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MONDAY REPORT

CMS Proposed Rule Limits State-Directed Payments

The Centers for Medicare and Medicaid Services (CMS) last week released a proposed rule that would dramatically alter long-standing Medicaid financing mechanisms that states, including Massachusetts, have used to increase payments to providers over and above inadequate Medicaid base rates.

The proposed rule effectuates new requirements for “state-directed payments” under the One Big Beautiful Bill (OB3) that passed last year; however, it goes further than the law required in limiting these financing mechanisms.

In Medicaid managed care, states are generally not permitted to direct spending of their managed care plans to providers given the risk-based nature of managed care. In 2016, CMS established an exception to this rule through the state-directed payments provision that allows states to direct how Medicaid managed care organizations reimburse healthcare providers under certain conditions. For example, a state can set minimum or maximum fee schedules, require uniform rates increases for a class of providers such as safety net hospitals, or require plans to make quality incentive payments to providers. Massachusetts has used state-directed payments for all of these purposes to support improved patient care outcomes and stabilize safety net hospitals, providing essential funding for care provided to MassHealth patients.

OB3 now requires this financing to be limited across all states. For Medicaid expansion states like Massachusetts, state-directed payments will now be limited to ensure that reimbursement from managed care plans does not exceed 100% of the Medicare rate. Currently, the limit is the average commercial rate, which is higher than Medicare. As required by OB3, a phase-in of this lower limit is required for state-directed payments that are already in effect. Beyond this new threshold, CMS goes further than the law required by proposing to apply the new rule to all services eligible for state-directed payments as opposed to the limited providers specified in OB3. It also seeks to apply the new limit for each service delivered, rather than at the aggregate level as measured today. CMS also proposed prohibiting the use of uniform rate increases that have been used to direct reimbursement increases to classes of providers, including safety net hospitals.

“This proposed rule – combined with the hundreds of thousands of people that are expected to lose Medicaid coverage in Massachusetts as a result of OB3 and who will affect the already insolvent Health Safety Net – will have long-term, damaging financial implications to Massachusetts hospitals,” said MHA’s Dan McHale, senior vice president, healthcare finance & policy. “Despite this potential immense challenge, we’re confident that solutions can be identified in collaboration with the Healey-Driscoll administration and legislature to ensure hospitals will have the resources needed to maintain delivery of high-quality care to all patients in their communities.”

Lawsuit Challenges Federal Loan Limit Rule

Massachusetts has joined 24 other states in filing a lawsuit that challenges a U.S. Department of Education final rule that sets student loan limits on people pursuing healthcare careers.

The department’s rule, created under the One Big Beautiful Bill, sets different loan limits for “graduate” and “professional” programs, limiting graduate students to $20,500 annually ($100,000 total) and professional students to $50,000 annually ($200,000 total). The regulation defines a professional student as an individual who is typically enrolled in a doctoral level program preparing students for a licensed professional practice that typically requires at least six years of postsecondary education. This revised definition significantly reduces the scope of programs considered “professional” and excludes many essential doctoral level and advanced graduate healthcare programs, including – but not limited to – advanced practice nursing, physician assistants, social workers, physical therapy, occupational therapy, and speech language pathology.

In the lawsuit filed last week in the U.S. District Court for the District of Maryland, the 25 states and the District of Columbia argue that the Education Department rule goes far beyond what Congress intended in passing OB3, which states that a professional degree is merely one that signifies the completion of academic requirements, goes beyond a level of skill normally required for a bachelor’s degree, and generally requires professional licensure. The rule’s addition of requiring a doctoral degree, six years of study, etc. “straightforwardly contradicts” what Congress intended, the suit reads.

MHA, in alignment with many other healthcare associations throughout the country, wrote a letter to the Department of Education in February urging it “to include a full range of healthcare post-baccalaureate professional degree programs in its definition of professional degrees. Healthcare – and hospital care in particular – requires a full team of highly trained healthcare professionals working together to provide high-quality, comprehensive, person-centered care.”

Massachusetts Delegation Members Outline Harm to Ending TPS for Haiti

Removing Temporary Protected Status (TPS) for people from Haiti would cause “a significant loss of essential healthcare workers nationwide” and would disproportionately affect Massachusetts healthcare, according to a new report from Senators Elizabeth Warren and Ed Markey and Congresswoman Ayanna Pressley.

The president sought to eliminate TPS for Haitians and those from some other nations in February 2025. The move was blocked by federal courts and the case is now pending in the U.S. Supreme Court.

Senator Warren launched an investigation of the issue, soliciting responses from the Association of Developmental Disabilities Providers, The Arc of Massachusetts, Massachusetts Senior Care Association, LeadingAge, and the National Domestic Workers Alliance.

That investigation found, among other things, that the long-term care sector in Massachusetts is under “severe strain” and that losing Haitian workers would “further exacerbate the problem;” that further staffing shortages due to the loss of Haitian workers would increase healthcare wait times and endanger patients; and that “culturally sensitive care” would be jeopardized.

“Because Massachusetts has the third-largest Haitian population in the United States, Massachusetts-based providers explained that Haitian caregivers play a major role in nursing facilities across the commonwealth, and thus the Trump Administration’s attempt to terminate TPS will have a particularly harsh impact on the healthcare workforce, healthcare quality, and healthcare costs in Massachusetts,” according to the report.

“Other providers in Massachusetts reported dismissing a dozen qualified staff after work authorizations expired, losing staff from schedules with little warning, and seeing candidates withdraw from hiring processes due to immigration concerns. These providers stressed that temporary agency staffing can cost multiple times more than direct employment and cannot replicate the trust, familiarity, or specialized experience of long-term staff.”

Warren Signs on to Letter Advocating Improved Long-Term Care

Senator Elizabeth Warren (D-Mass.) joined 16 of her Democratic colleagues in sending a letter to the full Senate encouraging a renewed focus on long-term care, specifically by expanding home care, addressing workforce shortages in the sector, and improving the quality of care in nursing homes.

“Contrary to popular belief, Medicare does not cover long-term care beyond limited, short-term medical services,” the Senators wrote. “State Medicaid programs are required to cover long-term care in nursing homes, and each state can choose to provide care at home to some people. The reality is that older adults and people with disabilities only qualify after they impoverish themselves to meet strict eligibility limits.”

POLST Go-Live Date is April 6, 2027

The Mass POLST team has announced that the go-live date for transitioning to the national POLST model is April 6, 2027.

Portable Orders for Life-Sustaining Treatment or POLST is a medical order that documents a patient’s treatment preferences in an emergency where they may be unable to communicate for themselves. The significant difference between POLST and the current MOLST is that POLST orders are organized around a patient’s goals of care and stored electronically. When POLST goes live next April, pre-existing MOLST forms will still be honored; however, all new orders will need to come in the form of POLST. The state and provider community have spent several years preparing for the transition, including through a 2023 pilot and a series of information sessions to share updates, spread awareness, and collect feedback.

For more information about the program and resources, visit the POLST program’s website.

John LoDico, Editor