CMS to New Hampshire: Stop Use of Hospital Donations to Fund Medicaid Expansion

A letter from CMS lays out 2 options for New Hampshire’s Medicaid expansion: either stop accepting donations from hospitals to fund expansion or have the program’s federal funding revoked.

In the letter sent to the state’s health commissioner, CMS contends that the use of donations from healthcare providers to bolster the expansion fund, known as the New Hampshire Health Protection Program (NHHPP), is prohibited by Medicaid statutes. The Social Security Act only permits donations with “no indirect relationship to Medicaid payments made to the donating provider, provider class, or any related entity.”

Because New Hampshire law specifies that funding for the NHHPP, and therefore Medicaid expansion, is contingent on donations, “CMS believes there is a relationship between the donations and Medicaid payments,” the letter continues. Specifically, providers can expect to receive some of their donation back, whether directly or indirectly, through Medicaid payments after the state uses the donations to pay for Medicaid services.

Although CMS cautioned in the letter that New Hampshire may be violating federal law, it will allow for a transition period in which the state is expected to correct the issue. It advises the state’s lawmakers to use the next legislative session to revise its non-federal Medicaid expansion funding so it complies with the law beginning in fiscal year 2019.

The letter also carries a warning of potential ramifications: if these changes are not included in the next budget, “the state may be faced with financial consequence that could include a deferral or disallowance action.” If CMS follows through on the threat of pulling federal expansion funding, the program would be unable to continue providing coverage for the almost 53,000 New Hampshire residents who gained insurance under expansion.

In closing, the letter recognizes the mutual “desire to achieve the best outcomes for beneficiaries while protecting the fiscal integrity of the program” and offers its assistance as the state navigates these changes.

A statement from Governor Chris Sununu, in response to the letter, provides some additional context. In 2016, New Hampshire lawmakers had chosen to accept hospital and insurer donations as non-federal share funding for the NHHPP, when the federal government lowered its share of program funding from 100% to 95%.

The statement reveals that CMS’ investigation of this funding arrangement had been ongoing since 2016. Upon receiving the letter in late July 2017, state representatives quickly negotiated an agreement with CMS that Medicaid expansion could remain intact through the end of 2018 while New Hampshire comes to a suitable solution.

““Regardless of whether you support Medicaid expansion or not, it would have been grossly unfair to strip medical coverage from the thousands of Granite Staters who rely on the program without a sufficient alternative in place,” Sununu said in the statement. New Hampshire will now use the transition period to “carefully consider and deliberate the future of Medicaid expansion given this new guidance from CMS.”