CMS NEWS
FOR IMMEDIATE RELEASE
August 22, 2018
Contact: CMS Media Relations
(202) 690-6145 | CMS
Media Inquiries
CMS Releases Formal Approach
to Ensure Medicaid
Demonstrations Remain Budget Neutral
Agency reinforces commitment to transparency and controlling costs;
provides new tool
Today, the Centers for Medicare and Medicaid Services (CMS) released a letter
to State Medicaid Directors that clearly describes CMS’s current approach
to calculating budget neutrality expenditure limits for Medicaid section
1115 demonstration projects. Medicaid
demonstration projects allow states to design
innovative ways to better serve the nation’s more than 65 million Medicaid
recipients. In response to longstanding concerns raised by the Government
Accountability Office (GAO), this letter marks the first time that CMS has
formally outlined how states must calculate budget neutrality for
demonstration projects, in order to strengthen fiscal accountability. The
guidance also comes a day after Administrator Seema Verma testified before
the Senate Homeland Security and Government Accountability Committee on
improper payments in the Medicaid program, which often result in higher
federal spending.
The Social Security Act authorizes Medicaid
demonstrations, if they are likely to promote the objectives of Medicaid.
However, CMS will only approve them if federal Medicaid spending is
estimated to be “budget neutral.” The calculation of the budget neutrality
spending limits—and how CMS monitors demonstration costs—is the subject of
the letter.
“CMS welcomes smart new approaches to coverage and delivering care
through Medicaid demonstration projects, but we won’t approve them without
a careful analysis of their impact on taxpayers. Federal spending on the
program has increased, growing by over $100 billion between 2013 and 2016,”
said CMS Administrator Seema Verma. “Today’s guidance is a comprehensive
explanation of how CMS and our state partners can ensure that new
demonstration projects can simultaneously promote Medicaid’s objectives and
keep federal spending under control.”
Controlling Costs
Budget neutral demonstration projects will not result in
federal Medicaid spending that exceeds what it would likely have been
absent the demonstration. Currently, budget neutrality spending limits are
one key component of CMS and state negotiations about proposed
demonstration projects, and are listed in the special terms and conditions
that govern each approved project. CMS currently subjects each
demonstration to limits on the amount of federal Medicaid funding the state
may receive over the course of the demonstration, based on projections of
the amount the state would likely have received in the absence of the
demonstration. The overarching goal of CMS’s approach to budget neutrality
is, therefore, to limit federal fiscal exposure resulting from the use of section
1115 authority in Medicaid.
New Tool for States
The State Medicaid Director letter also announces a new monitoring tool
to support a more streamlined and standardized approach to expenditure
reporting for Medicaid demonstrations.
The tool is a standardized budget neutrality reporting form that
consolidates financial data for each demonstration into a unified report,
to reduce redundancy—while, at the same time, strengthening and enhancing
CMS reviews. States will upload the tool into the Performance Metrics
Database & Analytics system as they currently do for their other
monitoring and evaluation reports.
CMS intends to require states to use the tool as a condition of
demonstration approval and will soon provide states with a schedule of
training dates outlining completion and submission of the tool.
Transparency
In detailing how CMS determines budget neutrality and approves
demonstrations, the Agency is reinforcing its commitment to transparency.
Another notable effort to increase transparency—the Medicaid and Children's
Health Insurance Program (CHIP) Scorecard—launched
in June 2018.
The Scorecard offers taxpayers insights into how their dollars are being
spent and the impact those dollars have on health outcomes.
The CMS agenda to transform Medicaid has three core tenets: state
flexibility, accountability and program integrity. Today’s guidance
supports all of these tenets.
CMS continues to revise and improve its approach to budget neutrality
for Medicaid demonstrations and will determine if additional guidance is
needed as implementation continues.
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