President Donald J. Trump officially announced a “war on fraud” in his State of the Union address earlier this week. The next day at the White House, Vice President J.D. Vance, HHS Secretary Robert F. Kennedy, Jr., and CMS Administrator Dr. Mehmet Oz announced a series of steps the administration would take to address fraud in Medicare and Medicaid, the most serious of which was a nearly $260 million deferment of Medicaid funding for Minnesota.
The steps also included a CMS RFI related to the Comprehensive Regulations To Uncover Suspicious Healthcare (CRUSH) initiative. The RFI was published in the Federal Register today. It generally seeks input from all types of health care stakeholders, including states and providers, on ways to strengthen CMS’s ability to prevent, detect, and respond to fraud, waste, and abuse in Medicare, Medicaid, CHIP, and the ACA marketplace. The RFI also seeks input on how CMS can address “program inefficiencies” in those government health care programs.
States, localities, and government-owned providers would be wise to pay close attention to the Medicaid questions included in the RFI, particularly the following, which focus on long-standing Medicaid financing mechanisms, supplemental payments, and state directed payments (SDPs):
- What ways can CMS improve the prevention, identification, and resolution of fraud, waste, and abuse related to non-federal share financing sources, including intergovernmental transfers (IGT)?
- How can CMS better prevent fraud, waste, and abuse associated with the differential payment of public and private providers?
- How can CMS help states better prevent, identify, and address fraud, waste, and abuse related to supplemental payments (for example, disproportionate share hospital (DSH) payments) or SDPs?
- How can CMS help states better prevent, identify, and address fraud, waste, and abuse in section 1915 waiver programs or section 1115 demonstration programs?
These questions signal that CMS is considering new federal restrictions on how states (i) finance the non-federal share of Medicaid expenditures, and (ii) use supplemental payments and SDPs to increase provider reimbursement for services furnished to Medicaid enrollees.
As states, localities, and government-owned providers know, a unique feature of the Medicaid program is the flexibility it gives states to tailor program services and non-federal share financing to best meet the needs of their enrollees and budgets. While states must adhere to broad federal guidelines regarding allowable funding sources, states are generally trusted to determine how to fund their share of Medicaid expenditures. IGTs and other public funds have been used since the Medicaid program’s inception to fund part of the non-federal share, in addition to general revenue funds and funds derived from other sources including provider taxes.
New restrictions on provider taxes, waivers related to provider taxes, and SDPs that were included in the One Big Beautiful Bill Act (OBBBA) (P.L. 119-21) have already begun to stress state Medicaid budgets. Additional new regulatory restrictions on long-standing Medicaid financing mechanisms and further limits on supplemental payments and SDPs will increase pressure on states to raise broad-based individual and property taxes, reduce provider payments and enrollee benefits, or enact some combination of the two to keep up with Medicaid expenditures, all of which will be unpopular.
Comments on these and other questions included in the RFI are due by March 30, 2026.
