Medicaid Program; Reassignment of Medicaid Provider Claims, 19718-19728 [2019-09118]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES

[Federal Register Volume 84, Number 87 (Monday, May 6, 2019)]
[Rules and Regulations]
[Pages 19718-19728]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09118]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 447

[CMS-2413-F]
RIN 0938-AT61


Medicaid Program; Reassignment of Medicaid Provider Claims

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

ACTION: Final rule.

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SUMMARY: This final rule removes the regulatory text that allows a 
state to make Medicaid payments to third parties on behalf of an 
individual provider for benefits such as health insurance, skills 
training, and other benefits customary for employees. We have concluded 
that this provision is neither explicitly nor implicitly authorized by 
the statute, which identifies the only permissible exceptions to the 
rule that only a provider may receive Medicaid payments. As we noted in 
our prior rulemaking, section 1902(a)(32) of the Social Security Act 
(the Act) provides for a number of exceptions to the direct payment 
requirement, but it does not authorize the agency to create new 
exceptions.

DATES: These regulations are effective on July 5, 2019.

FOR FURTHER INFORMATION CONTACT: Christopher Thompson, (410) 786-4044.

SUPPLEMENTARY INFORMATION:

I. Background

    The Medicaid program was established by the Congress in 1965 to 
provide health care services for low-income and disabled beneficiaries. 
Section 1902(a)(32) of the Social Security Act (the Act) requires 
direct payment to providers who render services to Medicaid 
beneficiaries. It states that no payment under the plan for care and 
services provided to an individual shall be made to anyone other than 
such individual or the person or institution providing such care or 
service, under an assignment or power of attorney or otherwise, unless 
a specified exception is met.
    We first codified Sec.  447.10 implementing section 1902(a)(32) of 
the Act in the ``Payment for Services'' final rule published in the 
September 29, 1978 Federal Register (43 FR 45253), and we have amended 
that regulation in the ensuing years. The 1978 final rule incorporated 
several specific statutory exceptions to the general principle 
requiring that direct payment be made to the individual provider. The 
regulations implementing section 1902(a)(32) of the Act have generally 
tracked the plain statutory language and required direct payments 
absent a statutory exception.
    In 2012, we proposed a new regulatory exception in the ``State Plan 
Home and Community-Based Services, 5-Year Period for Waivers Provider 
Payment Reassignment, and Setting Requirements for Community First 
Choice'' proposed rule published in the May 3, 2012 Federal Register 
(77 FR 26361, 26406) for ``a class of practitioners for which the 
Medicaid program is the primary source of service revenue'' such as 
home health care providers. We recognized in the proposed rule that 
section 1902(a)(32) of the Act does not specifically provide for 
additional exceptions to the direct payment requirement (77 FR 26364, 
26382).
    In response to the May 3, 2012 proposed rule, we received seven 
comments, all generally supportive of the proposed regulatory 
exception. We finalized the regulatory exception in the ``State Plan 
Home and Community-Based Services, 5-Year for Waivers Provider Payment 
Reassignment, and Home and Community-Based Setting Requirements for 
Community First Choice and Home and Community-Based Services (HCBS) 
Waivers'' final rule published in the January 16, 2014 Federal Register 
(79 FR 2947, 3001)

[[Page 19719]]

authorizing a state to make payments to third parties on behalf of 
certain individual providers ``for benefits such as health insurance, 
skills training, and other benefits customary for employees.''
    More recently, we have become concerned that Sec.  447.10(g)(4) is 
neither explicitly nor implicitly authorized by the statute, which 
identifies the only permissible exceptions to the rule that only a 
provider may receive Medicaid payments. Unlike section 1902(a)(6) of 
the Act, that requires a State agency to make such reports, in such 
form and containing such information, as the Secretary may from time to 
time may require, section 1902(a)(32) of the Act provides for a number 
of exceptions to the direct payment requirement that we believe 
constitutes an exclusive list of exceptions and does not authorize the 
agency to create new exceptions. The regulatory provision at Sec.  
447.10(g)(4) granted permissions that Congress has not expressly 
authorized, and in our interpretation, has foreclosed. Therefore, we 
published the ``Reassignment of Medicaid Provider Claims'' proposed 
rule in the July 12, 2018 Federal Register (83 FR 32252 through 32255) 
where we proposed to remove the regulatory exception at Sec.  
447.10(g)(4).

II. Provisions of the Proposed Regulations

    We proposed to remove only Sec.  447.10(g)(4) leaving in place the 
other provisions in Sec.  447.10 including the exceptions at Sec.  
447.10(e), (f) and (g)(1) through (3). We sought comments regarding how 
we might provide further clarification on the types of payment 
arrangements that would be permissible assignments of Medicaid 
payments, such as arrangements where a state government withholds 
payments under a valid assignment. Specifically, we invited comments 
with examples of payment withholding arrangements between states and 
providers that we should address.
    With regard to the authorities under sections 1915(c), 1915(i), 
1915(j), 1915(k), and 1115 of the Act, we explained that this final 
rule will not impact a state's ability to perform Financial Management 
Services (FMS) or secure FMS through a vendor arrangement. FMS are 
services and functions that assist the Medicaid beneficiary or his/her 
family to: (1) Manage and direct the disbursement of funds contained in 
the participant-directed budget; (2) facilitate the employment of staff 
by the family or participant, by performing as the participant's agent 
such employer responsibilities as processing payroll, withholding 
Federal, state, and local tax and making tax payments to appropriate 
tax authorities; and (3) performing fiscal accounting and making 
expenditure reports to the Medicaid beneficiary or family and state 
authorities.
    As discussed in response to comments below, the arrangements under 
FMS are not affected by the provisions of the final rule because this 
model involves the FMS vendor receiving monies from the state to 
administer the participant-directed budget and make payment to 
providers on behalf of the beneficiary. The budget furnished to the FMS 
vendor is not a ``payment under the plan for any care or service 
provided to an individual,'' and thus is not subject to the 
restrictions imposed by section 1902(a)(32) of the Act and Sec.  
447.10.
    We also requested comments on whether and how the proposed removal 
of Sec.  447.10(g)(4) would impact self-directed service models, where 
the Medicaid beneficiary takes responsibility for retaining and 
managing his or her own services, and, in some cases, may be performing 
payroll and other employer-related duties. We were especially 
interested in comments that described the additional flexibilities 
needed to support beneficiaries opting for self-directed service 
models, which may ensure stable, high-quality care for those 
beneficiaries.

III. Analysis of and Responses to Public Comments

    We received 7,166 timely comments from concerned citizens, parents 
of disabled individuals, health care providers, unions, state agencies, 
and advocacy groups. The comments ranged from general support to 
opposition to the proposed removal of Sec.  447.10(g)(4) and included 
very specific questions or comments regarding the proposed change. For 
the purpose of addressing the comments in this final rule, the term 
``provider(s)'' refers to the individual practitioner(s) that were 
subject to Sec.  447.10(g)(4), and the term ``reimbursement'' refers to 
the payment of provider claims.

A. Statutory Authority

    Comment: Several commenters indicated that CMS never had the 
statutory authority to add the exceptions that were detailed in Sec.  
447.10(g)(4). For instance, one commenter indicated that CMS lacked the 
authority to make an additional exception to the statute at section 
1902(a)(32) of the Act in 2014.
    Response: We agree with the commenters. After hearing from 
stakeholders since the publication of the 2014 final rule and engaging 
in a review of the statutory support for Sec.  447.10(g)(4), we have 
determined that the regulatory provision is foreclosed by statute, 
which is the reason we have removed Sec.  447.10(g)(4).
    Comment: Several commenters stated CMS provided no other 
explanation to support the concern that Sec.  447.10(g)(4) was not 
authorized by the statute at section 1902(a)(32) of the Act. Some 
commenters also suggested that CMS misunderstood the meaning of section 
1902(a)(32) of the Act, which commenters stated was enacted to prevent 
abuses stemming from factoring, and that the statute does not support 
CMS' interpretation that it prohibits customary employee payroll 
deductions.
    Response: We removed the provision at Sec.  447.10(g)(4) due to the 
lack of any evidence of express or implied authority to implement new 
exceptions to section 1902(a)(32) of the Act. See e.g.,, TRW Inc. v. 
Andrews, 534 U.S. 19, 28 (2001) (``Where Congress explicitly enumerates 
certain exceptions to a general prohibition, additional exceptions are 
not to be implied, in the absence of evidence of a contrary legislative 
intent.''); NRDC v. EPA, 489 F.3d 1250, 1259-1260 (D.C. Cir. 2007) 
(holding that where Congress provides certain enumerated exceptions in 
a statute, an agency ``may not, consistent with Chevron, create an 
additional exception on its own''). We have not seen any evidence of 
such intent in the text, structure, purpose, and legislative history; 
rather those tools of statutory construction in our view collectively 
confirm that the list of exceptions in section 1902(a)(32) of the Act 
was intended to be exclusive, and that that list of exceptions does not 
encompass the circumstance outlined in Sec.  447.10(g)(4). Thus, we 
believe that Congress has spoken to ``the precise question at issue,'' 
Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 
U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), and thus the 
exception at Sec.  447.10(g)(4) must be deleted.
    We agree with the commenter that Congress had expressed concern 
about abusive factoring arrangements when it enacted section 
1902(a)(32) of the Act. Congress sought to stem factoring and other 
abuses by enacting a broad prohibition that precludes states from 
making any payment for care or services to any person or entity other 
than the individual receiving care or services under the state plan, or 
the person or institution providing such care. Congress prohibited more 
than just

[[Page 19720]]

assignment of provider payment--it prohibited payments to anyone other 
than the beneficiary and the provider, whether made ``under an 
assignment or power of attorney or otherwise.'' Section 1902(a)(32) of 
the Act (emphasis added). Notwithstanding this broad prohibition, 
Congress did carve out certain exceptions, including an exception that 
explicitly allows a state to make payments to the employer of a 
provider when the provider is contractually required to turn over his 
or her right to payment to the employer as a condition of employment. 
Because Congress recognized the employer-employee relationship in its 
list of exceptions to the direct payment rule, we do not interpret 
section 1902(a)(32) of the Act as prohibiting employee payroll 
deductions that are made by a bona fide employer. But Congress did not 
create a similar exemption that would allow ``deductions'' to be taken 
from a provider's reimbursement check and diverted to a third party. 
While those dollars may ultimately go toward the same purpose--for 
example, health insurance coverage--it is the means by which those 
dollars are taken from the provider that run afoul of section 
1902(a)(32) of the Act. The January 16, 2014 final rule impermissibly 
expanded upon the statutory exceptions to create a new category of 
entities that can receive all or part of a Medicaid provider's 
reimbursement. This rule restores the direct payment rule to what we 
believe is its proper scope, and puts Medicaid providers back in 
control of their reimbursements.
    Comment: Many commenters indicated CMS conceded section 1902(a)(32) 
of the Act does not expressly provide for additional exceptions to the 
direct payment principle.
    Response: We believe the commenters may have been referring to the 
following language from the preamble to the January 16, 2014 final rule 
(79 FR 2947, 2949) that implemented Sec.  447.10(g)(4) which stated, 
``[w]hile the statute does not expressly provide for additional 
exceptions to the direct payment principle, we believe the 
circumstances at issue were not contemplated under the statute.'' After 
hearing from stakeholders and engaging in further review of the 
statute, we determined that we lacked authority to enact a new 
exception not explicitly or implicitly authorized by section 
1902(a)(32) of the Act.
    Comment: One commenter recommended a new regulation to focus on 
payments to employees of beneficiaries. Specifically, the commenter 
suggested that a regulation should indicate that payments to individual 
practitioners who are employed, in whole or in part, by a beneficiary 
can be assigned only to a government agency, or entity, or by court 
order.
    Response: This comment is outside of the scope of this rule; 
however, we will take into consideration whether a regulation or 
subregulatory guidance is needed to further clarify this issue.
    Comment: One commenter indicated that courts have concluded that 
similar arrangements, such as payment to Health Maintenance 
Organizations (HMO) under a contract with a Medicaid enrolled provider, 
are valid and authorized by Sec.  447.10(g)(3) despite the lack of 
corresponding statutory authority.
    Response: The provision at Sec.  447.10(g)(3) is outside the scope 
of this rulemaking. We will evaluate commenter concerns and may address 
the issues raised by the provision at Sec.  447.10(g)(3) in future 
rulemaking.
    Comments: Several commenters stated CMS should issue regulatory 
language or, at least clarify in the final rule, that section 
1902(a)(32)(B) of the Act permits states to assign Medicaid monies owed 
to personal care providers only to government agencies or by court 
order, which will permit necessary tax deductions but eliminate a 
state's ability to reassign reimbursement to private third parties.
    Response: Only a provider may reassign his or her payment. In 
addition, we agree that the statute does not preclude, and in fact 
expressly permits, a state to make a payment in accordance with a 
provider's assignment, if such assignment is made to a governmental 
agency or entity or is established by or under a court order. The 
statute also expressly permits the state to make payment to the 
employer of the provider, instead of making a direct payment to the 
provider, where the provider turns over his or her professional fees to 
the employer as a condition of employment. The employer may withhold 
taxes and other voluntary deductions for benefits like health insurance 
through the payroll process. Whether a particular assignment is 
permitted under section 1902(a)(32) of the Act will depend on the 
particular facts of the arrangement. We will take into consideration 
whether a regulation or further subregulatory guidance is needed to 
clarify the types of assignments permitted under section 1902(a)(32)(B) 
of the Act.
    Comment: Multiple commenters claimed CMS' action regarding the 
removal of Sec.  447.10(g)(4) may be arbitrary and capricious as 
related to the Administrative Procedure Act (Pub. L. 79-404, enacted on 
June 11, 1946) (APA). For example, one commenter indicated that 
hostility to union membership is an arbitrary and capricious reason for 
an agency action.
    Response: We disagree with the commenter. We previously believed 
that we had authority to enact the exception at Sec.  447.10 (g)(4) 
because the statute did not contemplate the circumstances at issue. 
However, upon further review, we have determined that we did not have 
such authority, because section 1902(a)(32) of the Act neither 
explicitly nor implicitly authorized us to enact additional exceptions. 
Section 1902(a)(32) of the Act broadly prohibits states from making 
Medicaid payments to anyone other than the beneficiary or the provider 
furnishing items or services, unless one of certain enumerated 
exceptions are met. Accordingly, we believe that the statutory 
exceptions are exclusive and that we lacked the authority to create a 
new regulatory exception. Under the APA, neither change nor the 
presence of some reliance interests are fatal. As the courts have 
noted, there is ``no basis in the [APA] or in our opinions for a 
requirement that all agency change be subjected to more searching 
review'' and an agency ``need not demonstrate to a court's satisfaction 
that the reasons for the new policy are better than the reasons for the 
old one; it suffices that the new policy is permissible under the 
statute, that there are good reasons for it, and that the agency 
believes it to be better, which the conscious change of course 
adequately indicates.'' FCC v. Fox Television Stations, Inc., 556 U.S. 
502, 514-15 (2009) (emphasis in original). Although an agency must 
``display awareness that it is changing position,'' it must only 
``provide a more detailed justification than what would suffice for a 
new policy created on a blank slate'' when its ``its new policy rests 
upon factual findings that contradict those which underlay its prior 
policy; or when its prior policy has engendered serious reliance 
interests that must be taken into account.'' Id. In this case, we have 
acknowledged that we have changed position but believe that we have 
good reasons for doing so under the circumstances. We do not believe 
that our new policy rests upon new or different factual findings but 
solely a new legal analysis. And we believe that the reliance interests 
at issue are not serious--and in any event, even if they are for the 
sake of argument, deemed to be serious--we believe that we have 
justified moving forward with our

[[Page 19721]]

proposal notwithstanding those reliance interests.
    Comment: Several commenters stated there was no need for a change 
to Sec.  447.10(g)(4) or that there was no evidence that stakeholders 
wanted a change to Sec.  447.10(g)(4). Commenters also indicated that 
states, providers, and other stakeholders have acted in reliance on the 
previous policy.
    Response: As previously discussed, we are removing Sec.  
447.10(g)(4) because, after revisiting our previous interpretation, we 
have determined that we lacked statutory authority to implement Sec.  
447.10(g)(4). We understand that stakeholders may have relied on the 
provision at Sec.  447.10(g)(4) to ease administrative burden on 
certain providers by withholding a portion of the providers' Medicaid 
reimbursement and redirecting those payments to third parties on the 
providers' behalf. However, we note that the rescission of this 
provision simply eliminates one method by which such payments to third 
parties may be made--it does not, and surely cannot--eliminate a 
provider's right to make such payments to third parties by other legal 
means. Providers remain free to purchase health insurance, training, 
and other benefits after receiving their Medicaid reimbursements.
    Comment: One commenter stated that reassignment of provider 
reimbursement under Sec.  447.10(g)(4) was an option, not a 
requirement.
    Response: We agree with the commenter that the regulations did not 
require providers to assign their right to payments to third parties. 
An assignment is typically a voluntary act where one party 
intentionally transfers a right, such as a right to future payment, to 
another party.\1\ Although providers had the option to utilize Sec.  
447.10(g)(4), our lack of statutory authority to promulgate this 
regulation requires us to rescind it.
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    \1\ See, for example, Restatement 2d of Contracts, section 317. 
Certain types of wage assignments may be involuntary, and are 
typically called garnishments. See generally, 15 U.S.C. 1672; H.R. 
Conf. Rep. No. 1280 at 280, 93d Cong., 2d Sess. (1974).
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B. Impact to Stakeholders

    Comment: Several commenters noted that the rescission of Sec.  
447.10(g)(4) would facilitate the proper use of Medicaid funds.
    Response: We appreciate the commenters' support. As previously 
discussed, we are removing Sec.  447.10(g)(4) because, after revisiting 
our previous interpretation, we have determined that we lacked 
statutory authority to implement Sec.  447.10(g)(4).
    Comment: Many commenters stated that removal of Sec.  447.10(g)(4) 
would result in a loss or disruption of benefits for home care workers, 
specifically health insurance coverage, and may lead to increases in 
uncompensated care costs and/or Medicaid enrollment, which may create 
downstream negative impacts. Commenters expressed concern that the 
proposed rule would prohibit automatic paycheck deductions and that 
Congress did not intend to affect healthcare deductions and deductions 
for voluntary union dues with the anti-reassignment provisions in 
statute. Several commenters stated that, as a result of this rule, home 
health workers will lose health insurance coverage.
    Response: We disagree with the commenters. The effect of this final 
rule is the elimination of one method of getting payment from A to B. 
It in no way prevents health care workers from purchasing health 
insurance, enrolling in trainings, or paying dues to a union or other 
association. Further, as previously described, the statute expressly 
allows payments to employers, and nothing in this rule would interfere 
with an employer's ability to make payroll deductions that are required 
by law or voluntary deductions for things like health and life 
insurance, contributions to charitable causes, retirement plan 
contributions, and union dues. Moreover, nothing in this rule would 
prevent a provider from affirmatively assigning his or her right to 
payment to a government agency.
    We also note that there is a distinction between payroll deductions 
made by an employer and diversions of Medicaid payments as a result of 
a valid assignment. Section 1902(a)(32) of the Act specifically allows 
the state to make Medicaid payments to a home care worker's employer, 
and any deductions made by the employer are outside the scope of the 
statutory direct payment rule. Section 447.10(g)(4) pertained to 
payment diversion, not to voluntary wage deductions made under a bona 
fide employment arrangement. Specifically, it pertained to the class of 
practitioners for which the Medicaid program is the primary source of 
service revenues, such as home health workers, who are not employees of 
the state. As non-employees, such practitioners do not receive salaries 
or wages from the state. Instead, they are the recipients of Medicaid 
payment for services they furnish. Certain assignments or other 
transfers of such payments are permitted under section 1902(a)(32) of 
the Act; however, the diversion to other third parties not otherwise 
identified in the statute is not.
    Comment: Several commenters indicated that the removal of paragraph 
(g)(4) from Sec.  447.10 would result in potential harm to the Medicaid 
program, including to stakeholders. For example, commenters indicated 
that the removal of the paragraph would result in a reduction in the 
number of individual practitioners, leading to a decrease in access and 
quality of care for beneficiaries and an increase in more expensive 
institutional care. One commenter noted that government has a role to 
promote quality care and improve effectiveness and efficiency of care.
    Several commenters stated that the proposed rule was not consistent 
with the mandates set forth in the Americans with Disabilities Act of 
1990 (Pub. L. 101-336, enacted on July 26, 1990) (ADA), as it would 
result in destabilization of the workforce that provides in-home care, 
and it would increase the likelihood of an individual being 
institutionalized.
    Response: While we agree that the government has a role in 
promoting high-quality, efficient healthcare, these commenter did not 
explain how or why these alleged harms would occur, nor did they cite 
to any evidence as to how the proposed change would cause harm to the 
Medicaid program, its beneficiaries, or the health care workforce that 
cares for the beneficiaries. Section 1902(a)(30)(A) of the Act requires 
states to assure that payments are consistent with efficiency, economy, 
and quality of care and are sufficient to enlist enough providers so 
that care and services are available under the plan at least to the 
extent that such care and services are available to the general 
population in the geographic area. As long as the requirements of 
section 1902(a)(30)(A) of the Act are met, states have the flexibility 
to address concerns regarding access and quality of care utilizing 
economic and efficient payment methodologies. Additionally, as noted 
previously, this rule does not prevent individual practitioners from 
purchasing or receiving any benefits, memberships, or trainings using 
the income they earn from the Medicaid program. It simply ensures that 
Medicaid reimbursement is paid directly to the practitioner (or, as 
permitted by law, to the practitioner's employer, business agent, or 
facility where the care or service was furnished) and not impermissibly 
redirected to third parties. That is, this rule does not restrict what 
Medicaid providers may do with their Medicaid reimbursement once it is 
paid to them. As such, we do

[[Page 19722]]

not expect that this rule would adversely affect access to, or quality 
of, care.
    Comment: Several commenters opposed the proposed rule and mentioned 
that eliminating the automatic payment of retirement or health care 
premiums from a provider's pay could cause a financial hardship if they 
had to purchase those benefits separately and not collectively through 
their employment.
    Response: This rule does not affect voluntary wage deductions for 
employer-sponsored benefits. Section 1902(a)(32) of the Act 
specifically allows the state to make Medicaid payments to a home care 
worker's employer, and any deductions made by the employer are outside 
the scope of the statutory direct payment rule.
    Comment: Several commenters opposed the proposed rule and stated 
that the removal of Sec.  447.10(g)(4) would eliminate a worker's 
ability to participate in a health plan and is likely to cause those 
beneficiaries to shift to the state Medicaid program or other publicly 
subsidized coverage that will likely lead to higher rather than lower 
costs for the state.
    Response: We believe the commenters are asserting that the loss of 
the ability to reassign a portion of an individual practitioner's 
Medicaid payment will ultimately result in that individual practitioner 
becoming a Medicaid beneficiary, which will likely result in increased 
costs for the state. As noted previously, we are removing Sec.  
447.10(g)(4) due to the lack of express or implicit statutory authority 
to implement new exceptions to section 1902(a)(32) of the Act. To the 
extent that the commenter is suggesting that practitioners will become 
uninsured as a result of this rule, we again reiterate that nothing in 
this rule prevents an individual practitioner from purchasing health 
insurance. Depending on a practitioner's particular circumstances, he 
or she may be eligible to purchase or obtain insurance coverage through 
a number of channels, including group coverage through an employer or 
an association, individual insurance coverage that is Affordable Care 
Act-compliant and guaranteed available to the general public, or, if 
the practitioner meets eligibility criteria, through Medicaid. As 
required by section 1902(a)(30)(A) of the Act, states must ensure that 
provider reimbursement rates are ``consistent with efficiency, economy, 
and quality of care and are sufficient to enlist enough providers so 
that care and services are available under the plan at least to the 
extent that such care and services are available to the general 
population in the geographic area.''

C. Administrative Burden and State Flexibility

    Comment: Several commenters that opposed the proposed rule noted 
the removal of this provision may result in administrative burden 
created by eliminating automatic payroll deductions for items such as 
health insurance, skills training, and other benefits customary for 
employees.
    Response: While we acknowledge that automatic payroll deductions 
may reduce administrative burden for some health care workers who would 
otherwise need to make a separate payment, we again note that 
elimination of Sec.  447.10(g)(4) will not disrupt payroll deductions 
that are made under a bona fide employment relationship and are 
otherwise permissible under state and federal law. Section 447.10(g)(4) 
pertained to the class of practitioners for which the Medicaid program 
is the primary source of service revenues, such as home health workers, 
who are not employees of the state or a home health agency that is paid 
by the state for its employees' services. As non-employees, such 
practitioners do not receive salaries or wages from the state. Instead, 
they are the recipients of Medicaid payments, and the state must 
directly pay them for their services. The removal of Sec.  447.10(g)(4) 
eliminates the regulatory exception that purported to allow states to 
``deduct'' or withhold portions of a provider's Medicaid reimbursement 
and re-direct the payment to third parties. However, individual 
practitioners can decide to use their payments for items like health 
and life insurance coverage and skills training. To the extent allowed 
by state and federal laws, states may also continue to allow individual 
practitioners to receive healthcare coverage from or through the state. 
Individual practitioners may also seek employment with home health 
agencies or other employers that offer benefit packages.
    Comment: Many commenters stated that the proposed rule would impact 
the flexibility states have to administer their Medicaid programs, 
resulting in potential harm to providers because certain individual 
Medicaid practitioners would not be able to have items such as health 
insurance, skills training, and other benefits customary for employees 
reassigned from their reimbursement.
    Response: States retain the flexibility to operate their Medicaid 
programs within existing Medicaid statutes and regulations. Nothing in 
this rule prevents a state from investing in its health care workforce, 
such as through strategies to ensure that the workforce is 
appropriately trained and that reimbursement rates are set at levels 
adequate to ensure beneficiaries have access to necessary care. As long 
as the requirements of section 1902(a)(30)(A) of the Act are met, 
states have flexibility to address concerns regarding access and 
quality of care utilizing economic and efficient payment methodologies.

D. Financial Management Services Under Self-directed Care

    Comment: We received several comments that varied from support to 
opposition of the proposed rule's impact on self-directed care and FMS.
    Response: The removal of Sec.  447.10(g)(4) eliminates a state's 
ability to redirect provider reimbursement for the delivery services 
under section 1905(a) of the Act to third parties that are not 
recognized under the statute. However, this rule does not impact a 
state's ability to perform FMS or secure FMS through a vendor 
arrangement provided under sections 1915(c), 1915(i), 1915(j), and 
1915(k) and 1115 authorities of the statute.
    Comment: One commenter requested that CMS codify, within the 
regulation text, the clarification included in the proposed rule 
regarding FMS under sections 1915(c), 1915(i), 1915(j), 1915(k) and 
1115 authorities of the statute, to allow FMS vendors to reassign 
reimbursement with the expressed intent of paying for the services 
rendered by the FMS vendor.
    Response: We note that payment to the FMS vendor for services is 
not affected by the provisions of the final rule because this model 
involves the FMS vendor receiving monies from the state to administer 
the participant-directed budget and make payment to providers on behalf 
of the beneficiary. As noted previously, the budget furnished to the 
FMS vendor is not a ``payment under the plan for any care or service 
provided to an individual,'' and thus, is not subject to the 
restrictions imposed by section 1902(a)(32) of the Act and Sec.  
447.10.
    Under the authorities in sections 1915(c), 1915(i), 1915(j), 
1915(k) and 1115 of the Act, FMS vendors are service providers. As 
such, depending on the authority, the state has the option to claim the 
cost it incurs for the provision of FMS as either a direct medical 
service, claimable via the applicable FMAP rate or, as a state program 
administrative expenditure. Therefore, we do not believe it is 
necessary to include regulation text outlining the ability of states to

[[Page 19723]]

reimburse entities for their contracted service provider functions, but 
we do reiterate that states may continue to do so. This was the case 
prior to the inclusion of Sec.  447.10(g)(4).

E. Factoring

    Comment: Several commenters noted that the original intent of 
section 1902(a)(32) of the Act was to eliminate the practice of selling 
Medicaid accounts receivables to ``factors,'' and not to prevent union 
dues and benefits from being deducted from the provider's 
reimbursement.
    Response: We agree with the commenters that one of the original 
intents of section 1902(a)(32) of the Act, perhaps even the main one, 
was to address concerns relating to the sale of receivables to factors. 
But we do not believe that this was necessarily Congress' only concern, 
and we note that factoring is not specifically mentioned in the statute 
and CMS found it necessary to subsequently emphasize via regulation 
that payments to factors are not permitted. See Sec.  447.10(h). In any 
event, Congress chose to address its concern about factoring with a 
broad prohibition and only limited exceptions. It could have done it in 
a more targeted way, but it did not. Notably, Congress did not limit 
itself to addressing payments to third parties that involving 
reassignment and powers of attorney; it also amended the statute to 
include ``or otherwise'' language, expanding its application to 
situations that did not involve factoring. While a commenter stated 
that, in the context of the sentence, ``or otherwise'' refers only to 
mechanisms similar to an ``assignment'' or ``power of attorney'' that 
permit third parties to act in the provider's stead in seeking Medicaid 
payments, and thus present a similar potential for abuse, we do not 
believe that the statute or legislative history makes this clear. 
Congress addressed its concern by requiring direct payment to providers 
in all circumstances, unless one of the limited statutory exceptions is 
met. As explained previously, we are removing Sec.  447.10(g)(4) 
because the payment diversions it authorizes are neither explicitly nor 
implicitly authorized by the statute.

F. Reassignment of Union Dues

    Comment: A large number of commenters, both in opposition and 
support of the proposed rule, mentioned unions and/or union dues, and 
some commenters mentioned the benefits workers receive from union 
membership. Other commenters noted that there are existing state laws 
surrounding union membership.
    Response: We are removing Sec.  447.10(g)(4) due to the lack of 
statutory authority to implement additional exceptions to section 
1902(a)(32) of the Act. It is well outside the scope of our authority 
to regulate how an individual practitioner chooses to use the income he 
or she receives from the Medicaid program. While we realize some states 
relied on Sec.  447.10(g)(4) as a mechanism to transfer contributions 
from practitioners to unions or other organizations, practitioners may 
continue contributing to unions or other organizations. This rule 
merely forecloses the ability of a practitioner to assign a portion of 
his or her Medicaid payment to a union. However, other means remain 
available. A provider may voluntarily agree to automatic credit card or 
bank account deductions to pay for union dues once 100 percent of 
reimbursement has been received. In regard to existing state laws 
surrounding union membership, if state law(s) and/or regulation(s) 
conflict with Sec.  447.10 after the removal of paragraph (g)(4), the 
state Medicaid agency will need to take corrective action to comply 
with current federal statute and regulations. We are available to 
answer any questions states may have or to provide additional technical 
assistance to states.
    Comment: Several commenters referenced state attempts to privatize 
providers or make providers state employees in order to reassign 
portions of the provider's reimbursement. Specifically, two commenter 
referenced states that passed legislation to privatize all homecare 
givers and force them to pay union dues.
    Response: As the comments are not directly applicable to the 
removal Sec.  447.10(g)(4), they are outside the scope of this final 
rule. However, we note that Sec.  447.10(g)(4) was specifically 
applicable to Medicaid enrolled individual practitioners who provided 
services on a contractual basis.
    Comment: One commenter noted that the proposed removal of Sec.  
447.10(g)(4) conflicts with National Labor Relations Act which allows 
home care worker agencies to deduct union dues from a provider's 
paycheck.
    Response: The provisions of the final rule do not affect home care 
worker agencies that make payroll deductions as authorized by their 
employees, provided that the requirements in Sec.  447.10(g)(1) are 
met. We do not see any conflict between removal of Sec.  447.10(g)(4) 
and the National Labor Relations Act.
    Comment: Multiple commenters stated the proposed removal of Sec.  
447.10(g)(4) will, in no way, prevent home care workers from 
voluntarily joining unions.
    Response: We agree. This rule does not prohibit an individual 
practitioner from using his or her income to pay dues to a union.
    Comment: One commenter indicated that authorized deductions of 
union dues or other benefit payments from their paycheck should not 
require a statutory exception to the anti-reassignment provision 
because such a deduction does not constitute a reassignment. Another 
commenter suggested that payroll deductions meet the qualification for 
third party payments provided in the current statute.
    Response: Aside from certain enumerated exceptions at section 
1902(a)(32) of the Act, Medicaid payments must be paid directly to the 
individual or institution that furnished the care or service to a 
Medicaid beneficiary. For Medicaid payments, a distinction must be made 
between payroll deductions and payment reassignment. Section 
447.10(g)(4) pertained to the class of practitioners for which the 
Medicaid program is the primary source of service revenues, such as 
home health workers, who are not employees of the state. As non-
employees, such practitioners do not receive salaries/wages from the 
state. Instead, they are the recipients of Medicaid payments, and only 
certain reassignments are permitted.
    In addition, the existing third party payments permitted in the 
statute are not payroll deductions. Specifically, section 1902(a)(32) 
of the Act contains several specific exceptions to the general 
principle requiring direct payment to individual practitioners. There 
are exceptions for payments for practitioner services where payment is 
made to the employer of the practitioner, and the practitioner is 
required as a condition of employment to turn over fees to the 
employer; payments for practitioner services furnished in a facility 
when there is a contractual arrangement under which the facility bills 
on behalf of the practitioner; reassignments to a governmental agency 
or entity, or through a court order, or to a billing agent; payments to 
a practitioner whose patients were temporarily served by another 
identified practitioner; or payments for a childhood vaccine 
administered before October 1, 1994. None of these exceptions allow for 
the type of payments transfers requested by the commenters.
    Comment: Several commenters stated that their rights will be 
impacted by this rule. They referenced examples such as

[[Page 19724]]

an individual's right to join/support a union, workers' rights, and 
individual rights under the Constitution.
    Response: It should be noted that we are removing paragraph (g)(4) 
due to the lack of authority to implement additional exceptions to 
section 1902(a)(32) of the Act. The removal of Sec.  447.10(g)(4) does 
not prevent individuals from exercising their individual rights. It 
only prevents the state from redirecting payments that, per the 
statute, must be paid directly to the practitioner. However, individual 
practitioners can purchase or contribute to the items previously 
allowed under paragraph (g)(4) through transactions separate from their 
Medicaid reimbursement.
    With regard to workers' rights, Sec.  447.10(g)(4) pertained to the 
class of practitioners for which the Medicaid program was the primary 
source of service revenues, who were not employees.
    Comment: One commenter indicated Sec.  447.10(g)(4) has been 
rescinded due to a bias against Unions.
    Response: The intent of the rule is to ensure that Medicaid 
practitioners paid fully and directly for their services as required by 
law. The Department, in no way, intends to prevent or discourage union 
membership. Although rescission of Sec.  447.10(g)(4) will eliminate a 
provider's ability to reassign portions of their reimbursement to 
contribute to union dues, we would like to note that providers remain 
free to contribute to union dues and other benefits through methods 
other than assignment of their right to payment.

G. Economic Impact

    Comment: One commenter indicated that the agency lacked any data to 
justify the rescission of Sec.  447.10(g)(4). This commenter also 
indicated that the agency lacked any analysis of this rule's impact on 
home care workers, beneficiaries, or states.
    Response: During the 30-day comment period, we suggested 
stakeholders to provide comments and analyses with regard to the 
economic significance of this rule. While we received comments that 
provided estimates of the potential impact of this rule, those 
estimates were not supported by any substantive analysis. As the agency 
has no authority to create additional exceptions to section 1902(a)(32) 
of the Act, the provision at Sec.  447.10(g)(4) must be removed 
regardless of its economic significance.
    Comment: Several commenters indicated this rule would result in a 
significant economic impact. For example, one commenter indicated that 
assignments to unions amounted to $99.2 million in 2017, with 
cumulative total of $924,174,007 from 2000 to 2017. Another commenter 
indicated that assignments to unions amount to $150 million in 2017 and 
totaled approximately $1.4 billion since 2000.
    Response: In the proposed rule, we estimated the dues related 
portion of the economic impact of this rule to be between $0 and 
approximately $71 million. While we received comments that provided 
estimates of the potential impact of this rule, those estimates were 
not supported by any documentation or analysis.
    Comment: One commenter recommended that CMS to conduct and publish 
an analysis of the issues pertaining to reassignment before finalizing 
this rule.
    Response: As mentioned in the proposed rule, we did not formally 
track the amount of reimbursement that was being reassigned to third 
parties under Sec.  447.10(g)(4), although one state submitted a state 
plan amendment as a direct result of that provision. In the proposed 
rule, we estimated that the financial impact of removing Sec.  
447.10(g)(4) could range from $0-71 million. We also suggested that 
stakeholders provide comment and analysis with regard to the economic 
significance of this rule during the comment period. While we received 
comments that focused on the union dues aspect of this rule and 
estimated the potential impact to be $150 million in 2017 and $1.4 
billion from 2000 to 2017 these estimates were not supported by any 
substantive analysis.
    Comment: Several commenters stated that Sec.  447.10(g)(4) helped 
to facilitate improper use of Medicaid funds.
    Response: With the removal of the regulatory provision, these 
concerns should be alleviated. It is also important to note that 
through all aspects of the Medicaid program, we work to ensure that 
Medicaid funds are properly used by states.
    Comment: Several commenters noted that the statement in the 
proposed rule, ``designed to ensure that taxpayer dollars dedicated to 
providing healthcare services for low-income vulnerable Americans are 
not siphoned away for other purposes,'' is false. Several commenters 
also noted that as union dues are deducted from already earned income, 
the state is merely a pass-through entity as it relates to the 
reassignment of items such as health insurance, skills training, and 
other benefits customary for employees.
    Response: Outside of the exceptions listed in the statute, section 
1902 (a)(32) of the Act requires direct payment to individual 
practitioners for the rendering of Medicaid services. A state agency is 
not permitted to ``pass through'' Medicaid reimbursement for healthcare 
services to third parties not recognized under the Medicaid statute.
    Comment: One commenter stated that CMS mischaracterized and 
misunderstood the flow of payments to individual Medicaid 
practitioners. The commenter further elaborated by indicating that the 
proposed rule's regulatory impact analysis reflected a similar 
misunderstanding as it suggested that states may have increased 
reimbursement levels in order to reassign portions of a provider's 
payment to a third party. The commenter suggested that the removal of 
Sec.  447.10(g)(4) may result in the lowering of rates if states are no 
longer able to make reassignments to third parties. Other commenters, 
however, stated rates would not be negatively affected.
    Response: To our knowledge, one state submitted a state plan 
amendment to increase rates as a direct result of the ability to 
redirect a portion of individual practitioners' reimbursement for the 
items outlined in Sec.  447.10(g)(4). We note that, as indicated in the 
proposed rule, we did not formally track states' diversion of provider 
reimbursement to third parties. As such, we cannot comment on other 
actions states may have taken in response to the issuance of Sec.  
447.10(g)(4). States are obligated to adopt payment methods that assure 
that payments are consistent with efficiency, economy, and quality of 
care and are sufficient to enlist enough providers so that care and 
services are available under the plan at least to the extent that such 
care and services are available to the general population in the 
geographic area as specified in section 1902(a)(30) of the Act. To the 
extent that any state has developed provider reimbursement rates to 
take into account a provider's reasonable overhead expenses, we do not 
anticipate that a state would reduce rates simply because it can no 
longer perform an administrative function for a provider. However, to 
the extent a state wishes to reduce documented payment levels, it must 
submit a State plan amendment and assure the proposed payment level 
does not trigger concerns regarding access to, or quality of, care.

H. 30-Day Comment Period

    Comment: Many commenters took exception to the 30-day comment 
period for the proposed rule and requested a 60-day comment period 
instead.
    Response: The APA requires the agency to provide at least a 30-day 
comment period for Medicaid

[[Page 19725]]

regulations. Because the removal of Sec.  447.10(g)(4) is a 
straightforward rule change, we concluded that 30 days was ample time 
to respond. Commenters may be confused by section 1871(b)(1) of the 
Act, which requires a 60-day comment period for Medicare rulemaking. 
However, this regulation has no effect on the Medicare program, and 
thus is not subject to the requirements in section 1871 of the Act.

I. General

    Comment: Multiple commenters noted that the removal of Sec.  
447.10(g)(4) has federalism implications and violates state 
sovereignty. Specifically, one commenter claimed that implementation of 
the proposed rule would disrupt states' established laws and would 
commandeer State governments and their subsidiaries in violation of the 
Tenth Amendment by regulating the ``States in their sovereign 
capacity.'' Another commenter claimed the agency is in violation of 
Executive Order 13132, which requires that the agency consult with the 
affected states, engage in real consideration of alternative policies, 
use the least restrictive means possible to achieve its results, and 
comply with other rules.
    Response: We disagree with the commenters. While the removal of 
Sec.  447.10(g)(4) may have an indirect effect on the way that states 
pay certain providers, it does not have the kind of ``substantial 
direct effect'' on states that would implicate Executive Order 13132. 
The provision at Sec.  447.10(g)(4) was added in the interest of 
administrative efficiency and convenience for states and certain 
classes of providers.
    As discussed previously, removal of Sec.  447.10(g)(4) eliminates a 
state's ability to redirect a portion of provider reimbursement for 
items such as health insurance, skills training, and other benefits 
customary for employees to third parties (apart from government 
agencies or under a court order under Sec.  447.10(e)) and federal law 
is clear that Medicaid payment may only be made to the individual 
beneficiary or person or entity furnishing the service, except in 
limited circumstances. Neither state law nor the federalism concerns 
raised by comments can override this federal statutory directive.
    Comment: One commenter noted this rule is in direct conflict with 
the August 3, 2016 Center for Medicaid and CHIP Services (CMCS) 
Informational Bulletin (CIB) entitled ``Suggested Approaches for 
Strengthening and Stabilizing the Medicaid Home Care Workforce.''
    Response: We believe the commenter is referring to the following 
language on the second page of the CIB: ``State Medicaid Agencies may, 
with the consent of the individual practitioner, make a 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 (Sec.  447.10(g)(4)).'' The language 
in the CIB will be revised to align with the language in this final 
rule.

IV. Provisions of the Final Regulations

    After consideration of the public comments, we are finalizing our 
proposal to remove Sec.  447.10(g)(4).

V. Collection of Information Requirements

    To the extent a state changes its payment as a result of this rule, 
the state will be required to notify entities of the pending change in 
payment and update its payment system. We believe the associated burden 
is exempt from the Paperwork Reduction Act (PRA) in accordance with 5 
CFR 1320.3(b)(2). We believe that the time, effort, and financial 
resources necessary to comply with the aforementioned requirement would 
be incurred by the state during the normal course of their activities, 
and therefore, should be considered usual and customary business 
practices.

VI. Regulatory Impact Analysis

A. Statement of Need

    As outlined in the proposed rule, we were concerned that Sec.  
447.10(g)(4) was insufficiently linked to the exceptions expressly 
permitted by the statute and violated the statute. As noted in the 
January 16, 2014 final rule (79 FR 2947, 3001), section 1902(a)(32) of 
the Act provides for a number of exceptions to the direct payment 
requirement, but the language does not explicitly or implicitly 
authorize the agency to create new exceptions. Therefore, the 
regulatory provision grants permissions that Congress has foreclosed. 
Accordingly, we removed the regulatory exception at Sec.  447.10(g)(4).

B. Overall Impact

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule that may: (1) 
Have an annual effect on the economy of $100 million or more in any 1 
year, or adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or state, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) create a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially alter the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raise novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). We estimate that this final rule could be ``economically 
significant'' as it may have an annual effect on the economy in excess 
of the $100 million threshold of Executive Order 12866, and hence that 
this final rule is also a major rule under the Congressional Review 
Act. However, there was considerable uncertainty around this estimate. 
As such, the Department invited public comments to help refine this 
analysis, but no substantive analysis of the economic impact of this 
rule was provided.
    As discussed previously, in the January 16, 2014 final rule (79 FR 
2947, 3039), we authorized states to make payments to third parties on 
behalf of individual providers ``for benefits such as health insurance, 
skills training, and other benefits customary for employees.'' We 
lacked information with which to quantify the potential impacts of this 
policy on these types of payments as the Department does not formally 
track the amount of reimbursement that is being reassigned to third 
parties under the regulatory provision that we are now removing. To 
offer one example, one likely impact of this rulemaking is that states 
will stop redirecting a portion of homecare workers' payments to unions 
for

[[Page 19726]]

membership dues. We estimated that unions may currently collect as much 
as $71 million from such assignments.\2\ While we have not similarly 
quantified the amount of other authorized reassignments, such as health 
insurance, skills training, or other benefits, we estimated that the 
amount of payments made to third parties on behalf of individual 
providers for the variety of benefits within the scope of this 
rulemaking could potentially be in excess of $100 million. While we 
sought comments on this estimate, and particularly on the type and 
amount of payments currently being reassigned under the exceptions in 
Sec.  447.10(g), we did not receive any comments that provided a 
substantive analysis with regard to the economic significance of this 
rule.
---------------------------------------------------------------------------

    \2\ Dues payments potentially associated with policies of the 
type being proposed for revision have been reported to be $8 million 
in Pennsylvania and $10 million in Illinois (https://www.fairnesscenter.org/cases/detail/protecting-the-vulnerable and 
https://www.washingtonexaminer.com/illinois-politicians-forced-home-care-workers-into-union-that-donates-heavily-to-them/article/2547368). The total population is approximately 26 million in these 
two states and 102 million across the states that have been reported 
by the State Policy Network to have relevant third-party payment 
policies (California, Connecticut, Illinois, Maryland, 
Massachusetts, Minnesota, Missouri, New Jersey, Oregon, Vermont and 
Washington) (https://www2.census.gov/programs-surveys/popest/tables/2010-2017/state/totals/nst-est2017-01.xlsx and https://spn.org/dues-skimming-faqs/). Factoring the $18 million (= $8 million + $10 
million) proportionately by population yields a nationwide total of 
approximately $71 million in union dues payments potentially 
affected by this proposed rule. This transfer estimate could be 
over- or understated if other states pay home care workers different 
average wages than Pennsylvania and Illinois, if dues payments are 
collected at different rates, or if participation in Medicaid home 
care programs is not proportionate to total population.
---------------------------------------------------------------------------

    The potential direct financial impact to providers of this policy 
change could be affected by many factors, such as the nature and 
amounts of the types of payments currently being reassigned and 
decisions made by homecare providers after a final policy takes effect 
about whether or not to voluntarily make payments to third parties for 
these types of benefits once the payments are no longer automatically 
withheld from their reimbursement checks. The Department was unable to 
quantify these direct financial impacts in the absence of specific 
information about the types and amount of payments being reassigned. 
Even where it may have been possible to derive such estimates, such as 
with the example of union dues, the Department lacks information to 
reliably estimate the proportion of homecare providers likely to stop 
making payments versus those likely to continue making payments through 
alternative means. While we requested comments on the factors that 
might influence the direct financial impacts to providers and 
recipients of reassignments of this policy change for the varied types 
and amount of payments currently being reassigned under the exceptions 
in Sec.  447.10(g), we did not receive any substantive analysis 
regarding this issue.
    Although states will no longer be able to withhold and redirect 
portions of a provider's payment to third parties not recognized by the 
statute, states are expected to maintain provider rates at levels 
necessary to ensure access to care. It may be the case that some states 
have set provider rates by taking into account the costs of health and 
welfare benefits, training costs, and other benefits. This rule does 
not alter the costs of those benefits to the provider, but may alter 
the means by which the provider remits payments to cover those costs--
that is, instead of the state making payments to third parties on a 
provider's behalf, the provider would make the payments directly to the 
third parties. We requested comments, particularly from states, on 
potential state behavior under the proposed policy; however, we did not 
receive any substantive analysis or useful information regarding this 
issue.
    As described above, it was difficult for us to conduct a detailed 
quantitative analysis given this considerable uncertainty and lack of 
data. However, we believe that without this final rule, states may be 
engaging in practices that do not comport with section 1902(a)(32) of 
the Act. We welcomed comments with regard to the quantitative impact of 
the elimination of states' ability to reassign Medicaid payment for 
items such as health insurance, skills training and other benefits 
customary for employees. We also sought comments identifying impacts to 
states and the federal government as a result of this final rule, 
including on the assumption that the time, effort and financial 
resources necessary to comply with the proposed requirement would be 
incurred by states during the normal course of their activities, and 
therefore, would not impose additional costs. While commenters provided 
estimates of the potential impacts of this rule, the estimates only 
focused on the union dues aspect of the rule and they were not 
supported by any substantive analysis. For example, one commenter 
indicated that assignments to unions amounted to $99.2 million in 2017, 
with cumulative total of $924,174,007 from 2000 to 2017. Another 
commenter indicated that assignments to unions amount to $150 million 
in 2017 and totaled approximately $1.4 billion since 2000.

C. Anticipated Effects

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $7.5 million to $38.5 million in any 1 year. Individual 
employees and states are not included in the definition of a small 
entity. We are not preparing an analysis for the RFA because we have 
determined, and the Secretary certifies, that this final rule will not 
have a significant economic impact on a substantial number of small 
entities. The significance on small business entities refers to the 
potential impact on the providers. Though we received comments that 
claimed the removal of Sec.  447.10(g)(4) would create an 
administrative burden for providers, these comments lacked any 
substantive data or supporting detail. We currently do not possess 
sufficient data to quantify administrative burden associated with the 
removal of the regulatory text at Sec.  447.10(g)(4), however, we do 
not believe the burden would be significant for any provider as any 
burden associated with this rescission would be due to the provider 
making arrangements to pay for items that were previously purchased or 
contributed to via the assignments allowed under Sec.  447.10(g)(4). 
Those providers with a bank account at a financial institution, or 
another financial product such as a prepaid debit card, could elect an 
automatic electronic payment for items previously reassigned by the 
state. In those instances, the burden cost would be one time and 
negligible since deductions can be set up through financial 
institutions and can often easily be set up online. For those providers 
without a bank account, the burden would be the cost of mailing 
payments directly to a third party or opening a bank account or an 
alternative financial product. In those instances, the associated cost 
of mailing payments each month would be negligible and would not exceed 
the 3 percent threshold of revenue earned by the vast majority of non-
employer entities that render Home Health Care Services under the 
Census Bureau's North American Industry Classification System (NAICS) 
62161, as reflected in Table 1, most of which earn revenue that does 
not exceed $25,000 per year.

[[Page 19727]]

For instance, a $10 box of envelopes and $6.60 for 12 stamps equals $17 
total per year, which is less than 3 percent of $25,000 or $750. With 
regard to providers on the low end of the revenue spectrum with 
revenues of $5,000 per year, 3 percent of their revenue equates to 
$150, which far exceeds the cost of $17 per year for postage. We also 
assume that the actual items purchased through third parties (existing 
union dues, training programs, health premiums) would be unaffected by 
the regulatory change as Sec.  447.10(g)(4) did not establish new 
items, but merely allowed for the state to reassign payments for these 
items.

                         Table 1--Non-Employer Establishments by Revenue Category, 2016
----------------------------------------------------------------------------------------------------------------
                                                                                                    Number of
           2012 NAICS code               Meaning of 2012 NAICS     Meaning of receipt size of      nonemployer
                                                 code                    establishments          establishments
----------------------------------------------------------------------------------------------------------------
62161................................  Home health care          Establishments with sales or             83,679
                                        services.                 receipts less than $5,000.
62161................................  Home health care          Establishments with sales or             74,158
                                        services.                 receipts of $5,000 to $9,999.
62161................................  Home health care          Establishments with sales or            122,219
                                        services.                 receipts of $10,000 to
                                                                  $24,999.
----------------------------------------------------------------------------------------------------------------

    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a Metropolitan Statistical Area for Medicare 
payment regulations and has fewer than 100 beds. We are not preparing 
an analysis for section 1102(b) of the Act because we have determined, 
and the Secretary certifies, that this final rule will not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2019, that 
threshold is approximately $154 million. This rule is not expected to 
have an impact that exceeds the $154 million threshold, and therefore, 
will not have a significant effect on state, local, or tribal 
governments or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed rule (and subsequent final 
rule) that imposes substantial direct requirement costs on state and 
local governments, preempts state law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on state 
or local governments, the requirements of Executive Order 13132 are not 
applicable.

D. Alternatives Considered

    We considered issuing guidance to require states to formally 
document consent to reassign portions of a provider's payment. We also 
considered limiting the items for which provider reassignment could be 
made. However, we had become concerned that Sec.  447.10(g)(4) was 
insufficiently linked to the exceptions expressly permitted by the 
statute and violated the statute. Therefore, we believed that removing 
the regulatory exception was the best course of action.

E. Accounting Statement

    As required by OMB Circular A-4 under Executive Order 12866 
(available at https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A4/a-4.pdf) in Table 2, we have prepared an accounting 
statement showing the classification of transfers associated with the 
provisions in this final rule. The accounting statement is based on 
estimates provided in this regulatory impact analysis and omits 
categories of impacts for which partial quantification has not been 
possible.

                                          Table 2--Accounting Statement
----------------------------------------------------------------------------------------------------------------
                                                                                       Units
                                                                 -----------------------------------------------
            Category               Low  estimate  High  estimate                  Discount  rate      Period
                                                                   Year  dollars        (%)           covered
----------------------------------------------------------------------------------------------------------------
                                                    Transfers
----------------------------------------------------------------------------------------------------------------
Annualized Monetized $ millions/               0             $71            2017               3            2019
 year...........................
                                               0              71            2017               7            2019
                                 -------------------------------------------------------------------------------
From whom to whom?..............                   From third parties to home health providers.
----------------------------------------------------------------------------------------------------------------

F. Regulatory Reform Analysis Under E.O. 13771

    Executive Order 13771, entitled ``Reducing Regulation and 
Controlling Regulatory Costs,'' was issued on January 30, 2017 and 
requires that the costs associated with significant new regulations 
``shall, to the extent permitted by law, be offset by the elimination 
of existing costs associated with at least two prior regulations.'' 
This final rule is considered an E.O. 13771 regulatory action.

G. Conclusion

    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs-health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

    For the reasons set forth in the preamble, the Centers for Medicare 
&

[[Page 19728]]

Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 447--PAYMENTS FOR SERVICES

0
1. The authority citation for part 447 is revised to read as follows:

    Authority: 42 U.S.C. 1302.


Sec.  447.10  [Amended]

0
2. Section 447.10 is amended by removing paragraph (g)(4).

    Dated: March 13, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: April 9, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-09118 Filed 5-2-19; 11:15 am]
BILLING CODE 4120-01-P