A new proposal aimed at clamping down on “impermissible financing arrangements” under Medicaid could hurt supplemental payments providers currently receive. The announcement caused ripples of concern throughout the provider community Tuesday.

The Centers for Medicare & Medicaid Services announced the Medicaid Fiscal Accountability Rule that aims to add transparency to Medicaid payment processes and eliminate suspect practices.

“We have seen a proliferation of payment arrangements that mask or circumvent the rules where shady recycling schemes drive up taxpayer costs and pervert the system,” CMS administrator Seema Verma said in announcing the new proposal.

The rule would establish new requirements for states to report provider-level information on Medicaid supplemental payments. It also would clarify Medicaid financing definitions by proposing new regulatory definitions for Medicaid base and supplemental payments. 

The American Health Care Association stressed the importance of supplemental payments to long-term care providers in response to the announcement. 

“Provider taxes and supplemental payment arrangements both have become very important financing sources for long-term care providers,” Mark Parkinson, AHCA president and CEO, said in a statement. 

“We welcome discussions with CMS on balancing adequate Medicaid base rates with the potentially devastating effects of any changes in Medicaid financing. This includes the vital need to protect provider taxes and supplemental payments, which are often used to offset inadequate base rates,” he said. 

Parkinson added that “underfunding is a challenge that must be addressed in order to ensure continued access to quality long-term services and supports for the millions who depend on them.”

Added Brendan Flinn, director of home and community-based services for LeadingAge: “Supplemental payments are an important part of Medicaid financing, particularly given that Medicaid rates in most states are inadequate compared to the actual cost of care.” 

“Generally speaking, changes that would restrict the state’s ability to make supplemental payments would jeopardize access to these important services,” Flinn said.

LeadingAge added that it plans to continue reviewing the proposed rule and assessing its impact on aging services providers, particularly nursing homes.