Sneak Preview: GAO Seeks Better Info on State-directed Payments

(The following was excerpted from a recent Thompson Grants Compliance Expert article.) Despite efforts in recent years to enhance the Department of Health and Human Services Centers for Medicare and Medicaid Services’ (CMS) oversight of state-directed payments under the Medicaid program, the Government Accountability Office (GAO) recently noted that more information is needed on how states are funding these payments.

States may provide Medicaid services under a managed care model, a fee-for-service model or both. Under managed care, states pay managed care plans capitation payments, which are fixed periodic payments typically paid on a per-enrolled Medicaid beneficiary basis. Managed care plans are responsible for paying providers for services delivered. In general, states may not direct a managed care plan’s payments to its providers.

However, in 2016, CMS issued regulations establishing certain circumstances under which states may direct managed care plan payments to providers, referred to as state-directed payments. States may determine the criteria for providers to receive state-directed payments (e.g., directing a payment to providers that improve performance in providing timely access to care). CMS is required to approve state plans to implement state-directed payments.

In a recent report to three House and Senate committee ranking members, GAO assessed CMS’ oversight of these state-directed payments, noting that the agency, through July 2021, had approved 660 state-directed payment proposals since 2017. Thirty-six states received CMS approval of one or more direct payments in 2021, compared to only 10 in 2017. GAO also recorded that CMS has approved 79 proposals requested by 28 states for state-directed payments beginning on or after July 1, 2021.

GAO said that CMS in 2021 updated its form for state-directed payment proposals “to reduce the quantity of follow-up questions during its review” for approval. States began using the revised form for all state-directed payments sought for contracting periods beginning July 1, 2021, or later. Among the changes to the form were requirements that states provide: (1) the estimated total dollar amount of the state-directed payment, as well as the estimated federal and nonfederal share; (2) an attestation that the state incorporated the state-directed payment into the managed care contracts and capitation rate certifications; and (3) the sources of the funds used to finance the nonfederal share of the state-directed payment (particularly whether provider taxes were a source).

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