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Medicaid rule leaves up to $2.5b at risk in Mass.

Charlie Baker is among governors around the country who are fighting the Trump administration over proposed changes to how the federal government reimburses states for Medicaid, seeking to avoid a shift that could blow a massive hole into state budgets.

The new regulations proposed by the Centers for Medicare and Medicaid Services could jeopardize some of the financing arrangements Massachusetts uses to pay for its $16.7 billion MassHealth program, according to the Baker administration and various state health care groups.

Nursing care facilities, particularly those located within continuing care retirement communities, could be especially hard hit.

A summary document put together by the Executive Office of Health and Human Services estimates that Massachusetts could lose between $365 million to $2.4 billion per year in federal revenue if the rule were to go into effect. The public comment period on the rule ended on Feb. 1.

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The Baker administration says the rule would probably lead to "the restructuring or elimination of existing health care related taxes" and require the negotiation of new waivers that the state uses to advance new care delivery strategies and supplement payments for certain services.

Baker said this week that, while in Washington, D.C. over the weekend for the National Governors Association meetings, he and other governors “spent a ton of time talking about health care, especially about Medicaid and, sort of, the future of the program.”

The gathering in Washington came a week after Baker and Oregon Governor Kate Brown wrote to the Trump administration on behalf of the National Governors Association warning that the rule could “significantly curtail the longstanding flexibility states have to fund and pay for services in their Medicaid programs.”

"We understand that CMS desires more oversight. However, the (rule) makes broad changes that could prohibit or limit many permissible financing and supplemental payment arrangements in Medicaid programs across the states," Baker and Brown wrote.

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CMS Administrator Seema Verma in November proposed the rule, known as the Medicaid Fiscal Accountability Regulation, as a way to ensure that supplemental payments and financing arrangements are fairly administered.

"We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system," Verma said in a statement.

CMS said that the national Medicaid program had grown from from $456 billion in 2013 to an estimated $576 billion in 2016, with a disproportionate share of the growth falling on the federal government, whose share climbed to $363 billion.

Supplemental payments — those given to providers in addition to the base payment for individual services — have also been growing from 9.4 percent of all other payments in fiscal 2010 to 17.5 percent in fiscal 2017.

Assistant Secretary for MassHealth Daniel Tsai said Massachusetts supports the goals of transparency and accountability but said the new regulation, as proposed, would be an "unprecedented federal overreach."

Tsai, in public comments submitted to CMS, urged Verma to withdraw the rule, calling it "ambiguous," "poorly defined," and one that would put "arbitrary limits on common financing arrangements."

In particular, Tsai said that by limiting intergovernmental transfers to revenue derived from state or local taxes, the administration would be prohibiting states from using other "legitimate" sources of funding, including bonds, lottery funds, and public college tuition, to cover its share of Medicaid costs.

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The rule, the Baker administration said, could also force the state to segregate all federal revenue from its general fund in order to ensure that none of it is appropriated to MassHealth during the annual budget process.

"The ambiguous and inconsistent nature of the rule creates significant uncertainty for states and would impose severe limitations on states' flexibility to channel funding toward new policy and delivery system reforms," Tsai wrote.

The sentiments expressed by the Baker administration have been echoed from leaders — both Democrats and Republicans — in states from California to Illinois. Florida medicaid director Beth Kidder said the impact of the rule in the Sunshine State would be “immediate and crippling.”

Attorney General Maura Healey joined six attorneys general to write a letter opposing the rule, while the Massachusetts Medicaid Society joined similar organizations from around the country to submit testimony raising concerns about projected impacts on state finances and the ability to deliver care to low-income patients.

Boston Medical Center president Kate Walsh said it was “unrealistic” to think that states would be able to continue with existing supplemental payments to safety-net providers like BMC if existing revenue streams like intergovernmental transfers and provider donations were no longer allowed.

“These reforms would place an exceedingly high and disproportionate financial burden on safety-net providers — legitimately putting BMC and many others at risk of failing to continue to operate — with dire consequences for low-income patients and their ability to access timely, quality health care services,” Walsh wrote.

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