In memo, Trump targets health care payments that 'game the system'

Yahoo

a day ago

BOSTON (SHNS) – As the U.S. Senate prepares to take its own crack at legislation that includes hundreds of millions of dollars in cuts to Medicaid, the president late last week made his thoughts on one provision clear and it could impact how Massachusetts and other states finance public health care.
Late on Friday, President Donald Trump issued a memo ordering U.S. Secretary of Health and Human Services Robert Kennedy Jr. to 'eliminate waste, fraud, and abuse in Medicaid, including by ensuring Medicaid payments rates are not higher than Medicare.'
The move targeted state directed payments, a Medicaid financing mechanism that gives states flexibility to require managed care organizations to pay providers specific rates or to implement rate increases to advance delivery system or state policy objectives, most commonly improving access to care. State directed payments came about as a result of a 2016 Medicaid reform, but they have grown significantly in popularity since then.
There were 250 unique directed payment arrangements approved between July 1, 2021 and Feb. 1, 2023, according to the Medicaid and CHIP Payment and Access Commission (MACPAC). The commission said the number increased by almost 21% to 302 unique arrangements approved between Feb. 1, 2023 and Aug. 1, 2024.
The arrangements approved as of Aug. 1, 2024 were projected to spend a total of $110.2 billion a year, a 59% increase over the $69.3 billion in projected spending identified by the commission's analysis of arrangements approved as of Feb. 1, 2023.
'This trajectory threatens the Federal Treasury and Medicaid's long-term stability, and the imbalance between Medicaid and Medicare patients threatens to jeopardize access to care for our seniors,' Trump wrote in the memo.
Trump said states and health care providers have used state directed payments 'to game the system,' echoing concerns previously raised by experts. The president outlined the scheme: states charge assessments on health care providers in order to nudge up reported state spending to score higher federal reimbursements, but then send 'the same money back to them in the form of a 'Medicaid payment,' which automatically unlocked for healthcare providers an additional 'burden-sharing' payment from the Federal Government.'
'Instead of paying Medicare rates, many States that utilize these arrangements now pay the same healthcare providers almost three times the Medicare amount,' the president said.
The U.S. Centers for Medicare & Medicaid Service has approved 63 such arrangements for Massachusetts since March 2023, according to CMS data.
The budget reconciliation bill passed last month by the U.S. House and expected to be taken up this month by the U.S. Senate would, among many other things, extend Trump's first-term tax cuts and reduce Medicaid spending by nearly $700 billion to help pay for it. Officials at MassHealth, which combines Medicaid and the Children's Health Insurance Program, have said the Bay State could be in jeopardy of losing more than $1 billion annually, with hundreds of thousands of residents at risk of losing coverage.
Health policy nonprofit KFF said the bill directs U.S. Health and Human Services to revise state directed payment regulations so that the total payment rate for inpatient hospital and nursing facility services is capped at 100% of the total published Medicare payment rate. The 100% limit would apply to Massachusetts and other states that have adopted the Medicaid expansion, and the limit would be 110% for the 10 states that have not adopted the expansion.
But the U.S. House version of the bill would grandfather in any state directed payments submitted for approval and approved prior to the legislation's enactment.
MassHealth has previously said that so-called safety net providers could sustain cuts of hundreds of millions of dollars annually if Congress or the president blocks renewal of Massachusetts's existing state directed payments. MassHealth and the Mass. Executive Office of Health and Human Services did not respond over the weekend or Monday to a request for comment on the president's memo on state directed payments.
Manatt Health Senior Managing Director Patricia Boozang said in March that Massachusetts uses state directed payments 'extensively' and that the Trump administration was likely to act on its own to address them if the president's favored policies don't advance as part of the reconciliation package.
The Congressional Budget Office said last month that the bill as passed by the U.S. House will mean $698 billion less in federal subsidies for Medicaid, $267 billion less in federal spending for SNAP, $64 billion less in net spending for all other purposes, and a $3.8 trillion increase in the federal deficit all over the next decade.
The CBO also said it expects the reductions in federal spending to lead to about $78 billion in additional spending among the 50 states 'accounting for changes in state contributions to SNAP and Medicaid and for state tax and spending policies necessary to finance additional spending.' The office said it was still analyzing 'expectations of the states' responses to changes in federal funding.'
The budget plans that House and Senate negotiators are attempting to reconcile into a final fiscal 2026 state budget assume about $15.76 billion in federal revenues, an increase over the $14.3 billion in the current budget, including $14.2 billion in federal MassHealth reimbursements alone. Most of the cuts in the U.S. House bill would hit in federal fiscal year 2027, which begins Oct. 1, 2026 (three months into Massachusetts' fiscal year 2027).
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