Sellers Dorsey Digest

Federal Updates

News

Community Health Centers Experience Funding Challenges After OMB Funding Freeze and Pause

• Some community health centers (CHCs) are facing financial challenges due to delayed or partial federal payments following the White House Office of Management Budget’s (OMB’s) federal funding freeze memo and subsequent court-ordered pause. States where CHCs are experiencing these financial issues are reported to include Maine, Nebraska, Illinois, Michigan, and Virginia, with at least one facility consolidating services and directing patients to other facilities. The Health Resources and Services Administration (HRSA) noted that some Payment Management System (PMS) users may be experiencing lags due to the high volume of requests following the OMB memo. HHS reported that it is working to resolve payment issues quickly as advocates and stakeholders remain concerned over the potential impact on more than 32.5 million patients served by CHCs (Inside Health Policy, February 7).

Medicaid Cuts Threaten Rural Hospitals, Putting Maternity Care at Risk

• The maternity ward at Pender Community Hospital, a rural facility in Nebraska, is facing possible closure due to the proposed cuts in Medicaid. The maternity unit, where 40% of obstetric patients rely on Medicaid coverage, delivers about 120 babies annually. Leadership at the hospital states that if federal Medicaid funding is capped, as is currently under discussion at the federal level, maintaining maternity services would become unsustainable. High operational costs and low reimbursement rates have already forced many hospitals to eliminate their maternity units, which is part of a larger rural healthcare crisis. Proposed Medicaid changes currently under consideration as part of the budget process, which could replace the federal-state financial participation system to fixed per capita payments or block grants that would significantly strain rural providers. To offset Medicaid funding losses, many states are considering increasing taxes, but experts argue this would not be enough to prevent service reduction or closures. If Medicaid cuts proceed, rural hospitals could struggle to recruit and maintain staff, as well as maintain essential services, leading to worsening healthcare access in these areas (Modern Healthcare, February 7).

DOGE Works with CMS Officials to Identify Fraud and Financial Waste

• Staff from the Department of Government Efficiency (DOGE) have begun working with CMS to access information about how the payment system works and how to effectively identify fraud and waste, as well as CMS’ organizational design. Two senior CMS officials are reportedly overseeing the engagement with DOGE. Thus far, DOGE representatives have reportedly received “read-only” access to the payment system and the CMS Acquisition Lifecycle Management (CALM) system, which includes comprehensive contract information. CMS has clarified that the DOGE reps have not been given access to any databases with identifiable personal health information from enrollees, nor have they accessed the Healthcare Integrated General Ledger Accounting System (HIGLAS) (Wall Street Journal, February 5).

Federal Legislation

GOP Bill Proposes Medicaid Work Requirements

• On February 6, 2025, Senators John Kennedy (R-LA) and Eric Schmitt (R-MO) introduced the Jobs and Opportunities for Medicaid Act, which would require a healthy adult without dependents to work or volunteer for at least 20 hours a week as a condition of receiving Medicaid coverage. The Congressional Budget Office (CBO) estimates this measure could result in up to $109B in savings to the federal government over ten years, according to a 2023 estimate. Some lawmakers argue this could help offset the cost of extending the 2017 tax cuts under President Trump’s first administration, which are set to end in 2025. The same CBO study also estimates that work requirements could result in 1.5 million Medicaid beneficiaries losing coverage. According to a KFF report, six out of ten Medicaid recipients report working full-time or part-time. Those who do not work mostly attend school, claim caregiving responsibilities, or have a disability (Becker’s Healthcare, February 7).

Federal Studies and Reports

Healthcare Access and Affordability Rank Highest on Rollins-Gallup Public Health Priorities Survey, Respondents Also Support Medicare and Medicaid Programs

• According to the Public Health Priorities Survey, released by Gallup and the Rollins School of Public Health at Emory University, healthcare access and affordability are still the most important issues to be addressed for Americans. Approximately 52% of respondents ranked healthcare access and affordability as one of their top three concerns when offered a list of 15 options. Thirty-seven percent selected ensuring safe food and water in their top three, while 32% chose reducing chronic disease. Thirteen percent prioritized ensuring access to comprehensive reproductive care, and 11% prioritized safeguarding childhood vaccination for preventable diseases and ensuring adequate care for a mother and infant after birth. Thirty-two percent of respondents supported strengthening Medicare and Medicaid programs, and 41% expressed the belief that the U.S. has decreased healthcare access, despite reduced rates of uninsurance, over the last 10 years, with only 32% believing progress has been made (Rollins School of Public Health | Emory University, February 4; Health Payer Specialist, February 10).

Challenges in Federal Healthcare Payment Integrity

• According to five years of data from the Department of Health and Human Services (HHS), the Medicaid, Medicare Advantage, and Medicare Part D programs have seen a decrease in improper payments; however, approximately $88.5B in payments across all Medicaid and Medicare programs were made improperly during 2024, with the most notable increases during the COVID-19 pandemic. While the number of improper payments in Medicaid and Medicare Advantage decreased, there was a rise in fee-for-service Medicare improper payments. According to a report from the Government Accountability Office, the majority of the improperly paid claims were for Medicare payments made for durable medical equipment, labs, and home health services, and also led to recommendations for improving Medicaid payment integrity (Modern Healthcare, February 7).

State Updates

News

Idaho Lawmaker Introduces Medicaid Expansion Reform Bill

• Idaho legislators are working to determine the future of Medicaid Expansion in the state. House Representative Jordan Redman introduced House Bill 138, which would mandate work requirements for all able-bodied adults, institute an enrollment cap on the number of adults under the Medicaid expansion category to 50,000 individuals, and create a lifetime limit on the program after an individual is covered for three years in the Medicaid expansion coverage group. If the bill’s policies are not implemented by July 1, 2026, it would require the full repeal of Idaho’s Medicaid expansion. According to the Idaho Department of Health and Welfare, nearly 90,000 Idahoans were covered under the Medicaid expansion category in December 2024. The bill’s fiscal note indicates that it would save the state up to $163M, compared to the state’s current coverage policies. Idahoans voted for Medicaid expansion in 2018, and the program was implemented in 2020. While HB 138 has received mixed opinions from other legislators, it has been referred to the House Health & Welfare Committee for further consideration (Idaho Capital Sun, February 4).

Massachusetts Legislators Introduce Bills for Single Payer Healthcare System

• Lawmakers in Massachusetts have refiled bills in the state’s House (HD 1228) and Senate (SD 2341) to implement a Medicare for All program. Representatives Sabadosa and Scarsdale along with Senator Eldridge sponsored the bills on behalf of Mass-Care, the organization behind the Medicare for All campaign, with the goal of establishing a single payer healthcare system in the state to increase access to healthcare and reduce costs. The bills would create the Massachusetts Health Care Trust, a public entity that would manage and finance all healthcare services in the state and replace the current landscape of private and public insurers. Residents would have covered healthcare without co-insurance, copays, deductibles, or other cost-sharing responsibilities. Medicare for All in Massachusetts would be funded through consolidation of healthcare funds and new taxes on unearned income, employer and employee payroll taxes, and a tax on self-employed individuals (Becker’s Payer Issues, February 7; Wicked Local, February 4).

New York eMedNY Makes $16M in Incorrect Medicaid Claim Payments

• A recent state audit of the New York Department of Health’s (DOH) eMedNY found that the computer system improperly paid $16.2M in Medicaid claims from October 1, 2023, to March 31, 2024. During this six-month period, eMedNY processed over 370 million claims, totaling about $49.6B in payments. Key findings of the audit include:
  • $11.8M in improper payments for recipients who were incorrectly provided Medicaid managed care coverage when they have concurrent third-party insurance.
  • $2M in improper payments of FFS inpatient hospital claims that should have been paid by managed care.
  • $1.3M in improper payments for newborn and maternity claims due to inaccurate information.
  • $964.3K in improper payments for inpatient, pharmacy, referred ambulatory and clinic services inconsistent with Medicaid guidelines.
  • $126.8K in improper payments where Medicaid was mistakenly assigned as the primary payer.
  • $35.4K in improper payments for incarcerated individual’s managed care premiums that should have been suspended.
  • 10 Medicaid providers were identified with past regulation and law violations with certain healthcare programs.

The DOH has removed nine of the providers from the state’s Medicaid program and recovered over $2.8M in improper payments. The Comptroller’s Office has since made recommendations to the DOH, such as formally advising hospitals to accurately report claim information when billing Medicaid for newborn health and practitioner-administered drugs, prompt sanctions or removal of providers who violate Medicaid provisions, and key focus areas for payment recovery (Office of the New York State Comptroller, February 6; Health Payer Specialist, February 10).

Montana Lawmakers Move Forward with Bill to Extend Medicaid Expansion

• Montana lawmakers are considering a bill that would extend coverage under the state’s Medicaid expansion policy, which is currently set to expire in 2025 without legislative action. The expanded coverage has provided healthcare to around 75,000 low-income adults since 2015. While the measure has some bipartisan support, some Republicans have raised concerns about the ongoing cost to the state, particularly if the federal government lowers the federal financial participation for the expansion population (Montana Free Press, February 7).

Rhode Island to Rebid Medicaid Contract, Extends Current Contracts Through June 2026

• Last week, Rhode Island (RI) announced that it would reissue the state’s Medicaid program RFP, referring to unspecified CMS guidance as the primary justification. The state also announced it would extend the current Medicaid managed care contracts until June 30, 2026. Blue Cross Blue Shield of RI (BCBS of RI) and Point32Health previously contested the initial contract awards after attaining scores lower than the threshold. Neither MCO announced whether they would bid on the updated RFP. According to an August 2024 KFF fact sheet, approximately 329,000 individuals were enrolled in Rhode Island’s Medicaid program which has a managed care budget of $15.5B (Health Payer Specialist, February 7).

SPA and Waiver Approvals

SPA AND WAIVER APPROVALS

• From February 6 to February 12, there were no waivers submitted or approved, and no SPAs approved.

Private Sector Updates

News

Elevance Health’s Public Policy Institute Report Details on their Food-As-Medicine (FAM) Strategy

• On February 5, Elevance Health’s Public Policy Institute released a new report, Surveying Food as Medicine (FAM) Initiatives, highlighting FAM programs operating in 18 states and Washington, DC that were implemented by Elevance-affiliated health plans. FAM interventions included medically tailored meals and grocery/produce prescriptions, but also focused on significant public nutrition security initiatives, community-based interventions, and personalized nutrition education programs. Fifty percent of the FAM programs were designed to reach individuals with chronic conditions or diet-sensitive conditions; another 71% were designed to work at a population-level; and 21% of the programs included both types of initiatives. Based on its experience with these programs, Elevance recommends “expanding flexibilities and funding stability in state and federal programs to support more FAM benefit offerings” and “incorporating health insurance providers’ investments in SDOH into medical loss ratio calculations” (Becker’s Payer Issues, February 5).

 FTC Amendments to Hart-Scott-Rodino Act Take Effect

• Following the Federal Trade Commission (FTC) amending the Hart-Scott-Rodino Act form last October, the new regulations officially went into effect on February 10. Under this new form, healthcare companies will be required to submit more comprehensive information including previous mergers and acquisitions, a list of investors, and any transaction related communications. Opponents of the change point out the possible increased costs, review process time, and administrative burden these new regulations will have on healthcare companies looking to merge. Prior to the rule taking effect, the US Chamber of Commerce filed a lawsuit in Texas to void the rule, referencing the cost and lack of information surrounding why the old system was not sufficient. Under one of President Trump’s January 20 Executive Orders that asked federal agencies to consider postponing issued rules for 60 days, the administration could move to take the rule under regulatory review (Modern Healthcare, February 10).

Sellers Dorsey Updates

NEWS

California’s Safety-Net at a Crossroads: Marko Mijic Shares Insights on Aligning Healthcare Delivery

• In his latest article with California Health Care Foundation, Sellers Dorsey Managing Director, Marko Mijic, explores the transformative shift of the state’s healthcare system. Providing unique insights on groundbreaking health policies like workforce initiatives and data exchange frameworks, Marko provides perspective on how to better connect the dots between various initiatives to improve healthcare access, quality, and outcomes.

Read Marko’s article