Security Act (the Act) and are consistent with the overall Federal-state financial partnership under title XIX of the Act.

In formal requests for additional information and several subsequent discussions, CMS asked that the State describe any transfers of funds between providers and State or local governments, and indicate whether the providers keep 100 percent of the total computable funds given as Medicaid payments. The State did not provide the requested information on transfers of funds between providers and local governments, nor did it indicate that the providers keep 100 percent of the total computable funds given as Medicaid payments.

The State provided information about the flow of funds between the State and local governments and from the State to providers. However, the State did not provide information about the flow of funds from providers to the State or to local governments. This information is necessary in order to validate the funding sources of the non-Federal share of Medicaid payments and to determine the appropriateness of the payment levels. If providers refund part or all of the Medicaid payments to the State or its political subdivisions, the proposed payment rate would not reflect the net expenditure by the State, and the net non-Federal share would not meet the requirements of section 1902(a)(2) of the Act. Moreover, if such refunds are made by providers, it is an indication that the full payment amount is not required to ensure Medicaid beneficiaries access to the providers' services. The result is that payments under this section of the plan would not be in compliance with the requirement under section 1902(a)(30)(A) of the Act that payment rates must be consistent with “efficiency, economy, and quality of care.”

Since the State did not provide the necessary information regarding provider payment retention, CMS could not find that SPA 03-06 is consistent with the requirement of section 1902(a)(19) of the Act that care and services are consistent with “simplicity of administration and the best interests of the recipients.” The best interest of recipients is not served by a proposed payment structure that would divert Medicaid payments from the providers to the State and shift financial burdens from the State to the Federal Government. The best interest of recipients requires that the full amount of Medicaid payments are available to support access to quality care and services. Furthermore, SPA 03-06 is not consistent with the requirements for a State plan that are set forth in the regulations implementing section 1902(a) of the Act. Under 42 CFR 430.10, the State plan must contain all the information necessary for CMS to determine whether the plan can serve as a basis for Federal financial participation (FFP) that would be available under section 1903(a)(1) of the Act. CMS cannot determine whether the proposed plan amendment sets forth a payment methodology that could be a basis for FFP without information about whether providers refund payments and, if so, whether these refunds are offset against expenditures as an applicable credit.

Moreover, absent the requested information, the State did not document whether the proposed payment methodology set forth under SPA 03-06 is consistent with the basic Federal and State financial partnership of the Medicaid program set forth by the Congress. Section 1905(b) of the Act specifies how the Federal medical assistance percentage will be calculated for states. This section clearly sets forth how the financial partnership of the Medicaid program should operate, including a definition of the required non-Federal expenditure. The requested information is necessary to determine whether the proposed payments under SPA 03-06 would accurately reflect net expenditures with a sufficient non-Federal share consistent with the Federal and State financial partnership set forth in section 1905(b) of the Act.

For these reasons, and after consultation with the Secretary as required by 42 CFR 430.15(c)(2), CMS disapproved Minnesota SPA 03-06.

I am scheduling a hearing on your request for reconsideration to be held on October 21, 2004, at 10 a.m., at 233 North Michigan Avenue, Suite 600, RE-6E Board Room, Chicago, Illinois 60601. If this date is not acceptable, we would be glad to set another date that is mutually agreeable to the parties. The hearing will be governed by the procedures prescribed at 42 CFR, part 430.

I am designating Ms. Kathleen Scully-Hayes as the presiding officer. If these arrangements present any problems, please contact the presiding officer. In order to facilitate any communication which may be necessary between the parties to the hearing, please notify the presiding officer to indicate acceptability of the hearing date that has been scheduled and provide names of the individuals who will represent the State at the hearing. The presiding officer may be reached at (410) 786-2055.

Sincerely,

Mark B. McClellan, M.D., Ph.D.