[Federal Register Volume 87, Number 94 (Monday, May 16, 2022)]
[Rules and Regulations]
[Pages 29675-29690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10225]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 447

[CMS-2444-F]
RIN 0938-AU73


Medicaid Program; Reassignment of Medicaid Provider Claims

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule reinterprets the scope of the general 
requirement that State payments for Medicaid services under a State 
plan must generally be made directly to the individual practitioner or 
institution providing services or to the beneficiary, in the case of a 
class of practitioners for which the Medicaid program is the primary 
source of revenue. Specifically, this final rule explicitly authorizes 
States to make payments to third parties on behalf of individual 
practitioners, for individual practitioners' health insurance and 
welfare benefits, skills training, and other benefits customary for 
employees, if the individual practitioner consents to such payments on 
their behalf.

DATES: These regulations are effective June 15, 2022.

FOR FURTHER INFORMATION CONTACT: Christopher Thompson, (410) 786-4044.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Prohibition on Payment Reassignment

    Congress established the Medicaid program in 1965 to provide health 
care services for low-income beneficiaries and beneficiaries with 
disabilities. Section 1902(a)(32) of the Social Security Act (the Act) 
imposes certain requirements on how States may make payments for 
services furnished to Medicaid beneficiaries. Section 1902(a)(32) of 
the Act provides generally that ``no payment under the plan for any 
care or service provided to an individual shall be made to anyone other 
than such individual or the person or institution providing such care 
or service, under an assignment or power of attorney or otherwise.'' 
This prohibition is followed by four enumerated exceptions. On 
September 29, 1978, we codified these exceptions under 42 CFR 447.10, 
the regulation implementing section 1902(a)(32) of the Act, in the 
``Payment for Services'' final rule (43 FR 45253) (hereinafter referred 
to as the ``1978 final rule''). The 1978 final rule simply reorganized 
and redesignated existing Medicaid regulations that previously appeared 
at 42 CFR 449.31. Since the 1990s, we have mostly understood this 
provision as governing only assignments and other similar Medicaid 
payment arrangements.
    Consistent with this understanding, from 2012 to 2014, we engaged 
in rulemaking in the ``State Plan Home and Community-Based Services, 5-
Year Period for Waivers Provider Payment Reassignment, and Setting 
Requirements for Community First Choice'' proposed rule published in 
the May 3, 2012 Federal Register (77 FR 26362) (hereinafter referred to 
as the ``2012 proposed rule'') to make it explicit that section 
1902(a)(32) of the Act did not apply to certain payments made by the 
State Medicaid program on behalf and for the benefit of individual 
Medicaid practitioners whose primary source of revenue is the State 
Medicaid program. We finalized this regulation in the ``State Plan Home 
and Community Based Services, 5-Year for Waivers, Provider Payment 
Reassignment, and Home and Community-Based Setting Requirements for 
Community First Choice and Home and Community Based Services (HCBS) 
Waivers'' final rule published in the January 16, 2014 Federal Register 
(79 FR 2948) (hereinafter referred to as the ``2014 final rule''). In 
that rulemaking, we reasoned that the statute permitted this policy 
because the apparent purpose of section 1902(a)(32) of the Act was to 
prohibit factoring arrangements, the practice by which providers sold 
their claims for a percentage of their value to companies that would 
then submit the claims to the State. The purpose was not to preclude a 
Medicaid program that is functioning as the practitioner's primary 
source of revenue from fulfilling the basic employer-like 
responsibilities that are associated with that role, a scenario that 
was not contemplated by section 1902(a)(32) of the Act and was outside 
of the intended scope of the statutory prohibition.
    We codified this policy as a regulatory exception under Sec.  
447.10(g)(4) to permit withholding from the payment due to the 
individual practitioner for amounts paid by the State directly to third 
parties for health and welfare benefits, training costs, and other 
benefits customary for employees. In an August 3, 2016 Center for 
Medicaid and CHIP Services Informational Bulletin, we outlined 
suggested approaches for strengthening and stabilizing the Medicaid 
home care workforce, including by supporting home care worker training 
and development. We noted that under Sec.  447.10(g)(4), State Medicaid 
agencies could facilitate this goal by, with the consent of the 
individual practitioner, making payment on behalf of the practitioner 
to a third party that provides benefits to the workforce, such as 
health insurance, skills training, and other benefits customary for 
employees.\1\
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    \1\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf.

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[[Page 29676]]

B. Current Medicaid Payment Assignment Regulations

    Medicaid regulations at Sec.  447.10 (``Prohibition against 
reassignment of provider claims'') implement the requirements of 
section 1902(a)(32) of the Act by providing that State plans may allow 
payments to be made only to certain individuals or entities. 
Specifically, payment may only be made to the individual practitioner 
that provided the service (the ``provider''), the recipient (the 
``beneficiary''), if he or she is a non-cash recipient eligible to 
receive payment under Sec.  447.25, or under one of the limited 
exceptions. The regulations specifically state that payment for any 
service furnished to a recipient by a provider may not be made to or 
through a factor, either directly or by power of attorney.
    The exceptions to the general direct payment principle at Sec.  
447.10 generally mirror those enumerated in the statute. They include 
payment in accordance with a reassignment to a government agency or 
reassignment under a court order. There are also exceptions permitting 
payments to third parties for services furnished by individual 
practitioners where certain employment or contractual conditions are 
met. Additionally, there is another exception for payment to a business 
agent, such as a billing service or accounting firm, that furnishes 
statements and receives payments in the name of the individual 
practitioner, if the business agent's compensation for this service is 
related to the cost of processing the billing, and not dependent on the 
collection of the payment.
    In 2018 and 2019, in a departure from our prior interpretation of 
this statute, we engaged in rulemaking to interpret the statutory 
prohibition as applying more broadly to prohibit any type of Medicaid 
payment to a third party other than the four exceptions enumerated in 
the statute. In doing so, we interpreted the statutory phrase ``or 
otherwise'' as encompassing any and all Medicaid payment arrangements 
involving third parties. We proposed this broad interpretation of the 
statutory language in the ``Reassignment of Medicaid Provider Claims'' 
proposed rule in the July 12, 2018 Federal Register (83 FR 32252) 
(hereinafter referred to as the ``2018 proposed rule'') and finalized 
it in the ``Reassignment of Medicaid Provider Claims'' final rule in 
the May 6, 2019 Federal Register (84 FR 19718) (hereinafter referred to 
as the ``2019 final rule''). This rulemaking eliminated the regulatory 
exception added by the 2014 final rule.

C. California v. Azar

    Six States and 11 intervenors challenged the 2019 final rule. In 
California v. Azar, 501 F. Supp. 3d 830 (N.D. Cal. 2020), the district 
court rejected the Department of Health and Human Services' (HHS') 
arguments that section 1902(a)(32) of the Act expressly prohibited the 
agency's pre-2018 interpretation and the States' related practices, 
remanded the case to HHS for further proceedings, and vacated the 2019 
final rule. Secretary Azar then appealed to the U.S. Court of Appeals 
for the Ninth Circuit in a case that is currently in abeyance and 
captioned California v. Becerra, No. 21-15091 (9th Cir.).

D. Individual Practitioner Workforce Stability and Development Concerns

    Since the direct payment principle was originally enacted in 
statute in 1972 and expanded in 1977, Congress changed the definition 
of medical assistance under section 1905(a) of the Act to permit States 
to offer coverage of categories of practitioner services in the 
Medicaid program that are not offered in other health insurance 
programs, such as personal care services and other HCBS. For these 
practitioners, who often provide services independently, rather than as 
employees of a service provider agency, the Medicaid program may be 
their primary, or only, source of payment. Some States have sought 
methods to improve and stabilize the workforce by offering health and 
welfare benefits to such practitioners, and by requiring that such 
practitioners pursue periodic training.
    Within Medicaid, long-term services and supports (LTSS) 
expenditures are shifting from institutional care (hospitals, nursing 
facilities, etc.) to HCBS. In FY 2013, HCBS LTSS expenditures reached 
51 percent of total Medicaid LTSS expenditures and increased to 58.6 
percent in FY 2019.\2\ HCBS represented a majority of LTSS expenditures 
in 28 States and the District of Columbia, and over 75 percent of 
expenditures in five States in FY 2018.
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    \2\ https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltssexpenditures2019.pdf.
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    Several States have requested that we adopt additional exceptions 
to the direct payment policy to permit a State to withhold from a 
payment due to the individual practitioner amounts that the 
practitioner is obligated to pay for health and welfare benefits, 
training costs, and other benefits customary for employees. These 
amounts would not be retained by the State, but would be paid to third 
parties on behalf of the practitioner for the stated purpose. We 
recognize that HCBS workforce issues, such as workforce shortages and 
staff turnover, have a direct and immediate impact on the quality of 
and access to services available to beneficiaries. We believe that 
State Medicaid agencies can play a key role in influencing the 
stability of this workforce by determining payment rates and 
facilitating greater access to benefits that support this class of 
providers.\3\
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    \3\ https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf.
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II. Provisions of the Proposed Regulations

    In the August 3, 2021 Federal Register, we published the ``Medicaid 
Program; Reassignment of Medicaid Provider Claims'' proposed rule (86 
FR 41803) (hereinafter referred to as the ``2021 proposed rule''). The 
following is a summary of those proposed provisions.

A. Prohibition Against Reassignment of Provider Claims (Sec.  447.10)

    Under title XIX of the Act, State Medicaid programs generally pay 
for Medicaid-covered practitioner services through direct payments to 
the treating practitioners. States may develop State plan payment rates 
that account for costs related to health and welfare benefits, 
training, and other benefits customary for employees. However, under 
our previous interpretation of the statutory provision at section 
1902(a)(32) of the Act, as reflected in regulations at Sec.  447.10 
under the 2019 final rule, the entire rate was required to be paid to 
the individual practitioner who provided the service, unless certain 
exceptions applied. Under the 2019 final rule, none of the exceptions 
applied to payments for health and welfare benefits, training, and 
other benefits customary for employees when the practitioner is not in 
a direct employment or contractual relationship with a third party that 
submits claims on the practitioner's behalf. While the 2019 final rule 
did not directly prevent practitioners from purchasing health 
insurance, enrolling in trainings, or paying dues to a union or other 
association, it did create an unnecessary administrative burden on 
practitioners, and may have increased costs for those practitioners by 
eliminating access to lower group rates.
    Following the district court's decision and analysis in California 
v. Azar, we re-examined the statutory language and legislative history, 
and now conclude

[[Page 29677]]

that the prohibition in section 1902(a)(32) of the Act is better read 
to be limited in its applicability to Medicaid payments to a third 
party under an assignment, power of attorney, or other similar 
arrangement. In other words, and consistent with the longstanding title 
of the provision at Sec.  447.10 (``Prohibition against reassignment of 
provider claims''), a title which the regulation has consistently had 
since at least 1978, the statutory prohibition is better viewed as an 
anti-reassignment provision that only governs assignment-like payment 
arrangements.\4\ We do not believe this provision should be interpreted 
as a broad prohibition on any and all types of Medicaid payment 
arrangements beyond payments made directly to Medicaid beneficiaries 
and providers or enumerated in the statutory exceptions. As such, we 
proposed to amend Sec.  447.10 to add a new paragraph (i), which would 
incorporate similar language from the previous paragraph (g)(4), as a 
new provision clarifying that certain types of third-party payments on 
behalf of a particular category of practitioners are outside the scope 
of the statutory provision in section 1902(a)(32) of the Act, rather 
than describing those payments as an exception to that prohibition.
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    \4\ See, for example, Gorman v. Nat'l Transp. Safety Bd., 558 
F.3d 580, 588 & n.5 (D.C. Cir. 2009) (holding that a regulatory 
heading confirmed the reasonableness of an agency's reading of the 
rule in that case, and observing that as a general matter ``a short 
and simple, if ambiguous, subsection of a regulation'' may be 
``clarified by the heading,'' and that headings ``may be of use'' `` 
`when they shed light on some ambiguous word or phrase.' '') 
(internal citations omitted).
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    Specifically, Sec.  447.10(i) as proposed specified that the 
payment prohibition in section 1902(a)(32) of the Act and Sec.  
447.10(d) would not apply to payments to a third party on behalf of, 
and with the consent of, an individual practitioner for benefits such 
as health insurance, skills training, and other benefits customary for 
employees, in the case of a class of practitioners for which the 
Medicaid program is the primary source of revenue.
    As discussed in the 2021 proposed rule, the text of the statute 
addresses only assignments and related payment arrangements wherein a 
provider's right to claim or receive full payment for services 
furnished to Medicaid beneficiaries is transferred to a third party. 
The statute includes examples of the types of payment arrangements 
intended to be prohibited, ``under an assignment or power of attorney 
or otherwise.'' The 2021 proposed rule included our reasoning that the 
language ``or otherwise'' is best read as referencing payments made 
under arrangements that are similar to an ``assignment'' and a ``power 
of attorney'' such that the reach of the prohibition under section 
1902(a)(32) of the Act does not extend to payment arrangements that are 
wholly distinct from such types of arrangements. Consistent with this 
interpretation, we also proposed to amend Sec.  447.10(a) to include 
the phrase ``under an assignment or power of attorney or a similar 
arrangement.'' We stated that this change would align the regulation 
with the applicable statutory language and our reading of that language 
and would create a consistent framework for the proposed new paragraph 
(i).
    The introductory language in section 1902(a)(32) of the Act 
specifies that no payment under the plan for any care or service 
furnished to an individual shall be made to anyone other than such 
individual or the person or institution providing such care or service. 
This prohibition applies only to payments ``for any care or service,'' 
which we interpret to prohibit full diversion of the right to claim and 
receive such payments to third parties absent an exception, but not to 
apply to partial deductions from payments at the request or with the 
consent of the provider, to make payments to third parties on behalf of 
the provider.
    A re-examination of the statutory exceptions to the general 
prohibition also supports the conclusion that the prohibition under 
section 1902(a)(32) of the Act does not extend to payment arrangements 
that are outside the category of payments with assignments or 
assignment-like arrangements. The excepted arrangements or transactions 
are all similar to assignments in that they involve third parties 
submitting claims directly to the State Medicaid agency for payment or 
having the right to receive the full amount of all payments due to the 
provider for services furnished to Medicaid beneficiaries. More 
specifically, section 1902(a)(32) of the Act contains several 
enumerated exceptions to the general principle of direct payment to 
individual practitioners. As described in the proposed rule, these 
exceptions may appear to be largely unrelated; however, they all 
involve payment arrangements where third parties are submitting claims 
to the Medicaid agency or where the right to receive all of the 
payments due to a provider for services furnished to Medicaid 
beneficiaries is transferred to a third party.
    The fact that the only types of transactions that are explicitly 
excepted by the statute are assignment-like transactions that involve 
the transfer to a third party of either a provider's right to submit 
claims directly to the State or to receive all payments otherwise due a 
provider for services furnished supports our interpretation that the 
scope of the statutory prohibition extends only to payments to a third 
party that involve similar types of arrangements. By contrast, partial 
deductions from Medicaid payments requested by a provider to make 
separate payment to a third party on behalf of the provider for 
benefits customary for employees does not involve third parties 
receiving direct payment from the State for care or services provided 
to Medicaid beneficiaries. Nor does this arrangement allow such third 
parties to pursue independent claims against the State for Medicaid 
payment.
    The legislative history of section 1902(a)(32) of the Act also 
supports our conclusion that the statutory text is best read as an 
anti-assignment prohibition. When Congress adopted the original version 
of this statute in 1972, it was focused on the practice of factoring--a 
practice which often led to the submission of inflated or false claims, 
raising concerns that the factoring industry was a breeding ground for 
Medicaid fraud.\5\ When Congress amended this provision in 1977, it 
reiterated that it understood the provision simply as a response to and 
an attempt to prevent factoring. Indeed, in 1977, Congress amended the 
anti-reassignment provision to close what it perceived to be a loophole 
that factoring companies were exploiting.\6\ This legislative history 
supports our proposed interpretation of the statutory prohibition as 
extending only to assignments and assignment-like arrangements that 
involve a potential for the type of abuse that the statute was intended 
to prevent.
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    \5\ See, for example, H.R. REP. NO. 92-231, at 104 (1972), 
reprinted in 1972 U.S.C.C.A.N. 4989, 5090; H.R. REP. NO. 92-231, at 
205, reprinted in 1972 U.S.C.C.A.N. at 5090; S. REP. NO. 92-1230, at 
204 S. REP. NO. 92-1230, at 204 (1972); Professional Factoring 
Service Association v. Mathews, 422 F. Supp. 250, 251-52 (S.D.N.Y. 
1976).
    \6\ See, for example, H. REP. NO. 95-393(II), at 43, reprinted 
in 1977 U.S.C.C.A.N. at 3045; H. REP. NO. 95-393(II), at 46, 
reprinted in 1977 U.S.C.C.A.N. at 3048; H. REP. NO. 95-393(II), at 
48-49 (1977), reprinted in 1977 U.S.C.C.A.N. 3039, 3051; S. REP. NO. 
95-453, at 6-8 (1977).
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    For classes of practitioners for whom the State's Medicaid program 
is the only or primary payer, the ability of the State to ensure a 
stable and qualified workforce may be enhanced by the ability to deduct 
from Medicaid payments at the request or with the consent of a provider 
to make separate payment to a third party on behalf of the provider. 
Deductions for these purposes

[[Page 29678]]

are an efficient and effective method for ensuring that the workforce 
has provisions for basic needs and is adequately trained for their 
functions as health care professionals, thus ensuring that 
beneficiaries have access to such practitioners and higher quality 
services. Requiring practitioner consent for such deductions ensures 
that Medicaid provider payments are treated appropriately, and in a 
manner consistent with the wishes of the practitioner, for purposes of 
receiving benefits such as health insurance, skills training, and other 
benefits customary for employees.
    Although we proposed that these deduction practices fall outside 
the scope of what the statute prohibits, we stated in the 2021 proposed 
rule that we consider it important to document the flexibility in 
regulation to ensure confidence in the provider community, particularly 
for front line workers during the Coronavirus Disease 2019 (COVID-19) 
pandemic. Within broad Federal Medicaid law and regulation, we have 
long sought to ensure maximum State flexibility to design State-
specific payment methodologies that help ensure a strong, committed, 
and well-trained workforce. Currently, certain categories of Medicaid 
covered services, for which Medicaid is a primary payer, such as home 
and personal care services, suffer from especially high rates of 
turnover and low levels of participation in Medicaid which negatively 
impact access to and quality of providers available to Medicaid 
beneficiaries.\7\ These issues often result in higher rates of 
institutional stays for beneficiaries. We also noted that the proposed 
rule would support our previous efforts to strengthen the home care 
workforce by specifying what actions are permitted to help foster a 
stable and high-performing workforce.\8\ As proposed, under the 
amendment to Sec.  447.10, State Medicaid programs would be permitted, 
as authorized under State law and with the consent of the individual 
practitioner, to deduct from the practitioner's payment to pay third 
parties for health and welfare benefit contributions, training costs, 
and other benefits customary for employees.
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    \7\ Kim J. (2020), Occupational Credentials and Job Qualities of 
Direct Care Workers: Implications for Labor Shortages. Journal of 
Labor Research, 1-18. Advance online publication. https://doi.org/10.1007/s12122-020-09312-5.
    \8\ https://www.medicaid.gov/federal-policy-guidance/downloads/cib080316.pdf.
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    For States, the third-party payment arrangements authorized by the 
provisions in the proposed rule would be optional; States that choose 
to implement them can use existing administrative processes to make 
deductions for certain benefits on behalf of the individual 
practitioner and with consent of the practitioner, from a 
practitioner's Medicaid payment. For practitioners, we stated that the 
proposed rule would enhance the ability of the practitioners, 
regardless of their employment arrangement, to perform their functions 
as health care professionals, and thus support beneficiary access to 
quality home care. The Medicaid program, at both the State and Federal 
levels, has a strong interest in ensuring the development and 
maintenance of a committed, well-trained workforce.
    With the majority of LTSS expenditures spent on HCBS, rather than 
institutional services, the importance of a strong home care workforce 
in Medicaid cannot be understated. HCBS provides critical services to 
millions of individuals across the county, including people with 
disabilities and older Americans. As the COVID-19 pandemic continues to 
impact health care in the United States, it is crucial that Medicaid 
beneficiaries are able to receive the home-based care they need in 
their homes and communities. Section 9817 of the American Rescue Plan 
Act of 2021 (Pub. L. 117-2) reinforces the importance of HCBS in 
Medicaid and during the COVID-19 pandemic by providing a temporary 10 
percentage point increase to the Federal medical assistance percentage 
for certain HCBS, including those delivered by home care providers. As 
we explained in the proposed rule, the flexibility permitted under the 
rule would help protect the economic security for home care providers 
as well as protect and strengthen the HCBS workforce and accelerate 
LTSS reform and innovation. Facilitating access to benefits customary 
for employees for home care providers is critically important to 
improve workforce standards. Moreover, because the majority of home 
care workers are women and people of color,\9\ permitting this type of 
payment arrangement will directly benefit those populations and address 
inequities.
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    \9\ https://www.kff.org/coronavirus-covid-19/event/march-30-web-event-unsung-heroes-the-crucial-role-and-tenuous-circumstances-of-home-health-aides-during-the-pandemic/.
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    Further, as discussed in the proposed rule, the increasing shortage 
of home care providers due to high turnover, low participation in 
Medicaid, low wages, and lack of benefits and training has 
significantly reduced access to home care services for older adults and 
people with disabilities. State Medicaid agencies can play a key role 
in increasing such access by improving workforce stability of these 
practitioners by addressing training, wages and benefits, and provider 
payment.\10\ Under the rule as proposed, State Medicaid agencies would 
be authorized to make deductions from a practitioner's Medicaid 
payment, with the consent of the individual practitioner, to pay a 
third party on behalf of the individual practitioner for benefits that 
provide the workforce with freedom to advocate for higher wages and 
career advancement, access to health insurance and necessary trainings, 
and other customary employee benefits.
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    \10\ https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf.
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    States typically have an established administrative process for 
their own employees' deductions for benefits that can also be applied 
to classes of practitioners for whom Medicaid is the only or primary 
payer. Additionally, State Medicaid agencies often perform employer-
like responsibilities without a formal relationship to a certain class 
of practitioners for whom Medicaid is the only or primary payer, such 
as home care providers or personal care assistants. Using the State's 
established administrative processes to deduct funds to pay third 
parties on behalf of the practitioner, with the consent of the 
individual practitioner, may simplify administrative functions and 
program operations for the State and provide advantages to 
practitioners. For example, a practitioner could receive continuous 
health care coverage because the State automatically deducts funds for 
health insurance premiums on behalf of the practitioner. Providing 
State Medicaid agencies with the authority to make deductions from 
Medicaid payments, with the consent of the individual practitioner, to 
make payments to a third party on behalf of the individual practitioner 
for benefits such as health insurance, skills training, and other 
benefits customary for employees will ensure many of the country's most 
vulnerable workers, who care for the country's most vulnerable 
individuals, gain or retain benefits which help them support themselves 
and their families, and subsequently benefit those individuals they 
care for.
    We noted in the 2021 proposed rule that these provisions would not 
authorize a State to claim, as a separate expenditure under its 
approved Medicaid State plan, amounts that are deducted from payments 
to individual practitioners (that is, health and welfare

[[Page 29679]]

benefit contributions, training, and similar benefits customary for 
employees). As explained in the proposed rule, should a State wish to 
recognize such costs, they would need to be included as part of the 
rate paid for the service to be eligible for Federal financial 
participation. No Federal financial participation would be available 
for such amounts apart from the Federal match available for a rate paid 
by the State for the medical assistance service. These costs also could 
not be claimed by the Medicaid agency separately as an administrative 
expense. As a result, we noted that the rule would have little to no 
impact on Federal Medicaid funding levels as the 2014 final rule is the 
status quo in light of the district court's decision in California v. 
Azar.
    As discussed in the 2014 final rule, the similar policies proposed 
in the 2021 proposed rule would not require any change in State funding 
to the extent that practitioner rates have already factored in the cost 
of benefits, skills training, and other benefits customary for 
employees. As proposed, this rule would simply ensure flexibility for 
States to pay for such costs directly on behalf of practitioners and 
ensure access to benefits, such as health insurance, skills training, 
and other benefits customary for employees. We noted that should the 
rule be finalized as proposed, there may even be cost savings resulting 
from the collective purchase of such benefits and greater workforce 
stability.
    We solicited public comments on the extent to which the payment 
arrangements that would be permitted under the 2021 proposed rule would 
benefit States and practitioners, particularly if and how a 
practitioner's access to benefits would be impacted, as well as any 
adverse impacts that may have not been anticipated. Additionally, we 
sought comments on other permissible actions based on our proposed 
statutory interpretation that might similarly simplify and streamline 
States' operations of their Medicaid State plans and payment processes.

III. Analysis of and Responses to Public Comments

    We received 32 public comments in response to 2021 proposed rule. 
The following is a summary of the comments we received and our 
responses.

A. General

    Comment: Most commenters stated support for the 2021 proposed rule. 
Commenters appreciated the flexibility provided by this rule, which 
would be optional for States to avail themselves of, and view the rule 
as a beneficial policy for States and providers. Commenters believe the 
rule aligns with the previous 2014 final rule, and will enhance and 
strengthen HCBS programs. One commenter noted that the ability of 
States to process payroll and make deductions for taxes and other 
workplace benefits for independent provider home care workers provides 
parity between independent providers and agency-employed workers for 
whom such deductions are a standard practice. Some commenters opposed 
the rule and alleged that there is no or insufficient statutory 
authority to create this regulation and raised concerns about the 
inclusion of union dues in payments that may be made to third parties.
    Response: We appreciate the support for the changes in the 2021 
proposed rule. We wish to clarify an imprecise characterization of the 
rule regarding who and what entities the rule affects and what the rule 
authorizes. As clarified in a subsequent response, individual 
practitioners affected by this rule are individual providers of 
Medicaid services whose primary source of revenue is Medicaid. The rule 
does not authorize States to process payroll or make tax deductions for 
independent providers. This rule provides State Medicaid agencies with 
the authority to make deductions from Medicaid payments, with the 
consent of the individual practitioner, to make payment to a third 
party on behalf of the individual practitioner for benefits such as 
health insurance, skills training, and other benefits customary for 
employees. We address concerns regarding statutory authority and unions 
more specifically in subsequent responses.
    Comment: One commenter supported the proposed revision to Sec.  
447.10(a) as the provision aligns with the court's ruling in California 
v. Azar and the interpretation of the statutory prohibition as 
extending only to assignments and assignment-like arrangements that 
involve a potential for factoring that the statute was intended to 
prevent.
    Response: We agree with the district court's decision and analysis 
in California v. Azar. We appreciate the comment that expressed support 
for the proposed revision to Sec.  447.10(a).
    Comment: One commenter requested CMS define the term ``individual 
practitioner'' used in the rule.
    Response: In the context of Sec.  447.10, ``individual 
practitioner'' simply refers to an individual as opposed to an entity 
or institution providing Medicaid services. Individual practitioners 
can include individuals that have a contractual employment relationship 
with the State agency. This rule pertains specifically to a class of 
practitioners who are not employees of the State, or a service agency 
that is paid by the State, such as a home health agency, but whose 
primary source of revenue is Medicaid. To make this determination, 
States may look only at revenue related to Medicaid-covered services 
furnished by the practitioner. Medicaid-covered service revenue does 
not include revenue related to unallowable facility costs, such as room 
and board or food. The proposed regulatory text, which we are 
finalizing, provides the necessary latitude for a State to determine 
whether it is acting in an employer-like role for a particular class of 
practitioners.
    Comment: One commenter requested CMS modify the regulatory language 
in Sec.  447.10(i) to explicitly include all providers of home and 
community-based services. Specifically, the commenter proposed using 
the term ``providers of Home and Community Based Services'' rather than 
``individual practitioner'' in Sec.  447.10(i).
    Response: We are maintaining the term ``individual practitioner'' 
to prevent any unintentional exclusions of the types of providers 
affected by this rule. As stated in the 2012 proposed rule, we included 
the payment reassignment provisions in the HCBS proposed rule because 
State Medicaid programs often operate as the only or primary payer for 
a class of practitioners that includes HCBS providers. While the final 
rule does apply to a large number of HCBS workers, there are other 
provider types affected as well, such as personal care services and 
home health workers.
    Comment: Several commenters offered lists of the types of benefits 
offered to practitioners affected by this rule: health insurance 
premiums, life insurance premiums, retirement plan contributions, union 
and association dues, job training (for example, CPR/first aid, 
dementia care, stress management, fall prevention, nutrition, and 
health) and education trusts. One commenter indicated that the health 
insurance premium for individual practitioners affected by this final 
rule in the State of Washington was $25, deducted monthly. A few 
commenters provided single statistics regarding the number of providers 
affected by this final rule in their area or State. One commenter 
indicated there were 26,300 providers in Alameda County in California, 
while another commenter indicated a quarter of a million providers in 
California have elected voluntary deductions, and 24 percent of 
Wyoming's small, independent

[[Page 29680]]

providers of developmental disabilities waiver services offer health 
insurance to their employees.
    Response: In the 2021 proposed rule, we sought public comments and 
data on the type and amount of benefit deductions broken down by 
benefit that may be included under Sec.  447.10(i). We appreciate the 
commenter's submission of State-specific information about the types 
and amounts of benefits available to providers. Based on the public 
comments and data received, none of the information suggested a need to 
further revise Sec.  447.10(i).

B. Statutory Authority

    Comment: Several commenters agreed with the district court's 
decision in California v. Azar, which rejected HHS's arguments in that 
case that section 1902(a)(32) of the Act expressly and unambiguously 
prohibited the agency's pre-2018 interpretation, an interpretation 
which had been set forth in the 2014 final rule, and States' related 
practices. Several commenters also agreed with CMS' analysis that the 
statutory prohibition is better viewed as an anti-reassignment 
provision that only governs assignment-like payment arrangements. 
Commenters commended CMS' quick action to issue a proposed rule to 
amend the relevant regulations under the new statutory interpretation 
described in the 2021 proposed rule.
    Response: We also agree with the district court's decision and 
analysis in California v. Azar. We appreciate the commenters' support 
of our statutory analysis described in the 2021 proposed rule and 
recognition of the agency's swift action in response to the district 
court's decision.
    Comment: Nearly every commenter opposed to the rule cited a lack of 
CMS authority to add the Sec.  447.10(i) language to the regulatory 
text under part 447. Those commenters stated that the language in 
section 1902(a)(32) of the Act both prohibited these types of 
deductions from Medicaid payments, and did not have ambiguity to allow 
us to interpret the statute differently than the way we interpreted it 
in the 2019 final rule. Most asserted that the principle of direct 
payments that begins section 1902(a)(32) of the Act does not leave room 
for interpretations that permit payment deductions outside of the 
subsequent enumerated exceptions. Some commenters stated that the 2021 
proposed rule contradicted some of the agency's own prior 
interpretations of the statute, with one citing correspondence with a 
State seeking to formally permit such practices.
    Response: Federal administrative agencies generally have authority 
from Congress to regulate certain activities. An agency's authority 
often derives from specific statutory directives, which the agency is 
charged with interpreting. The Supreme Court has long noted Congress's 
delegation of ``extremely broad regulatory authority to the Secretary 
in the Medicaid area.'' \11\ Here, we are relying on our interpretation 
that section 1902(a)(32) of the Act does not prohibit payments made by 
the State Medicaid program for certain benefits on behalf of individual 
Medicaid practitioners whose primary source of revenue is the State 
Medicaid program, which we discuss in subsequent responses. From there, 
we are utilizing our general rulemaking authority at section 1102 of 
the Act, which authorizes the agency to publish regulations as 
necessary for the efficient function of, in relevant part, the Medicaid 
program. Ensuring that individual practitioners whose primary source of 
revenue is the State Medicaid program have the training and benefits 
necessary to remain in the workforce and to continue furnishing quality 
services, particularly to some of Medicaid's most vulnerable 
beneficiaries, is necessary for the Medicaid program's efficient 
operation, especially as more and more needy beneficiaries choose to 
receive care in their homes.\12\
---------------------------------------------------------------------------

    \11\ See, for example, Wisconsin Dep't of Health and Family 
Servs. v. Blumer, 534 U.S. 473, 496, n. 13 (2002) (collecting 
authorities).
    \12\ See, for example, Wisconsin Dept. of Health and Family 
Servs., 534 U.S. at 496, n. 13.
---------------------------------------------------------------------------

    Agencies are not bound by their prior interpretations of a 
statutory provision and may change their minds. Indeed, the Supreme 
Court has indicated that ``an initial agency interpretation is not 
instantly carved in stone. On the contrary, the agency . . . must 
consider varying interpretations and the wisdom of its policy on a 
continuing basis,'' \13\ and ``an administrative agency is not 
disqualified from changing its mind.'' \14\
---------------------------------------------------------------------------

    \13\ Nat'l Cable & Telecomms. Ass'n v. Brand X internet Servs., 
545 U.S. 967, 981 (2005) (quoting Chevron U.S.A. Inc. v. Nat. Res. 
Def. Council, Inc., 467 U.S. 837, 863-64 (1984)).
    \14\ NLRB v. Local 103, Int'l Ass'n of Bridge Workers, 434 U.S. 
335, 351 (1978).
---------------------------------------------------------------------------

    In the 2021 proposed rule, and in adherence to the order of the 
district court in California v. Azar to revisit the statutory question, 
we reviewed the statute anew, focusing on the language of the statute 
itself and the issues Congress sought to address as indicated by the 
legislative history. From this analysis, we determined that the 
payments to third parties addressed in this rulemaking fall outside of 
what is covered by the statute. Notably, when we first enacted this 
policy as an exception in 2014, some States were already making the 
types of deductions and payments expressly authorized under that 2014 
exception, based on a belief that it was permitted under the statute. 
While we did initially raise concerns with a State about whether 
deductions it was making from practitioner payments were in line with 
the statute, it was not until the 2012 proposed and 2014 final rules 
that we chose to use rulemaking to address these payment deductions 
under the statute. We concluded that the statute did not seek to limit 
administrative efficiency for a class of practitioners for which the 
Medicaid program is the primary source of revenue. In the present rule, 
we merely proposed, and are now finalizing, a different approach to the 
foundational principle we discerned from the intent of the statute, and 
from which our only deviation was in the 2019 final rule.
    Comment: Some commenters suggested that this rulemaking is not the 
result of new evidence, but rather political motivations, citing the 
change in administration since CMS finalized the 2019 final rule.
    Response: The cause of the change was our thorough statutory 
analysis conducted in compliance with a court order, and not the result 
of political interests. In California v. Azar, the court vacated the 
2019 final rule and remanded to HHS for further consideration of the 
appropriate interpretation of the statute. Upon our re-examination of 
the statute, as well as consideration of the court's analysis that 
resulted in the remand, we determined that a wholly new statutory 
interpretation was appropriate and correct.
    Comment: Many commenters agreed with CMS' conclusion that the 
purpose of section 1902(a)(32) of the Act was to prohibit factoring and 
that it extends only to assignments and assignment-like arrangements 
that involve a potential for the type of abuse that the statute was 
intended to prevent. One commenter stated that section 1902(a)(32) of 
the Act is not an unbounded prohibition on all third-party payments. 
Another commenter indicated that a provision of a statute should be 
understood in the context of the whole statute, and not read in 
isolation, citing King v. St. Vincent's Hosp., 502 U.S. 215, 221 (1991) 
(referencing ``the cardinal rule that a statute is to be read as a 
whole, since the meaning of statutory language, plain or not, depends 
on context''). The commenter stated that, in reading the statute in its 
entirety, the prohibition of ``payments'' prohibits assignments of

[[Page 29681]]

the right to payment and the words ``or otherwise'' refers to 
assignments in which claims for payment from individuals other than 
providers or agencies would occur. A third commenter stated that 
statutory interpretation canons of noscitur a sociis (that is, ``a word 
is known by the company it keeps'') and ejusdem generis (which limits 
general terms that follow specific ones to matters similar to those 
specified) supported CMS' conclusions; therefore, payment deductions, 
including partial deductions, are not exceptions to the anti-assignment 
provision and fall outside of the scope of what the statute prohibits.
    Response: We agree that section 1902(a)(32) of the Act was intended 
by Congress to prohibit factoring-type arrangements. For the reasons 
explained in the 2021 proposed rule and in our response to the next set 
of comments about the ``or otherwise'' language, we agree that the 
provision is not an unbounded prohibition on all third-party payments, 
but instead a prohibition that only extends to assignments and 
assignment-like arrangements that involve a potential for the type of 
abuse that the statute was intended to prevent. We also agree that both 
looking at the statute as a whole and applying the ejusdem generis 
canon of statutory construction support our conclusion that section 
1902(a)(32) of the Act does not unambiguously prohibit all third-party 
payment arrangements that are not explicitly excepted by the statute, 
and that the canon noscitur a sociis may apply as well.
    Comment: Some opposing commenters stated the statute was clearly 
drafted in a way to end all payments to third parties, other than in 
the specific exceptions, with one pointing to the comma before ``under 
an assignment or power of attorney or otherwise,'' as evidence that 
those terms are non-essential rather than limiting. Two commenters 
closely scrutinized CMS' assessment of the meaning of ``or otherwise'' 
in the Act, disagreeing with our conclusion and the associated change 
to Sec.  447.10(a). Both stated the phrase is broadly inclusive, as 
supported by some cited case law, and therefore CMS' more narrow 
interpretation was incorrect. One commenter noted CMS' use of the 
principle of ejusdem generis did not apply because of the broad meaning 
of the phrase in question. One commenter stated if a court were to 
review our interpretation, the court would not find in our favor.
    Response: We do not agree with these commenters. The Medicaid 
statute at section 1902(a)(32) contains no clear prohibition on all 
non-excepted third-party payments as some commenters suggest. Viewing 
these commenters' statements in the most favorable light, the statutory 
language is, at best, ambiguous about whether such payments are 
authorized. When considering the language of the statute as a whole, 
along with its legislative history and programmatic purpose, we have 
concluded that the best interpretation of the statute is that it does 
not bar payments to third parties for health and welfare benefits, 
training, and other benefits customary for employees for certain 
categories of individual practitioners who consent to such payments on 
their behalf. We believe the best reading of the anti-assignment 
statutory text suggests that the States' payment arrangements with home 
care workers at issue in this rulemaking are authorized. While 
consideration of the legislative history is not strictly necessary to 
reach our conclusion, the legislative history further supports our 
narrow reading of the anti-reassignment provision.\15\ More 
specifically, the legislative history of section 1902(a)(32) of the Act 
supports our conclusion that the statutory text is best read as an 
anti-assignment prohibition and provides important context to show that 
that the opposing comments misunderstand the scope of section 
1902(a)(32) of the Act. The legislative history shows that Congress 
acted specifically to address a problematic circumstance, factoring, 
and then to close a loophole it had missed when first enacting section 
1902(a)(32).
---------------------------------------------------------------------------

    \15\ See Samantar v. Yousuf, 560 U.S. 305, 316 n.9, 130 S.Ct. 
2278, 176 L.Ed.2d 1047 (2010).
---------------------------------------------------------------------------

    The commenters' statement that ``or otherwise'' is broadly 
inclusive would mean Congress had intended their statutory restriction 
to apply almost unbounded, a position not supported by the legislative 
history of the original statutory provision nor the reasons for the 
expansion of the statutory language to include ``an assignment or power 
of attorney or otherwise.'' Because ``or otherwise'' is non-specific, 
it is by its very nature ambiguous. Where statutory language is 
ambiguous, we must arrive at a reasonable interpretation of the statute 
by applying general canons of statutory construction and examining the 
legislative history of the provision. Under the canon of ejusdem 
generis, when general words follow specific words in a statutory 
enumeration, ``the general words are construed to embrace only objects 
similar in nature to those objects enumerated by the preceding specific 
words.'' \16\ We believe that approach is appropriately applied to the 
list structure of this statutory language. Accordingly, the language 
``or otherwise'' is best read as referencing payments made under 
arrangements that are similar to an ``assignment'' and a ``power of 
attorney'' such that the reach of the prohibition under section 
1902(a)(32) of the Act does not extend to payment arrangements that are 
wholly distinct from such types of arrangements. To interpret ``or 
otherwise'' as an all-encompassing term would make meaningless the 
illustrative examples Congress listed before it.
---------------------------------------------------------------------------

    \16\ Sutherland Statutory Construction section 47:17 (1991); 
Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (2001).
---------------------------------------------------------------------------

    This interpretation is further supported by the legislative history 
of section 1902(a)(32) of the Act discussed previously in this 
response. As we explained in the 2021 proposed rule, when Congress 
adopted the original version of this provision in 1972, it was focused 
on the practice of factoring, based on concerns that the factoring 
industry was a breeding ground for Medicaid fraud.\17\ Then in 1977, 
when Congress amended the anti-reassignment provision, it did so 
specifically to close what it perceived to be a loophole that factoring 
companies were exploiting.\18\ The legislative history demonstrates 
that the statutory language was tailored to address certain issues, 
rather than the phrase ``under an assignment or power of attorney or 
otherwise'' being added as a nonessential descriptor. To interpret the 
scope of the statute as extending beyond that goal is to make it 
overburdensome on the very providers whose payments Congress sought to 
protect.
---------------------------------------------------------------------------

    \17\ See, for example, H.R. REP. NO. 92-231, at 104 (1972), 
reprinted in 1972 U.S.C.C.A.N. 4989, 5090; H.R. REP. NO. 92-231, at 
205, reprinted in 1972 U.S.C.C.A.N. at 5090; S. REP. NO. 92-1230, at 
204 S. REP. NO. 92-1230, at 204 (1972); Professional Factoring 
Service Association v. Mathews, 422 F. Supp. 250, 251-52 (S.D.N.Y. 
1976).
    \18\ See, for example, H. REP. NO. 95-393(II), at 43, reprinted 
in 1977 U.S.C.C.A.N. at 3045; H. REP. NO. 95-393(II), at 46, 
reprinted in 1977 U.S.C.C.A.N. at 3048; H. REP. NO. 95-393(II), at 
48-49 (1977), reprinted in 1977 U.S.C.C.A.N. 3039, 3051; S. REP. NO. 
95-453, at 6-8 (1977).
---------------------------------------------------------------------------

    Finally, we note that our interpretation is largely consistent with 
the court's analysis in California v. Azar. No court has held 
otherwise.
    Comment: One commenter, citing a desire for environments where 
practitioners can thrive, agreed with CMS' reinterpretation of the 
scope of section 1902(a)(32) of the Act as long as a practitioner 
voluntarily consented to such payments to third parties on the 
practitioner's behalf, as described in the 2021 proposed rule under 
Sec.  447.10.

[[Page 29682]]

    Response: We acknowledge the importance of practitioner consent in 
Sec.  447.10(i), which we are finalizing as proposed.
    Comment: Several opposed commenters referred to the new language in 
Sec.  447.10(i) as an additional exception to the direct payment 
provision in the Act and its specific enumerated exceptions. They 
pointed to those specific exceptions as evidence that there was not 
room or authority to make an additional exception, a principle with 
which CMS agreed in our 2019 final rule. One commenter acknowledged 
that the new provision is not an exception, but functionally is the 
same.
    Response: The final rule does not create a new exception under 
section 1902(a)(32) of the Act. In the 2021 proposed rule, we 
reinterpreted the scope of the statute and concluded that these 
deductions from Medicaid payments as authorized by the individual 
practitioner fell outside of that scope. As discussed in Section II.A., 
the intent of the statutory provision was to prohibit factoring 
arrangements. The purpose was not to preclude a Medicaid program that 
is functioning as the practitioner's primary source of revenue from 
fulfilling the basic employer-like responsibilities that are associated 
with that role, a scenario that was not contemplated by section 
1902(a)(32) of the Act and was outside of the intended scope of the 
statutory prohibition. The statute refers to assignments of claims and 
the exceptions describe permissible assignments of claims. The payment 
arrangements authorized under this rule do not involve an assignment of 
a claim to a third party, and are neither covered by the statute nor 
are they sufficiently similar to the enumerated exceptions as to be 
considered one as well.
    Comment: A few of the commenters who disagreed with the 2021 
proposed rule cited various court decisions to support the assertion 
that the authorization by the provider to make third party payment 
deductions is necessarily a form of assignment and therefore covered by 
the anti-assignment language of the Act.
    Response: It is true that some case law exists indicating some 
payment deduction scenarios may constitute legal assignment. However, 
the case law is varied and suggests that the wording and intent of 
contracts is pertinent to the question of whether the ``assignment'' 
has transferred a right, the form of assignment relevant here.\19\ We 
have found numerous decisions that make clear that, in many 
circumstances, a person may consent to have an amount deducted from 
their pay without conferring a right through an assignment.\20\ 
Furthermore, the statute specifically makes impermissible the 
assignment of claims (and through such assignment, the right to collect 
on those claims). Even if the deduction of benefit payments could, in 
certain circumstances, be labeled an ``assignment'' under some case law 
definitions, such an assignment would not confer the right to the claim 
and therefore is outside the statute's scope. Our interpretation does 
not create a new type of assignment or exception, but instead creates 
an avenue for the same type of payment arrangements enjoyed by other 
practitioners, but for those without a formal employment relationship. 
When re-examining the statute and the problems Congress sought to 
address when expanding the language of its direct payment provision, it 
is clear that the focus was on instances where providers assigned 
claims or created workarounds to do so. Assigning the right to collect 
on a claim is not the same as granting an authorization to deduct for 
benefits, and the statute was not intended to preclude State agencies 
from providing their non-employee providers benefits of their 
employment-like relationships. Therefore, it is reasonable to conclude 
that in this context, assignment refers to the assignment of a claim 
for a whole Medicaid payment.
---------------------------------------------------------------------------

    \19\ See Restatement (Second) of Contracts section 324 (1981) 
(``It is essential to an assignment of a right that the obligee 
manifest an intention to transfer the right to another person 
without further action or manifestation of intention by the 
obligee.'').
    \20\ See, for example, California v. Azar, 501 F. Supp. 3d 830, 
840 n.8 (N.D. Cal. 2020) (the argument ``that authorizing deductions 
for union dues is an `assignment' (or something very close to an 
assignment) because of the way union dues are described in other 
contexts--is barely worth mentioning. Unlike the types of 
assignments involved in factoring and the statute's exceptions, 
unions cannot step into the shoes of the worker and pursue 
independent claims against the State for Medicaid reimbursement 
based on the worker's decision to authorize deductions for union 
dues. The fact that union dues are sometimes referred to as 
`assignments' in a few judicial opinions and Federal statutes in 
distinct contexts does not mean that they are `assignments' within 
the meaning of the anti-reassignment provision and in the context of 
assigning the right to submit a claim for reimbursement of health 
services.''); see also, for example, United Broth. of Carpenters and 
Joiners of Am. v. Ohio Carpenters Health and Welfare Fund, 926 F.2d 
550, 553, 557 (6th Cir. 1991) (finding that a form that had 
```authorized and directed [their employers] to pay and remit to [a 
union]' dues deducted from the payroll'' when ``properly construed, 
is the employee's consent to the employer's role as agent for the 
union in the collection of dues,'' but ``is not a true common law 
assignment, since it creates no rights in any assignee.''); Dialysis 
Newco, Inc. v. Cmty. Health Sys. Group Plan, 938 F.3d 246, 253-255 
(5th Cir. 2019) (explaining that ``a direct-payment authorization 
and a prohibition against the assignment of benefits are distinct 
concepts''); Brown v. Blue Cross Blue Shield of Tenn., Inc., No. No. 
1:14-CV-00223, 2015 WL 3622338, at *3-*7 (E.D. Tenn. June 9, 2015) 
(collecting cases and noting that ``[t]here is no consensus among 
the Federal courts regarding whether language providing for direct 
payment of benefits constitutes an assignment for purposes of 
ERISA,'' but explaining that ``[t]he cases holding that forms 
providing for direct payment do not constitute an assignment have 
the better end of the argument.'')
---------------------------------------------------------------------------

    Comment: Several commenters opposed to the rule pointed out the 
distinction CMS drew between an assignment of a full payment claim and 
a partial payment deduction. They indicated the distinction was 
irrelevant, and a couple of commenters indicated that such a 
distinction could give rise to scenarios in which Medicaid providers 
would see their payments reduced by any amount regardless of 
surrounding circumstances so long as it was a portion of the payment.
    Response: As previously discussed, we concluded that the intent of 
the statute is to address scenarios of claim assignment that had given 
rise to fraud, particularly through factoring, and therefore the 
distinction between partial payment deductions and assignment of the 
right to the full payment is relevant. However, we clarify that the 
true test is not whether the payment to the third party is partial or 
full, but instead whether the arrangement is the transfer of the rights 
to a claim versus the redirection of monies due to the practitioner to 
directly cover costs that would otherwise be paid by the practitioner, 
with the practitioner's consent. We also note that this rule very 
narrowly applies only to individual practitioners for whom the Medicaid 
program is the primary source of revenue and have provided consent for 
such deductions. In developing this rule, we sought to both describe 
and address a specific arrangement that we are confident was not 
intended to be curtailed by the language of the Act. We reiterate that 
this rule would simply ensure flexibility for States to pay for such 
costs directly on behalf of practitioners and ensure access to 
benefits, such as health insurance, skills training, and other benefits 
customary for employees.

C. Consent Requirement

    Comment: Several commenters opposed to the 2021 proposed rule did 
not agree that the consent requirement included in the rule, which the 
prior similar regulation did not make explicit, would be sufficient to 
overcome the perceived risks of allowing for deductions for benefits 
directly from a provider's payment. The risks cited by

[[Page 29683]]

commenters centered mainly around examples of unions that had engaged 
in fraudulent or questionable practices, such as high-pressure 
enrollment meetings, when obtaining or using dues. One commenter cited 
a concern that an individual practitioner might not know what he or she 
is consenting to, for example if English was not the practitioner's 
first language. One commenter requested that the voluntary consent 
requirement include a requirement that the consent be communicated 
directly to the State agency.
    Response: We make every effort to ensure we do not create avenues 
for fraud, and to protect against instances where those might occur. In 
the time between our 2014 final rule, which permitted these types of 
payment deductions as an exception to the Act, and the 2021 proposed 
rule, there have been two noteworthy cases regarding payment 
deductions, specifically in the context of union dues. The First 
Amendment principles regarding consent for the deduction of union dues 
outlined by the Supreme Court in Harris v. Quinn, 573 U.S. 616 (2014), 
and Janus v. Am. Fed'n of State, Cnty., & Mun. Emps., Council 31, 138 
S. Ct. 2448 (2018), are binding on States regardless of any rules we 
may issue, and we are mindful of the fact that these rules must be 
consistent with those decisions. Furthermore, for clarity, and because 
this rule applies to deductions for a variety of benefits, not simply 
union dues, we believed it was important to include an explicit 
voluntary consent requirement in the regulatory text (and not limited 
to the context of union dues) to ensure that Medicaid payments are 
handled in accordance with the wishes of the provider to which the 
Medicaid payments are owed, both for public policy reasons and to 
address any possible First Amendment concerns which may arise both 
within and outside of the union dues context. The existence of bad 
actors governed under other laws and regulated by other agencies should 
not preclude the creation of our policy intended to benefit providers. 
Many workplaces allow employees to deduct union dues from their 
paychecks, and the union practices cited by some commenters do not 
justify distinguishing this aspect of an employment-like relationship 
from any other benefits deduction. In addition, while we appreciate the 
desire to guard against erroneous or involuntary deductions, we 
determined it is appropriate to defer to States regarding which methods 
of obtaining and documenting consent are sufficient or suitable, and to 
rely on States to ensure third parties are not furnishing fraudulent 
practitioner consent for deductions. States and third parties are 
expected to adhere to the applicable laws regarding contractual 
capacity to ensure practitioners with limited English proficiency are 
providing informed, voluntary consent.
    Comment: Many commenters advised CMS against requiring explicit 
written provider consent for deductions out of concern that codifying a 
requirement for written consent could unintentionally result in a 
conflict with State law and could be unduly burdensome on State 
programs and workers within those programs. One commenter urged CMS not 
to be too prescriptive about the format of consent to avoid conflicting 
with existing laws and employment contracts. Another commenter 
explained that some State laws and policies regarding consent for 
deductions require a ministerial form while other States include 
consent as a component to a contractual agreement among other methods 
used to collect consent: Electronic, online, voice-recorded assent, or 
traditional penned signatures. Commenters recommended that CMS defer to 
State Medicaid agencies' determination on how to obtain consent from 
providers affected by this rule. One commenter supported also deferring 
to State Medicaid agencies' determinations on how to implement provider 
payment deductions consistent with State law and regulations for State 
employee benefit deductions, as indicated in the 2021 proposed rule. A 
few commenters opposed to the rule overall requested that, should CMS 
nevertheless proceed with its policy, the consent requirement include a 
written requirement and also include CMS authorization.
    Response: Based on some of the concerns raised by commenters as 
well as our original concerns that codifying a requirement for written 
consent could unintentionally result in a conflict with State law, we 
have decided to not impose a Federal regulatory requirement for 
explicit written provider consent for deductions or to insist that 
States submit their proposed consent forms to us for review. While we 
appreciate the desire of some commenters to have more rigorous 
safeguards, we are confident the inclusion of a consent requirement, 
while allowing States flexibility for compliance with that requirement, 
creates the right balance between addressing problematic situations and 
respecting the rights of State agencies to administer their State 
Medicaid plans.
    Comment: Two commenters advised CMS against requiring consent only 
for specific types of deductions, rather than all types of benefits, 
for which Medicaid payment amounts may be deducted and paid to a third 
party, in the regulatory text. The commenters indicated this additional 
requirement is unnecessary and already addressed by State law or 
employee contracts.
    Response: Based on the concerns raised by commenters, as well as 
our original concerns that rulemaking may not accurately capture all of 
the employee benefits practitioners believe should require consent, and 
our interest in ensuring that Medicaid payments are handled in 
accordance with the wishes of the provider to whom such payments are 
owed, we have decided not to limit the practitioner consent requirement 
to only specific types of deductions. Thus, we are finalizing the rule 
as proposed, to require consent for all deductions for benefits that 
may be deducted and paid to a third party under Sec.  447.10(i).

D. Impact to Stakeholders

    Comment: The commenters opposed to the rule largely disagreed with 
CMS about the benefits this rule would have for individual 
practitioners. A couple of commenters cited the lack of availability of 
varied trainings or benefits for which an individual practitioner may 
wish to enroll. Some referenced the 2019 final rule which stated that 
the lack of this flexibility did not preclude a practitioner from being 
able to participate in such benefits, and instead just changed the 
process. One commenter noted that the rule does not prescribe any sort 
of standard for the benefits for which payment deductions may be made. 
A few commenters also cited a lack of meaningful evidence that 
providers in fact benefit from such practices.
    Response: We reaffirm our belief that this final rule will enhance 
the ability of the affected practitioners, regardless of their 
employment arrangements, to perform their functions as health care 
professionals and thus support beneficiary access to quality home care. 
While the types and availability of trainings and benefits varies 
across States, we want to encourage access to benefits for individuals 
effectively acting as employees, such as health insurance, skills 
training, and other benefits customary for employees. It is true that 
this policy applies to a narrow class of providers for one specific 
procedural step of enrolling in benefits. However, it addresses a 
situation where individuals with an employment-like relationship with 
the State agency cannot currently benefit from that

[[Page 29684]]

relationship in the same manner an actual employee can. While this 
policy has evolved over time, the consistent theme remains that there 
are States that wish to offer individual practitioners this type of 
flexibility, enough to initiate litigation in the aforementioned 
California v. Azar case in response to the rescission of the policy in 
2019. Furthermore, some States had already implemented payment 
deduction arrangements before we issued the 2014 final rule. With the 
appropriate safeguards in place, despite commenters' assertions of only 
a minimal benefit, the policy nevertheless responds to a known demand.
    Comment: Some commenters expressed concern that this policy would 
in fact harm individual practitioners. They stated that the benefits 
paid by the State on behalf of the practitioner would result in a 
reduced payment to that practitioner, and concluded this could take 
money away from providing services to the needy. They also cited 
concerns about Medicaid monies being taken from providers 
inappropriately.
    Response: We want to ensure that providers receive the monies they 
are owed for the provision of Medicaid services to beneficiaries. That 
is why we proposed, and are now finalizing, a voluntary consent 
requirement, as we wanted to ensure that individual practitioners' 
payments are handled in accordance with their wishes. As such, under 
this rule, the only deductions that may be made from Medicaid payments 
due an individual practitioner are those that are specifically 
authorized by that practitioner to pay for certain benefits on their 
behalf. Furthermore, permitting State Medicaid agencies to deduct from 
the practitioner's payment, at the direction of that practitioner, does 
not impact the services provided to a beneficiary any more than if the 
practitioner was paying these third-party costs on their own. We note 
that State Medicaid agencies have the option to develop State plan 
payment rates that account for costs related to benefits customary for 
employees. Moreover, we believe that this policy may in fact benefit 
beneficiaries receiving services from practitioners by improving and 
stabilizing the workforce.
    Comment: Several commenters advised CMS against including a defined 
list of allowable benefits or excluded benefits within the regulatory 
text. Commenters indicated that providers have access to a wide variety 
of benefits, depending on the State the provider works in. Commenters 
also indicated that benefits continue to expand and regulatory text 
that codifies the list of benefits could possibly conflict with 
available benefits and interfere with the efficiency of State Medicaid 
programs by creating barriers for States and providers. One commenter 
indicated that a final rule could provide examples of certain purposes 
and benefits for which payroll deductions may be utilized, but such a 
list should be illustrative and neither definitive nor limiting.
    Response: We share the concerns raised by commenters that such a 
list may not accurately reflect all employee benefits available to 
practitioners and would need frequent updates through the rulemaking 
process to remain relevant. Thus, we have decided not to include a 
defined list of allowable benefits or excluded benefits within the 
regulatory text or for illustrative purposes in the final rule, and 
States that choose to make deductions under this regulation will have 
flexibility to determine the types of benefits that are eligible for 
payment via such deductions.

E. Impact to States

    Comment: Many commenters indicated that States and local 
governments have been making third party payments for benefits (that 
is, health, dental, and vision insurance, training, union dues) on 
behalf of individual practitioners for decades. Many commenters stated 
that California first began this process in the 1990s, Washington in 
2002, Illinois in 2003, and Oregon in 2011. Many commenters emphasized 
that the scope and form of third-party payments on behalf of individual 
practitioners is a matter of State law or employee contracts and 
advised CMS not to regulate this area in the final rule to avoid 
conflicting with existing laws and contracts.
    Response: We reiterate that this rule would simply reassure States 
of the flexibility to pay for certain benefits directly on behalf of 
certain practitioners, as our interpretation of the statute is that 
these payment arrangements are outside the scope of the statutory 
prohibition.
    Comment: Two commenters raised concerns about a State's 
administrative burden and additional administrative costs for 
implementing the 2021 proposed rule. Specifically, one commenter urged 
CMS to reconsider the existing requirements and administrative burden 
faced by State Medicaid Agencies because CMS stated in the 2021 
proposed rule that the time, effort, and financial resources necessary 
for States to exercise this optional flexibility would be incurred by 
the State during the normal course of their activities. Another 
commenter indicated the 2021 proposed rule may have unintended 
consequences by not allowing States to claim additional administrative 
costs to implement this optional rule, such as reducing payment rates 
to cover new State costs of implementation for the singular subset of 
direct care workers.
    Response: We wish to clarify our intent regarding State program 
administrative costs incurred by the State when implementing the 2021 
proposed rule. To expend Federal, State, and local resources in the 
most cost-effective manner possible, States may not claim expenditures 
for the costs of allowable administrative activities that should have 
been reimbursed as direct medical services, as this would result in 
duplicative claiming. States that wish to account for the cost of 
benefits, skills training, and other benefits customary for employees 
in their expenditures need to include these costs as part of the rate 
paid for the service to be eligible for Federal financial 
participation.
    States that wish to account for any additional State program 
administrative costs incurred by the State when implementing the 2021 
proposed rule, such as the cost of payment system updates, must claim 
such administrative costs in accordance with Federal requirements. In 
accordance with section 1903(a)(7) of the Act and implementing 
regulations at Sec. Sec.  430.1 and 431.15, activities must be found 
necessary by the Secretary for the proper and efficient administration 
of the plan. Administrative costs must also be reasonable, allowable, 
and allocable in compliance with 2 CFR part 200 and 45 CFR 75.402 
through 75.411. States are also required to maintain a Public 
Assistance Cost Allocation Plan, as required by Sec.  433.34 and 
subpart E of 45 CFR part 95.
    Comment: One commenter requested CMS revise the rule to provide 
clarity about a Financial Management Services (FMS) entity's authority 
to make mandatory deductions from wages that are required by law to be 
made by an employer, such as deductions for Federal and State taxes, 
without requiring the provider's consent.
    Response: This rule does not impact a State's ability to perform 
FMS or secure FMS through a vendor arrangement provided under sections 
1915(c), 1915(i), 1915(j), 1915(k), and 1115 of the Act. Rather, this 
rule pertains to payments for State plan services under section 1905(a) 
of the Act. Section 447.10(i), as finalized, explicitly authorizes 
States to make payments to third parties to benefit individual 
practitioners by ensuring

[[Page 29685]]

health and welfare benefits, training, and other benefits customary for 
employees, if the practitioner consents to such payments to third 
parties on the practitioner's behalf. These payment deductions are 
distinct from mandatory payments under State and Federal law, which are 
outside the scope of this rulemaking.
    Comment: Two commenters requested CMS issue guidance on offering 
employee benefits in participant direction programs that do not have a 
union or other third party that offers benefits. Specifically, the 
commenters requested Federal guidance about how the cost of employee 
benefits should be built into an individual budget when a beneficiary 
opts to self-direct their care under HCBS.
    Response: To reiterate, this rule does not impact a State's ability 
to perform FMS or secure FMS through a vendor arrangement provided 
under sections 1915(c), 1915(i), 1915(j), 1915(k), and 1115 of the Act. 
The question of how the cost of employee benefits should be built into 
an individual budget when a beneficiary opts to self-direct their care 
under HCBS is outside the scope of this rulemaking.
    Comment: One commenter indicated that the 2021 proposed rule will 
not support the stability of HCBS without significant investment in the 
entire direct care workforce and necessary protections and oversight to 
ensure there are no further funding shortfalls.
    Response: This rulemaking is narrowly tailored to respond to recent 
litigation and interest from States in the flexibility to enter into 
the types of payment arrangements discussed in this rule. Stabilizing 
HCBS with a significant investment in the entire direct care workforce 
and providing necessary protections and oversight to ensure there are 
no further funding shortfalls is outside the scope of this rulemaking. 
We will evaluate the commenter's concerns and continue to partner with 
States, consumers and advocates, providers, and other stakeholders to 
create a sustainable, person-driven long-term support system in which 
people with disabilities and chronic conditions have choice, control, 
and access to a full array of quality services that assure optimal 
outcomes, such as independence, health, and quality of life. We expect 
that this final rule will contribute some stabilization of HCBS by 
offering States the opportunity to pay for such costs directly on 
behalf of practitioners and ensure access to benefits, such as health 
insurance, skills training, and other benefits customary for employees.
    Comment: One commenter requested CMS clarify the oversight process 
it intends to implement after finalization of the 2021 proposed rule. 
Specifically, the commenter sought clarification about if and how CMS 
will request data from States about the individual practitioners 
affected by this rule and the type and amount of third-party payments 
made on behalf of individual practitioners, if third party payments 
will be subject to Federal audit, and what documentation about these 
third-party payments that States need to maintain. The commenter also 
questioned if CMS consulted with the Internal Revenue Service regarding 
how deductions should be reported on an individual practitioner's 
income or earnings form. Lastly, the commenter questioned CMS about 
States' ability to incorporate costs related to health and welfare 
benefits, training, and other benefits customary for employees or other 
costs which are not otherwise eligible for Federal financial 
participation.
    Response: We expect States to comply with applicable Federal 
requirements. States are expected to maintain supporting documentation 
for Medicaid expenditures reported on the quarterly Form CMS-64 to 
claim Federal financial participation. In instances where the State is 
making payments to a third party on behalf of an individual 
practitioner, States are expected to maintain relevant documentation of 
these transactions, including documentation demonstrating the 
deductions are voluntary. We may conduct quarterly reviews of Medicaid 
expenditures claimed on the Form CMS-64 and associated State 
documentation to ensure State compliance with this final rule. While 
the Form CMS-64 itself would not reflect changes as a result of this 
rule, we may request documentation from a State to support its Form 
CMS-64 claims, including evidence that the consent requirement is met 
and the individual practitioner funds are being handled appropriately. 
Additionally, we may initiate additional oversight activities to ensure 
State compliance with the requirements in this final rule.
    Requirements regarding how a practitioner should report deductions 
on income and earnings forms relating to Federal and State tax 
requirements are outside the scope of this rulemaking. We would like to 
reiterate that should a State wish to recognize such costs, they would 
need to be included as part of the rate paid for the service to be 
eligible for Federal financial participation. No Federal financial 
participation would be available for such amounts apart from the 
Federal match available for a rate paid by the State for the medical 
assistance service.
    Comment: One commenter disagreed that this rule will be budget 
neutral or have a minimal economic impact that is unlikely to have an 
annual effect on the economy in excess of the $100 million threshold of 
Executive Order 12866. The commenter went on to cite various figures 
regarding the collection of union dues in some States that have 
exercised the ability to make third party payment deductions, and 
stated that the benefits to individual practitioners we cited in the 
2021 proposed rule contradict the budget neutral assessment.
    Response: The commenter's assessments assume that the 2019 rule 
remains in effect, the 2014 rule is not in effect, or both. With this 
premise, the commenter seems to suggest that the baseline for 
determining the impact of this rulemaking should not reflect the 2014 
final rule (that is, the existence of the authority previously codified 
at Sec.  447.10(g)(4)). This reasoning is incorrect. In our current 
circumstance, the court's vacatur of the 2019 rule, which the commenter 
did not acknowledge, means that the 2014 rule is now back in effect by 
operation of law, with no new round of rulemaking necessary to bring 
about this result. It is a well settled principle that ``[t]he effect 
of invalidating an agency rule is to reinstate the rule previously in 
force.'' \21\ Therefore, relative to this analytic baseline, the 
present rule, which closely mirrors the prior regulatory language under 
the 2014 final rule, but under a more appropriate statutory analysis, 
creates very little difference from the scenario where Sec.  
447.10(g)(4) is in effect. The unique feature of the present rule is 
the consent requirement, which as discussed previously, is already a 
requirement for the deduction of union dues under the First Amendment. 
As such, our proposed rule reflected our assessment that the effect, 
when compared against the present regulatory and legal landscape, is 
budget neutral.
---------------------------------------------------------------------------

    \21\ Paulsen v. Daniels, 413 F.3d 999, 1008 (9th Cir. 2005) 
(citing Action on Smoking & Health v. Civil Aeronautics Bd., 713 
F.2d 795, 797 (D.C. Cir. 1983) (per curiam)). As the district court 
noted in California v. Azar, ``vacating the agency's action simply 
preserves a status quo that has existed since at least the early 
1990[ ]s while the agency takes the time it needs to give proper 
consideration to the matter.'' 501 F. Supp. 3d at 843.
---------------------------------------------------------------------------

    However, we acknowledge that the appeal related to California v. 
Azar is still outstanding, and as such, our present circumstance is not 
guaranteed. Therefore, we have now included data in the Regulatory 
Impact Analysis section examining the impact of this

[[Page 29686]]

policy against a potential alternate scenario where the 2019 final rule 
is once again in effect.

F. Union Dues

    Comment: Nearly all the commenters who were opposed to the rule 
raised the fact that union dues are included among the benefits for 
which payments may be deducted. Many commenters pointed to and 
expressed concern about the potential for ``dues skimming,'' wherein a 
State automatically deducts union dues from payments, a concern which 
was raised in the 2019 final rule. They pointed to the cases of Harris 
v. Quinn and Janus v. AFSCME as examples of the impermissibility and 
First Amendment implications of the practice. In addition, some 
commenters provided examples of questionable or improper actions taken 
by unions in various States. Commenters indicated finalizing this rule 
would roll back protections and permit States to divert Medicaid money 
to unions and political campaigns. Some commenters identified coercive 
practices that they claim unions use despite consent requirements, such 
as ``captive audience'' pitches and a limited ability to disenroll.
    Response: We proposed and are finalizing this policy with its 
consent requirement to align with relevant case law surrounding union 
dues and consent, and to address related concerns cited in the 2019 
final rule. Even though this protection is already founded in the cited 
case law, we believed it was important to include it as a regulatory 
requirement as well to provide an additional layer of protection for 
providers specifically. We also note that regardless of whether a State 
is able to make third party payment deductions, a number of the 
commenters' concerns could still exist. For example, ``captive 
audience'' union pitches and limited disenrollment periods are outside 
the scope of this rulemaking, and HHS is not the agency that would 
address how unions use their dues once received. Facilitating a 
transfer between consenting providers and third parties does not 
affect, either positively or negatively, the practices of unions, and 
therefore those concerns do not warrant a change in this policy. This 
rule allows States to make deductions to pay for benefits such as 
health insurance, skills training, and other benefits customary for 
employees from an individual practitioner's payment, with their 
consent. We reiterate that we want to ensure providers receive the 
monies they are owed for the provision of Medicaid services to 
beneficiaries by finalizing a voluntary consent requirement. None of 
the concerns cited demonstrated a sufficient reason or evidence as to 
why the practitioners impacted by this rule should have more limited 
access to union dues deductions than those in formal employment 
relationships.
    Comment: One opposed commenter made several suggestions for how to 
address union dues should CMS choose to proceed with finalizing this 
policy. The suggestion included an opt-in requirement, multifactor 
authorization, additional notice regarding the individual's rights, an 
expiration of authorization for deductions, and open disenrollment.
    Response: The suggestions are outside the scope of this rulemaking 
or outside the authority of what HHS can regulate. To the extent we can 
address the concerns raised by commenters, our regulatory consent 
requirement appropriately balances the case law around the First 
Amendment and union dues, the concerns about bad actors, and the 
ability of States to exercise flexibility in their State Medicaid 
programs. In section VI.D., we detail the alternatives we considered, 
but did not adopt based on the feedback of commenters and our 
assessment of the most effective approach.

IV. Provisions of the Final Regulation

    After consideration of the public comments, we are finalizing as 
proposed our additional language in Sec.  447.10(a) and the new 
paragraph at Sec.  447.10(i).

V. Collection of Information Requirements

    Our August 3, 2021 (86 FR 41803) proposed rule solicited public 
comment on, among other things, the rule's ``collection of 
information'' assumptions. For the purpose of this section of the 
preamble, collection of information is defined under 5 CFR 1320.3(c) of 
OMB's implementing regulations. We received one comment addressing this 
section, urging CMS to reconsider the exempt classification should CMS 
find the amount of necessary State effort to be understated. We stated 
in the 2021 proposed rule that the time, effort, and financial 
resources necessary for States to exercise this optional flexibility 
are exempt from the requirements of the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3501 et seq.) as they would be incurred by the State 
during the normal course of their activities, and therefore should be 
deemed as a usual and customary business practice under 5 CFR 
1320.3(b)(2). That assessment remains unchanged. This rule codifies a 
policy option that exists regardless of this rule, both through our 
interpretation that this policy is beyond the scope of the statute, and 
due to the California v. Azar decision vacating the 2019 final rule. 
The consent requirement is new to the present rule, but as we are not 
establishing a specific method to obtain consent, and because consent 
is already required for union dues deductions under the First 
Amendment, our determination is that the consent requirement will 
likely be met through usual and customary business practices, and does 
not produce a measurable impact.
    We also believe that the proposed and finalized requirements have 
no impact on our currently approved State plan amendment (SPA) 
requirements and burden estimates. While CMS-64 (OMB control number: 
0938-1265) is mentioned elsewhere in this final rule, this rule has no 
impact on the form's currently approved requirements and burden 
estimates. Any effort to request documentation from a State to support 
its CMS-64 claims, including evidence that the consent requirement is 
met and the individual practitioner funds are being handled 
appropriately, would be on a case-by-case basis using non-standardized 
questions that are exempt from the PRA under 5 CFR 1320.3(h). 
Consequently, this rule does not have any collection of information 
implications that are subject to the PRA.

VI. Regulatory Impact Analysis

A. Statement of Need

    In California v. Azar, the district court vacated the 2019 final 
rule and remanded to HHS for further proceedings. Although this remand 
left broad discretion for next steps, we chose to examine the relevant 
statute anew, and determined that the prohibition in section 
1902(a)(32) of the Act is better read to be limited in its 
applicability to Medicaid payments to a third party under an 
assignment, power of attorney, or other similar arrangement. Although 
the court vacated the 2019 final rule, our current statutory 
interpretation requires this rulemaking to reclassify the policy 
previously codified as an exception at Sec.  447.10(g)(4) as instead 
describing arrangements that are beyond the scope of prohibition in 
section 1902(a)(32) of the Act. Furthermore, while we now believe these 
arrangements are beyond the scope of the statute, we nevertheless 
consider it important to document and ensure clarity and flexibility 
for certain individual practitioners. Finally, this rule provides us an 
opportunity to reinforce the important caveat that such

[[Page 29687]]

deductions may only be made with the consent of the individual 
practitioner.

B. Overall Impact

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Section 
3(f) of Executive Order 12866 defines a ``significant regulatory 
action'' as an action that is likely to result in a rule that may: (1) 
Have an annual effect on the economy of $100 million or more in any 1 
year, or adversely and materially affecting a sector of the economy, 
productivity, competition, jobs, the environment, public health or 
safety, or State, local or tribal governments or communities (also 
referred to as ``economically significant''); (2) create a serious 
inconsistency or otherwise interfering with an action taken or planned 
by another agency; (3) materially alter the budgetary impacts of 
entitlement grants, user fees, or loan programs or the rights and 
obligations of recipients thereof; or (4) raise novel legal or policy 
issues arising out of legal mandates, the President's priorities, or 
the principles set forth in the Executive Order.
    A regulatory impact analysis (RIA) must be prepared for major rules 
with economically significant effects ($100 million or more in any 1 
year). In the 2021 proposed rule, we estimated that this final rule 
would be budget neutral, but could have broader economic impact that is 
unlikely to have an annual effect on the economy more than the $100 
million threshold of Executive Order 12866. We maintain that position 
for the final rule, under the current regulatory landscape at the time 
of finalization. However, we acknowledge that an appeal of the district 
court decision that gave rise to this rulemaking is currently pending. 
As such, it may be appropriate to provide an analysis for each of the 
possible baseline scenarios: One where Sec.  447.10(g)(4) is in effect, 
and one where the 2019 final rule is in effect.\22\ We will examine 
each baseline analysis in turn.
---------------------------------------------------------------------------

    \22\ See https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf. (Circular A-4 (2003) 
at 15 (``When more than one baseline is reasonable and the choice of 
baseline will significantly affect estimated benefits and costs, you 
should consider measuring benefits and costs against alternative 
baselines.).
---------------------------------------------------------------------------

    Presently, as a result of the district court decision, the 2019 
final rule is nullified and the 2014 final rule implementing Sec.  
447.10(g)(4) represents current policy. When the district court vacated 
the 2019 final rule and remanded the case to HHS for further 
proceedings, we had broad discretion as to how to address the remand. 
Because the vacatur reestablished the policy from the 2014 rule, we 
could have simply published a final rule in the Federal Register 
waiving notice of proposed rulemaking and public comment and informing 
the public that Sec.  447.10(g)(4) was in effect due to the district 
court's decision, and instructing the Office of the Federal Register to 
republish Sec.  447.10(g)(4), had we determined that was the best 
approach. Our other potential options, which were not mutually 
exclusive, included the option to appeal the court's decision, to issue 
sub-regulatory guidance, or engage in rulemaking to either reinstate 
the 2019 final rule relying on a legal basis different from that 
rejected by the court, or to implement the same or similar policy as in 
the previously codified Sec.  447.10(g)(4) pursuant to a different 
legal analysis. As stated by the district court, ``vacating the 
agency's action simply preserves a status quo that has existed since at 
least the early 1990's while the agency takes the time it needs to give 
proper consideration to the matter.'' \23\ We initially appealed, then 
chose to review the statute anew, eventually determining that the 
payments to third parties addressed in this rulemaking fall outside the 
scope of the statute.
---------------------------------------------------------------------------

    \23\ California v. Azar, 501 F. Supp. 3d at 843 (N.D. Cal. 
2020).
---------------------------------------------------------------------------

    For the economic analysis in the 2021 proposed rule, we believed 
that this rule offered State Medicaid programs additional operational 
flexibilities to ensure a strong provider workforce, which resulted in 
a proposed rule that was preliminarily designated as not economically 
significant.
    With regard to the impact on State operations, we believe State 
budgets will not likely be significantly affected because the 
operational flexibilities in this final rule only facilitate the 
transfer of funds between participating entities, rather than the 
addition or subtraction of new funds. As noted by multiple commenters, 
some States had implemented this flexibility decades before the 2014 
final rule which is currently the status quo. To the extent that those 
States may have continued or resumed exercising such flexibility 
following the district court's decision, those States will experience 
no change to their operations under this current rule. States that have 
not already implemented this policy option are not required to 
implement it under the current rule and their operations will remain 
unchanged, unless the State takes specific actions to implement this 
policy option. Therefore, using the established baseline assumption of 
the 2019 final rule not occurring and defaulting to the 2014 final 
rule, we anticipate the minimal impact on State budget and operations.
    We believe the current rule may have an annual effect on the 
economy in excess of the $100 million threshold of Executive Order 
12866. While the effect may be similar in magnitude to the impact 
analysis in the 2019 final rule, we believe the effect will be opposite 
in sign where States are allowed to deduct payments from a provider's 
payment with their consent under certain circumstances described in the 
2021 proposed rule, thereby shifting portions of Medicaid payments from 
home care workers to third parties. Since the 2014 and 2019 final 
rules, we are not aware of any SPAs submitted by State Medicaid 
agencies that intended to modify provider payments rates in response to 
these previous regulatory changes. In addition, we do not track the 
payment amounts that State Medicaid agencies pay to third parties as 
affected by this regulatory provision, although we could obtain such 
information through review of a State's Medicaid expenditures claimed 
on the Form CMS-64. As such, the Department invited public comments to 
help refine this analysis in the 2018 proposed rule, but no substantive 
analysis of the economic impact of this rule was provided as noted in 
the 2019 final rule. In the current rulemaking, we again sought 
comments on this estimate, and particularly on types and amounts 
deducted from individual providers for payment to third parties, broken 
down by benefit that may be included under Sec.  447.10(i). We did not 
receive comments with compelling data specific to the economic impact 
of this policy, and we did not receive comprehensive data about the 
types and amounts of deductions broken down by benefit.

[[Page 29688]]

    Alternatively, due to the outstanding appeal of the district court 
decision, it may be appropriate to consider a scenario in which the 
2019 final rule is still in effect, as the district court decision may 
not be the final outcome of California v. Azar. If the 2019 final rule 
were in effect, then this current rulemaking would mark a significant 
policy shift, with a measurable impact. We have added a discussion of 
this alternate baseline in our regulatory impact analysis comment 
response, and included estimates in Table 1 of section VI.E. of this 
final rule.
    Based on our estimates, OMB's OIRA has determined that this 
rulemaking is ``economically significant'' under Executive Order 12866 
and ``major'' under Subtitle E of the Small Business Regulatory 
Enforcement Fairness Act of 1996 (also known as the Congressional 
Review Act).
    Comment: One commenter disagreed with our assessment in the 
proposed rule that a regulatory impact analysis was unnecessary. That 
commenter pointed to our language in the 2021 proposed rule that 
included positive benefits associated with stabilizing the home care 
workforce. The commenter also noted the fact the deductions are already 
occurring should have no bearing on the estimated economic impact of 
this rule. The commenter cited figures from a report that solely 
focused on quantifying the amount of third-party payments made to 
unions to demonstrate the economic significance.
    Response: As stated in section III.E. of this final rule, the 
effect of the vacatur in California v. Azar is that the 2014 final rule 
is our current policy, and the commenter failed to acknowledge the 
effect of the court decision. However, we acknowledge litigation is 
still pending, and furthermore there is value in understanding the 
effect of this policy under a possible alternate trajectory where the 
2019 final rule is in effect. We lack direct information with which to 
quantify those impacts, as the Department does not track the amount of 
Medicaid payments that are being assigned to third parties. However, we 
can surmise from the California v. Azar case that at least six States 
\24\ are currently utilizing this policy. We also believe it is 
reasonable to conclude some additional States have already or in the 
future may adopt these practices to provide individual practitioners 
administrative convenience, but as we do not have a means to assess 
that amount, we have not included them in this exercise. As States are 
the Medicaid program operators, enroll providers in their programs, and 
determine economic and efficient payment rates for providers, we 
believe States are better situated to quantify the amount of Medicaid 
payments that may be transferred to third parties under the policy 
discussed in this rule.
---------------------------------------------------------------------------

    \24\ Named plaintiff States included California, Connecticut, 
Oregon, Massachusetts, Washington, and Illinois.
---------------------------------------------------------------------------

    We utilized example data provided in comments to the 2021 proposed 
rule to extrapolate an approximate estimate for health insurance 
transfers within the six plaintiff States. We estimate that individual 
practitioners may be offered a $25 monthly premium for health insurance 
\25\ and there may be approximately 270,000 individual practitioners 
affected by this rule within those six States.\26\ We then estimated 88 
percent,\27\ or 237,600 of eligible individual practitioners will 
enroll in an offered health insurance plan; therefore, we expect 
transfers of $71,280,000 annually from the 6 States who already adopted 
this policy option to one or more third party health insurance plans on 
behalf of individual practitioners. This estimate assumes all six 
States have the same number of providers and offer health insurance 
plans with the same monthly premium. We also acknowledge that a large 
portion of home care workers obtain their health insurance through 
publicly funded programs, such as Medicaid,\28\ and may or may not have 
a health insurance premium, depending on the State's program, which 
adds an additional caveat to this estimate. While we have not similarly 
quantified the amount of other authorized deductions, such as for 
skills training or other benefits, we estimate that the amount of 
payments made to third parties on behalf of individual providers for 
the variety of benefits addressed in this rulemaking could potentially 
be in excess of $100 million. We have included some financial impact 
estimates from the policy generally in Table 1 in section VI.E. of this 
regulatory impact analysis.
---------------------------------------------------------------------------

    \25\ Heath insurance premium amount was sourced from Public 
Comment CMS-2021-0130-0013 located at https://www.regulations.gov/comment/CMS-2021-0130-0013.
    \26\ The number of individual practitioners in a single State 
who has already adopted this policy option was sourced from Public 
Comment CMS-2021-0130-0013 located at https://www.regulations.gov/comment/CMS-2021-0130-0015. This number was used to extrapolate an 
estimate for the six States who has already adopted this policy 
option.
    \27\ https://www.bls.gov/news.release/pdf/ebs2.pdf.
    \28\ https://www.nelp.org/publication/surveying-the-home-care-workforce/#_ednref2; see also, for example, https://www.kff.org/medicaid/press-release/combined-federal-and-state-spending-on-medicaid-home-and-community-based-services-hcbs-totaled-116-billion-in-fy-2020-serving-millions-of-elderly-adults-and-people-with-disabilities/; https://www.kff.org/medicaid/issue-brief/state-policy-choices-about-medicaid-home-and-community-based-services-amid-the-pandemic/.
---------------------------------------------------------------------------

    The potential direct financial impact on the individual 
practitioners is similarly difficult to quantify due to the absence of 
specific information about the types and amount of payments being 
reassigned. The 2019 final rule acknowledged potential, but minor 
negative financial impacts on practitioners related to mailing 
payments, and we can conclude this policy, where available, avoids 
those potential costs.

C. Anticipated Effects

    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
less than $8.0 million to $41.5 million in any 1 year. Individuals and 
States are not included in the definition of a small entity. We are not 
preparing an analysis for the RFA because we have determined, and the 
Secretary certifies that this final rule would not have a significant 
economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare an 
RIA if a rule may have a significant impact on the operations of a 
substantial number of small rural hospitals. This analysis must conform 
to the provisions of section 604 of the RFA. For purposes of section 
1102(b) of the Act, we define a small rural hospital as a hospital that 
is located outside of a metropolitan statistical area for Medicare 
payment regulations and has fewer than 100 beds. We are not preparing 
an analysis for section 1102(b) of the Act because we have determined, 
and the Secretary certifies, that this final rule would not have a 
significant impact on the operations of a substantial number of small 
rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2022, that 
threshold is approximately $165 million. This rule will have no 
consequential effect on State, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it issues a proposed

[[Page 29689]]

rule (and subsequent final rule) that imposes substantial direct 
requirement costs on State and local governments, preempts State law, 
or otherwise has Federalism implications. Since this regulation does 
not impose any costs on State or local governments, the requirements of 
Executive Order 13132 are not applicable.

D. Alternatives Considered

    We considered incorporating additional regulatory text under Sec.  
447.10(i) requiring explicit written consent from a practitioner before 
State Medicaid agencies may make a payment on behalf of the 
practitioner to a third party that provides benefits to the workforce 
such as health insurance, skills training, and other benefits customary 
for employees. We also considered identifying specific employee 
benefits for which payments may be deducted and paid to a third party 
in the regulatory text under Sec.  447.10(i), such as Federal income 
taxes, Federal Insurance Contributions Act taxes, State and local 
taxes, retirement benefits (for example, 401k, profit-sharing), health 
insurance, dental insurance, vision insurance, long-term care 
insurance, disability insurance, life insurance, gym memberships, 
health savings accounts, job-related expenses (for example, union dues 
with affirmative consent, uniforms, tools, meals, and mileage), and 
charitable contributions. Rather than listing the universe of benefits 
for which payments may be deducted and paid by State Medicaid agencies 
to third parties with consent of the provider, we also considered 
whether to exclude certain benefit deductions from the scope of this 
final rule. Finally, we considered requiring practitioner consent only 
for specific types of deductions, rather than all types of benefits, 
for which Medicaid payment amounts may be deducted and paid to a third 
party in the regulatory text under Sec.  447.10(i). Based on additional 
analysis and commenter feedback, we are not amending any proposals to 
reflect these variations.
    We also considered but did not propose or finalize requiring 
explicit written provider consent for deductions out of concern that 
codifying a requirement for written consent could unintentionally 
result in a conflict with State law. We defer to State Medicaid 
agencies to ensure consent is obtained and for further implementation 
of provider payment deductions consistent with State law and regulation 
for State employee benefit deductions. We requested public comments on 
whether to include a CMS requirement for written provider consent or to 
remain silent on the form such consent must take and to defer to 
existing State law and regulation.
    Specifically, we sought comments on what constitutes appropriate 
consent (that is, letter, email, form), descriptions of State law that 
require consent, and how we could minimize burden on State Medicaid 
agencies and prevent conflict with State laws and regulations if 
specific consent requirements were finalized within the regulatory 
text. Thus, we provided in the 2021 proposed rule that a provider must 
voluntarily consent to payments to third parties on the provider's 
behalf, but decided to defer to each State to determine the best means 
of confirming the provider's consent in each case.
    We also considered but did not propose or finalize codifying a 
defined list of allowable benefits or excluded benefits within the 
regulatory text based on concerns that such a list may not accurately 
reflect all employee benefits available to practitioners and would need 
frequent updates through the rulemaking process to remain relevant. We 
discussed in the 2021 proposed rule that the available benefits may 
vary between States and we would, again, defer to specific State laws 
and regulations as the basis for implementing the provisions of the 
2021 proposed rule. We solicited public comments on whether to codify a 
defined list of benefits that may be deducted from a provider's payment 
and, on behalf of the provider, be made to third parties.
    We also solicited public comments on whether there are additional 
types of benefits that State Medicaid agencies make to third parties on 
behalf of a provider receiving benefits that were not contemplated in 
the examples described in this section. In particular, we sought 
comments on whether the described list of benefits is generally 
permissible and consistent with deductions or payments made by States 
on behalf of State employees, as well as examples of potential 
impermissible arrangements we may exclude from the final rule. Finally, 
we requested that commenters further explain why the benefits they 
provide as examples within their comments are permissible or 
impermissible as we proposed at Sec.  447.10(i).
    We considered but did not propose or finalize a consent requirement 
only for specific types of deductions, rather than all types of 
benefits, for which Medicaid payment amounts may be deducted and paid 
to a third party in the regulatory text based on the concern that we 
may not accurately capture all of the employee benefits practitioners 
believe should require consent. Additionally, identifying certain types 
of employee benefits for which payments may be deducted and paid to a 
third party in the regulatory text would also need frequent updates 
through the rulemaking process to remain relevant. We solicited public 
comments on whether to codify that consent is only required for 
deductions for certain types of employee benefits, which benefits, and 
why those benefits should require consent from the practitioner. We 
also solicited public comments on whether requiring consent for certain 
types of employee benefits is advantageous or disadvantageous for the 
State and practitioner rather than requiring consent for all types of 
employee benefits.

E. Accounting Statement

    As discussed previously, the outstanding appeal related to 
California v. Azar means it may be appropriate to examine the impact of 
the policy described in this final rule against two, alternate 
baselines. The first baseline considers this final rule to reclassify a 
current policy using a new statutory interpretation, due to the vacatur 
of the 2019 final rule. In this case, we would not be required to 
prepare an accounting statement as would otherwise be required by OMB 
Circular A-4 under Executive Order 12866 (available at https://www.whitehouse.gov/wp-content/uploads/legacy_drupal_files/omb/circulars/A4/a-4.pdf).
    However, the second baseline considers an alternative scenario 
where the 2019 final rule, or its relative impact, is in effect. 
Therefore, we prepared an analysis of the impact of the policy 
described in this final rule, to the extent we can estimate based on 
contributions sourced from public commenters on the 2021 proposed rule 
and reasonable estimates of policy adoption, in the absence of actual 
data. Those impacts are discussed in a comment response in section 
VI.B. of this final rule. In Table 1, we have prepared an accounting 
statement showing the classification of transfers associated with the 
provisions in this proposed rule. The accounting statement is based on 
estimates provided in this regulatory impact analysis and omits 
categories of impacts for which partial quantification has not been 
possible.

[[Page 29690]]



                                          Table 1--Accounting Statement
----------------------------------------------------------------------------------------------------------------
                                                    Transfers
-----------------------------------------------------------------------------------------------------------------
                                                                                       Units
                                                                 -----------------------------------------------
            Category               Low estimate    High estimate                   Discount rate
                                                                   Year dollars         (%)       Period covered
----------------------------------------------------------------------------------------------------------------
Annualized monetized $ millions/               0           $71.3            2021               3            2022
 year...........................
                                               0            71.3            2021               7            2022
                                 -------------------------------------------------------------------------------
From whom to whom?..............        From States to third parties on behalf of individual practitioners.
----------------------------------------------------------------------------------------------------------------

F. Conclusion

    In accordance with the provisions of Executive Order 12866, this 
final rule was reviewed by the Office of Management and Budget.
    Chiquita Brooks-LaSure, Administrator of the Centers for Medicare & 
Medicaid Services, approved this document on March 16, 2022.

List of Subjects in 42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs--health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

    For the reasons set forth in the preamble, the Centers for Medicare 
& Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 447--PAYMENTS FOR SERVICES

0
1. The authority citation for Part 447 continues to read as follows:

    Authority: 42 U.S.C. 1302 and 1396r-8.


0
2. Amend Sec.  447.10 by revising paragraph (a) and adding paragraph 
(i) to read as follows:


Sec.  447.10  Prohibition against reassignment of provider claims.

    (a) Basis and purpose. This section implements section 1902(a)(32) 
of the Act which prohibits State payments for Medicaid services to 
anyone other than a provider or beneficiary, under an assignment, power 
of attorney, or similar arrangement, except in specified circumstances.
* * * * *
    (i) The payment prohibition in section 1902(a)(32) of the Act and 
paragraph (d) of this section does not apply to payments to a third 
party on behalf of an individual practitioner for benefits such as 
health insurance, skills training, and other benefits customary for 
employees, in the case of a class of practitioners for which the 
Medicaid program is the primary source of revenue, if the practitioner 
voluntarily consents to such payments to third parties on the 
practitioner's behalf.

    Dated: May 5, 2022.
Andrea Palm,
Deputy Secretary, Department of Health and Human Services.
[FR Doc. 2022-10225 Filed 5-12-22; 11:15 am]
BILLING CODE 4120-01-P