CMS Administrator Seema Verma said state and provider partners raised concerns about "potential unintended consequences" of the proposed rule, which require further study.
The Centers for Medicare & Medicaid Services (CMS) withdrew the proposed Medicaid Fiscal Accountability Regulation (MFAR) rule Monday afternoon.
First proposed in November 2019, the rule aimed to create new requirements for state governments to report provider-level information on Medicaid supplemental payments.
CMS Administrator Seema Verma tweeted that healthcare stakeholders raised concerns about "potential unintended consequences" of the proposed rule, which require further study.
The public comment period for the proposed rule ended on February 1.
"We’ve listened closely to concerns that have been raised by our state and provider partners about potential unintended consequences of the proposed rule, which require further study," Verma said in a statement. "Therefore, CMS is withdrawing the rule from the regulatory agenda."
The withdrawal came just over a month after a coalition of hospital and business groups sent a letter to Verma urging her to withdraw the MFAR, citing the "unprecedented challenges and uncertain future" created by the coronavirus disease 2019 (COVID-19) pandemic this spring.
"We remain concerned that CMS issued the MFAR without any meaningful analysis of its impact on states, providers, and most important, Medicaid beneficiaries," the letter read. "The cursory regulatory impact analysis vastly understates the effects of the proposed rule. While we acknowledge the difficulties in precisely estimating the financial impact, that fact alone is reason enough to withdraw the MFAR."
Two of the cosigners on that letter, the American Hospital Association (AHA) and America's Essential Hospitals (AEH), released statements praising Verma's decision to withdraw the proposed rule.
"We appreciate CMS for acknowledging the harmful consequences this rule would have for patients," Tom Nickels, executive vice president of the AHA, said in a statement. "Up to $50 billion in annual funding for the Medicaid program was on the line, cuts that would have crippled state financing and limited access to care, especially in rural and underserved areas. Hospitals and health systems will be greatly relieved when the proposed rule is formally withdrawn."
"The Centers for Medicare & Medicaid Services (CMS) made a wise and welcome decision today to withdraw its proposed Medicaid Fiscal Accountability Regulation (MFAR), especially as state budgets and providers strain under the heavy financial burden and economic fallout of COVID-19," Beth Feldpush, DrPH, senior vice president of policy and advocacy of AEH, said in a statement. "We thank CMS Administrator Seema Verma for hearing our concerns and recognizing the potential for this rule to undermine Medicaid and harm access to care. We appreciate her leadership and willingness to acknowledge the unintended consequences of this approach to regulating state Medicaid financing."
Additionally, both Arizona Governor Doug Ducey and the Association for Community Affiliated Plans (ACAP) commended the Trump administration's withdrawal of the MFAR.
"The withdrawal of this proposed rule will protect our health care system, especially our rural providers," Ducey said in a statement. "We are strong supporters of fiscal accountability and proud that AHCCCS is the gold standard for both care and cost control. This will continue to be a priority for us in the state of Arizona. We thank the Administration for listening to doctors, nurses, hospitals, and nursing homes and continuing to work with states to support our health care system, especially as we work to address COVID-19."
Margaret A. Murray, CEO of ACAP, said withdrawing the rule was "the right thing to do."
“If ever there was a Medicaid regulation in need of a do-over, it was this one," Murray said in a statement. "We applaud the withdrawal of this rule; going forward, we restate our desire that CMS consult with the appropriate stakeholders on how to improve the financing and operation of state Medicaid programs—and make a good-faith effort to assess the effects of the proposed changes on Medicaid programs and beneficiaries."
Editor's note: This story has been updated to include commentary from Arizona Governor Doug Ducey and the Association for Community Affiliated Plans.
Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.