CMS issues guidance on Medicaid pass-through payments

The Centers for Medicare & Medicaid Services recently issued an informational bulletin to address questions regarding the ability of states to increase or add pass-through payments for health care providers under Medicaid managed care contracts and capitation rates. A May final rule updating Medicaid managed care requirements provides for a 10-year phase-out of these payments. “Adding new or increased pass-through payments for hospitals, physicians and nursing facilities, beyond what was included as of July 5, 2016, into Medicaid managed care contracts would exacerbate a problematic practice that is inconsistent with statutory and regulatory requirements, complicates the transition of these pass-through payments to permissible provider payment models, and reduces managed care plans’ ability to effectively use valued-based purchasing strategies and implement provider-based quality initiatives,” the bulletin states. “CMS intends to further address this policy in future rulemaking, linking pass-through payments through the transition period to amounts in place at the time the Medicaid managed care rule was effective on July 5, 2016.” CMS said it will use its contract and rate certification approval processes to closely monitor pass-through payments.