Stay up to date on the latest news and legislative alerts in mental health law: Email   ZIP For RSS readers

More Information House Oversight Committee Report on State-by-State Impact of the seven rules (3/3/08) Bazelon Center Summary of the case management rules (HTML or easy-to-print PDF)

Six Harmful Medicaid Rules Delayed

July 7, 2008—Advocates for people with mental illnesses across the country are celebrating success. Efforts in response to Action Alerts like the Bazelon Center's helped convince Congress to delay implementation by the Centers for Medicare and Medicaid of damaging rules on rehabilitative services, targeted case management and school-based administration and transportation services.

The supplemental war-funding bill (H.R. 2642, Supplemental Appropriations Act), approved 96-6 by the Senate and signed by the President on June 30th, includes a moratorium until April 1, 2009 for these three cost-cutting regulations along with three others that involve graduate medical education, a provider tax and public-provider cost limits. A seventh regulation on outpatient services under Medicaid was excluded from the moratorium.

The rules on rehabilitative services and school-based administration and transportation services were scheduled to take effect on June 30th. They had been on hold under a moratorium enacted last year in the Medicare, Medicaid and SCHIP extension Act (P.L. 110-173).

The House had approved the supplemental funding bill with the same delay of the six Medicaid rules earlier last month, after a successful compromise with the White House that paved the way for speedy approval by both houses of Congress.

HHS Must Report on How Rules Would Combat Fraud and Abuse

In addition to setting a one-year moratorium on the six Medicaid regulations, the bill signed by the President also provides $25 million annually to the Department of Health and Human Services (HHS) for combating Medicaid fraud and abuse by states. HHS is required to submit to Congress a report identifying the prevalence of fraud and abuse in the areas the delayed rules would attempt to remedy, explaining how the rules would address those issues and citing the legal authority for the rules. HHS would also be required to have an independent contractor assess the rules’ impact state-by-state.

The language in the moratorium stems chiefly from legislation introduced by House Energy and Commerce Committee Chairman John Dingell (D-MI) and Representative Timothy Murphy (R-PA), “Protecting the Medicaid Safety Net Act of 2008” (H.R. 5613).

SCHIP Coverage Policy Will Take Effect

The Economic Recovery in Health Care Act (S. 2819), sponsored by Senators John Rockefeller (D-WV), Olympia Snowe (R-ME) and Edward Kennedy (D-MA) was similar to H.R. 5613. However, it also included $12 in fiscal relief for states and delay of a harmful August 2007 CMS policy directive that would affect states’ eligibility criteria for the State Children’s Health Insurance Program (SCHIP).

The SCHIP directive seeks, among its problematic requirements, to address “crowd out” (when one form of insurance is substituted for another). It prohibits states from providing health coverage to uninsured children in families earning more than 250% of the federal poverty level unless a state can prove it has enrolled 95% of children whose family income is at or below 200% of the poverty level. The directive will likely reduce state efforts to expand health coverage to include uninsured children. Unfortunately, the CMS directive was not delayed by H.R. 2642 as signed by the President.

What the Moratorium Stops

The moratorium prohibits HHS from taking any action “through promulgation of regulation, issuance of regulatory guidance, use of Federal payment audit procedures, or other administrative action, policy or practice, or including a Medical Assistance Manual transmittal or letter to State Medicaid Directors” that would be more restrictive of the affected Medicaid services than before the rules were issued.

This ban is particularly important because, HHS had begun using the language in the proposed rehabilitative services rule to insist on accounting and billing for rehabilitative services in 15-minute increments and to deny payments through daily rates, case rates and similar arrangements. Such a shift in rate-setting methodology is not efficient. Furthermore, it would prove detrimental to the provision of evidence-based mental health services, such as assertive community treatment and therapeutic foster care, which are more frequently offered as a package of intertwined interventions delivered in a flexible manner.

For the targeted case management regulation (CMS 2237-IFC-interim final rule released December 4, 2007 and effective March 3, 2008), the moratorium does not apply to portions of the provision in the Deficit Reduction Act that defined case management services and targeted case management services included in the interim final regulation, unless they are more restrictive than the policy set forth in the Dear State Medicaid Director letter on case management (issued January 19, 2001) and on community transition case management (issued in the Dear State Medicaid Director letter of July 25, 2000) related to the Olmstead Supreme Court case. Thus, the provisions in the regulation that went well beyond the law and these two Dear State Medicaid Director letters are stopped, including the vague and problematic language that would have prohibited Medicaid payment for case management services that are deemed “integral” to the administration of another program, the severe reduction in the number of days Medicaid would cover transitional case management prior to a person’s discharge into the community, and the requirement that case management services be billed in units of services not exceeding 15 minutes—a requirement that would erode state flexibility to pay for Medicaid services in the most cost-efficient manner.

For details, see the summary of the case management services rule and rehabilitative services rule.

Please Thank Your Lawmakers

Advocates are encouraged to thank Representatives Dingell and Murphy, the leaders of H.R. 5613, Senators Rockefeller, Snowe and Kennedy, the leaders of S.2819, and their own Senators and Representative who voted for the moratorium in the war funding bill.

See who voted for the House bill
See if your Senators voted for the legislation

To reach your members of Congress, see How to Contact Lawmakers.

If you find our Alerts and Policy Reporters useful, please consider making a contribution in support of the Bazelon Center's advocacy for people with disabilities. You can donate safely online!