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Medicaid Financial Accountability Proposed Rule

The Centers for Medicare and Medicaid Services (CMS) issued a proposed Medicaid Fiscal Accountability Regulation on November 11th, 2019 that impacts provider assessments and upper payment limit (UPL) programs. While CMS states its aim is to "eliminate state financing gimmicks," it is important to note that CMS is not proposing to eliminate provider tax, inter-governmental transfers (IGT), and supplemental payments. Nevertheless, this rule would have significant negative impacts on funding.

CMS is proposing significant changes in the regulations that frame permissible provider taxes and various UPL programs. For most of the changes, CMS is providing two to three years for state programs to come into compliance.

Implications for Provider Taxes:


  • State programs that do not have a waiver and if the provider tax-based dollars are in base rates, not paid in a lump sum outside the waiver, appear to be in compliance with the proposed rule. 
  • There are new requirements for waivers to be broad-based and uniform. If the state waiver is not compliant, the state will have three years to come into compliance. 
  • Any amendment to a waiver after the rule is effective must be compliant immediately, as part of the amendment process;
  • New waivers after the rule is effective must be compliant when submitted;   
  • Waivers will need to be renewed every three years. During this renewal process, waivers will be assessed for compliance using tests laid out in the proposed rule. 
  • States that pay the provider tax-based payment outside of the base rate will face new requirement, forcing these states to start making payments in the base rate. 
  • Click here to see which states have a nursing home provider tax. 

Implications for UPL and IGT Programs:

  • Additional and more stringent requirements are added for UPL programs.
  • Each state will need to look at its program closely to determine what changes need to be made to be compliant. It is possible that the requirements may not be surmountable for some states.
  • States with IGT-based supplemental payments will be required to renew their programs, much like a Medicaid waiver. 
  • Those approved three or more years before the effective date of the rule will expire two calendar years following effective date of rule
  • Those approved less than three years prior to effective date will expire three calendar years following the effective date. 

AHCA is working with other provider and beneficiary groups to address the challenges proposed in this rule. AHCA is also working with Joe Lubarsky, the premier national expert in this area, and our state affiliates to identify the impact these changes would have in each of the 50 states and DC.


Please address any questions, comments, or concerns to This inbox will be monitored daily and responses will be issued as soon as possible.