CMS Rescinds Three Medicaid Regulations, Postpones Another

Three Medicaid rules that had been under a congressional moratorium set to expire July 1, 2009 have now been officially rescinded by the Obama administration in a final rule published June 30, 2009. The regulations, which deal with outpatient services, case management and school-based transportation, were implemented by the Bush administration in 2007 and 2008 and have been the subject of much criticism. HHS Secretary Kathleen Sebelius said that she ordered rescission of the regulations because of their potentially adverse consequences for Medicaid beneficiaries. The rule rescinding the Medicaid regulations was effective upon publication.
 
One of the rescinded regulations, The Clarification of Outpatient Hospital Facility (Including Outpatient Hospital Clinic) Services Definition, narrowed the definition of outpatient services under Medicaid by introducing limitations on the treatments that could be billed and paid as an outpatient hospital service to those services reimbursable under Medicare. The rule also limited the definition of outpatient services to exclude services covered and reimbursed under the scope of another Medicaid service category. The limitation would have significantly cut payments for outpatient care for patients in ambulatory-care settings and limited states’ ability to save money by moving costly inpatient services to outpatient settings when appropriate. The 2008 final rule had not been implemented by CMS. The rule was met with concern about potential adverse effects, particularly the potential restrictions on available services and whether the impact of the rule would be greater than anticipated.
 
The Case Management Interim Final Rule, published in December 2007, was rescinded in part. The portions of the regulation that were rescinded would have narrowed Medicaid payments for case management services offered by some states to Medicaid beneficiaries and would have limited some beneficiaries’ access to other medical, social and educational services.  The rule had been criticized for possibly restricting beneficiary access to covered case management services and reducing state flexibility in determining delivery systems for case management services by eliminating federal funding for some services, placing limits on others, and requiring states to change their billing and reimbursement services.
 
Another of the regulations that was rescinded, the School-Based Administration/Transportation Final Rule, was rescinded in its entirety. This rule would have prohibited Medicaid reimbursement for administrative costs incurred by schools and for transporting Medicaid-eligible children to and from school. Critics of the rule feared that it could limit the Medicaid administrative outreach activities of schools and that the impact on schools’ budgets could potentially impact their ability to offer Medicaid services to students.
 
In addition to the three rules that were rescinded, CMS also delayed until June 30, 2010 the enforcement of another regulation codifying the reduction in the indirect guarantee threshold test to reduce the allowable amount that can be collected from a healthcare-related tax for the period of Jan. 1, 2008 through Sept. 30, 2011, as required by the Tax Relief and Health Care Act of 2006. Sebelius said that CMS may give additional consideration to alternative approaches during the delay period.